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Written by David Batstone
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Wal-Mart has come to terms with the fact that its public image is taking a
nose dive. According to The New York Times, Wal-Mart hired a top-notch
polling group to gauge the consumer impact of its reputation. The results
reportedly show that anywhere from 2 percent to 8 percent of Wal-Mart
shoppers have stopped visiting its retail stores due to "negative press they
have heard."
Wal-Mart is trying hard to change that public sentiment, of course. The
retailer harvested bushels of good will with its aid to victims of Katrina.
While government agencies floundered, Wal-Mart effectively delivered
emergency goods to those in most need. Late in 2005 Wal-Mart also announced
a campaign that it trumpeted as the beginning of a new era for the company.
Among the noteworthy initiatives: reducing greenhouse gases at its stores
around the world by 20 percent in the next seven years; offering health-care
coverage to all workers for around $25 a month; and calling on Congress to
raise the nation's minimum wage above the current $5.15 per hour.
All good steps. Nonetheless, I can't help but feel cynical about Wal-Mart's
efforts. The company seems more concerned about public relations than an
actual reform of its business operations. Wal-Mart now has a rapid-response
"war room" that handles criticism like a political operative. In actual
fact, former advisers from the Reagan, Clinton, and Kerry electoral
campaigns coordinate the image campaign. For that reason, it is hard to
separate fact from spin at Wal-Mart.
To its credit, the company did host a public forum on its business practices
last November. Advertised as "An In-Depth Look at Wal-Mart and Society," the
retailer invited nine economists to assess its effects on the economy.
Overall, the news was not good for the host. The majority of the economists
put forward research demonstrating that Wal-Mart makes total payroll wages
per person fall in towns where it does business and increases Medicaid costs
significantly among its own workers.
On the other side of the ledger, Jerry Hausman, a professor at the
Massachusetts Institute of Technology, showed that Wal-Mart's entry into a
local market lowers food prices at all retailers about 25 percent, with the
biggest benefits going to poor and minority households. "I'm actually quite
disturbed at some of my liberal friends who want to keep Wal-Mart out," said
Hausman.
No one disputes that Wal-Mart delivers lower prices, nor the fact that
Wal-Mart employs 1.33 million working-class Americans. But what are the
trade-offs for these benefits? Will Wal-Mart continue to squeeze its labor
costs to sharpen its competitive edge?
A troubling answer to those questions came in a leaked memo sent in 2005 by
a senior Wal-Mart executive to the company's board of directors. The memo
may be the best indicator of Wal-Mart's intentions.
Susan Chambers, Wal-Mart's executive vice president for worker benefits,
recommended in the memo that the company hire more part-time workers in
order to keep down health-care costs and screen out unhealthy people from
the Wal-Mart labor force. The Chambers memo acknowledged that 46 percent of
Wal-Mart's employees already were uninsured or on Medicaid. Nonetheless, the
primary purpose of the memo was to offer strategies for slicing benefits
even further.
The Chambers memo also clearly expressed her anxiety about how Wal-Mart?s
battered reputation might suffer further if these actions were taken.
Consumers and activists alike need to ensure that her concerns are
justified. Even the strongest company brand is vulnerable to a soiled
reputation.
*An original version of this column appears in the Jan/Feb edition of Sojourners magazine
Free downloads of the "In-Depth Look at Wal-Mart" research available from BusinessWeek
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