The Common Good
January 2006

Spinning Wal-Mart

by David Batstone | January 2006

Wal-Mart is focused more on public relations than a reform of its business operations.

Nearly two years have passed since the release of Saving the Corporate Soul. In my book I made a strong critique of Wal-Mart, particularly the way it mistreats its employees. At the time, Wal-Mart employees in 28 states were waging legal battle, accusing their bosses of cheating them out of overtime pay. In numerous independent incidents, supervisors ordered Wal-Mart workers to continue working after they had punched out on the time clock.

I recall two strong responses to this section of my book. Agents from Wal-Mart informed me that I had gravely misrepresented the facts and unfairly besmirched a proud company legacy. Social justice activists, on the other hand, let me know what a waste of time it was to apply business ethics with the likes of Wal-Mart. The retail giant, they said, was impervious to change.

A lot has happened in two years to change the terrain. 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 consultancy to gauge the consumer impact of its poor 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.” That trend, along with the prospect of Robert Greenwald’s hard-hitting documentary, Wal-Mart: The High Cost of Low Price, reaching into a mass market, pushed Wal-Mart into a counteroffensive.

Wal-Mart 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. In addition, Wal-Mart came forward with a campaign that it trumpeted as the beginning of a new era for the company. Among the noteworthy initiatives: reducing greenhouse gases at 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.

In most respects , however, Wal-Mart’s efforts to change its spots focus more on public relations than a 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 its efforts. For that reason, it is hard to separate fact from spin.

To its credit, Wal-Mart did host a public forum on its business practices in 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. With only minority dissent, the economists put forward research demonstrating that Wal-Mart causes total payroll wages per person to fall in towns where it does business and increases Medicaid costs significantly among its own workers.

On the positive 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 at the forum.

No one disputes that Wal-Mart delivers lower prices, of course, nor the fact that Wal-Mart employs 1.33 million working-class Americans. As the subtitle of Greenwald’s film implies, however, what are the trade-offs for these benefits? Will Wal-Mart continue to squeeze its labor costs to sharpen its competitive edge?

A memo sent in 2005 by a high Wal-Mart executive to the company’s board of directors, and leaked to the press, is probably 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 did acknowledge 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.

It is well worth noting that the Chambers memo clearly expresses 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.

David Batstone is executive editor at Sojourners.

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