Walmart’s annual meeting earlier this month managed to celebrate the retailer’s 50 years of spectacular growth in usual style, with plenty of enthusiastic associates from around the world and high-profile celebrities on display.


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Inside This Issue - News

Walmart shareholder votes reflect concerns

June 25th, 2012

BENTONVILLE, Ark. – Walmart’s annual meeting earlier this month managed to celebrate the retailer’s 50 years of spectacular growth in usual style, with plenty of enthusiastic associates from around the world and high-profile celebrities on display.

The final tally of shareholders’ votes on incumbent Walmart board members, however, demonstrated a significant level of discontent with the way management and the board initially handled allegations of corruption at Walmart de México.

Since members of the Walton family and other insiders hold just over half of the company’s 3.4 billion shares, all of the incumbents as well as a new nominee, Marisa Mayer, easily won their seats. But significant numbers of shares were voted against former chief executive officer Lee Scott, current president and CEO Mike Duke, chairman Rob Walton and board member Christopher Williams, who was chairman of the board’s audit committee when the corruption charges were first reported to management.

According to the New York Times article that broke the story in April, allegations of bribery by a whistle-blower were detailed in memos sent by the general counsel of Walmart International to members of senior management and the board. Although the company initially engaged an outside law firm that recommended a full-scale, independent investigation, management instead decided on a much more limited internal inquiry that was ultimately assigned to a Walmart de México executive who himself was implicated in the charges.

After the story appeared, the California State Teachers Retirement System (CalSTRS), the nation’s second-largest public pension fund, announced it would vote all of its 5.3 million shares against the entire slate of board members, accusing incumbents of “a breakdown of corporate governance and lack of oversight.” The New York City Pension Funds, which holds 5.6 million shares of Walmart stock, also lined up in opposition to certain board members.

Two influential proxy advisory firms also weighed in. Institutional Shareholder Services Inc. recommended voting out Scott, Duke, Walton and Williams, stating that those directors did not respond adequately to the bribery allegations. Scott was CEO of Walmart at the time, while Duke was head of Walmart International.

Glass Lewis & Co. advised voting against Scott, Duke and Williams as well as Aida Alvarez, Michele Burns, James Cash and Arne Sorenson, all of whom were members on the audit committee when the allegations were reported to management.

In the final vote, 15.7% of votes were cast against Scott, 13.3% against Williams, 13.1% against Duke and 12.6% against Walton. Last year shareholders voted an average of 98.4% in favor of the board members.

Excluding the roughly 50% of shares held by the Waltons and other insiders, about 38% of the remaining shares were voted against Scott, about 32% against Williams and Duke, and just over 31% against Walton. Outside observers were divided over the significance of the numbers.

John Liu, New York City comptroller, termed it a “stinging rebuke” of the board, while Paul Hodgson, a senior research associate at GMI Ratings, a research firm that evaluates corporate boards, told the Associated Press that the no votes would need to have been higher than 40% to spur further action.

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