Wal-Mart's Latest Ethics Controversy

An employee who scrupulously followed the company's own ethics guidelines may find herself out of a job

By Pallavi Gogoi

The very first day that Chalace Epley Lowry started working at Wal-Mart Stores (WMT) as an administrative assistant in the communications department, on Jan. 2 of this year, she went through a day-long orientation with a heavy emphasis on ethics. "We were told that even if we see something that has the appearance of something unethical we should report it," says Lowry. Now, two weeks after filing a complaint against a more senior executive, the 50-year-old mother of two finds herself looking for another job.

Lowry is the first to admit that she didn't know whether the Wal-Mart executive had done anything wrong. Mona Williams, the vice-president for corporate communications, had asked Lowry to copy some papers she thought were related to stocks. When Lowry found out a few days later that Wal-Mart was planning a $15 billion stock buyback, she worried that Williams might have traded on insider information by exercising her stock options. "In all honesty, Mona's transactions could all have been aboveboard," she says, "but I acted in good faith, just pointing out that there might have been some wrongdoing."

"Next Steps"

Wal-Mart says Lowry is simply confused. The company says she mistook a deferred compensation form for an options exercise request and that Williams did nothing wrong. "The Ethics Office determined the same day the complaint was filed that the document that created Ms. Lowery's [sic] concerns had nothing to do with stock trading and that there was no violation of Wal-Mart's ethics policy," said David Tovar, a Wal-Mart spokesman, in a statement. (Wal-Mart spells the name "Lowery" throughout its communications, although her name, as she told BusinessWeek repeatedly, is in fact spelled Lowry.)

In dispute, however, are the circumstances that led to Lowry's looking for a new job. Soon after Lowry filed the complaint, her identity was disclosed to Williams. Wal-Mart says Lowry agreed to disclosure, but Lowry says she was never given a choice. Lowry said it was impossible to remain in the department since Williams was effectively her boss, so she asked to be transferred. Wal-Mart has said that Lowry now has 60 to 90 days to look for a job within the company, but she may not get one. If she can't find another Wal-Mart job in 90 days, human resources officials have told her that they would have to discuss "next steps."

Tarnished Image

For Wal-Mart's own communications department to be dealing with an issue like this is particularly poignant. Williams and the department have been the key people trying to protect Wal-Mart's reputation over several difficult years. The company has come under scathing attacks for its workplace practices from union-backed groups WakeUpWalmart.com and Wal-Mart Watch, as well as from several politicians including Presidential hopefuls Senator Barack Obama (D-Ill.) and former Senator John Edwards (see BusinessWeek.com, 11/16/06, "Can Barack Wake Up Wal-Mart?"). Wal-Mart has also taken heat from shareholders as its stock price has stagnated (see BusinessWeek.com4/30/07, "Wal-Mart's Midlife Crisis").

Most recently, the issue of ethics at Wal-Mart has been in the spotlight because of the firing of a high-profile marketing executive, Julie Roehm (see BusinessWeek.com, 2/12/07, "My Year at Wal-Mart"). Wal-Mart says that the company dismissed Roehm because she violated the company's code of ethics by accepting gifts from vendors and because she had an affair with a subordinate. In a lawsuit against the company, Roehm has denied those charges and alleged that other top Wal-Mart executives have received gifts from vendors. She says in her suit that Chief Executive H. Lee Scott Jr. accepted trips and discounts on yachts and jewelry from billionaire Irwin Jacobs, who owns a company that buys surplus items from Wal-Mart. Wal-Mart has denied those charges, and Jacobs has filed claims against Roehm for defamation.