By Wendy Zellner If the outcome of discrimination lawsuits at other major companies is any guide, Wal-Mart Stores WMT) could be facing a cultural revolution. The retailing behemoth will feel intense pressure to settle what became the nation's largest sex-discrimination class action ever on June 21. But any settlement would probably require dramatic changes in how Wal-Mart operates and would open its insular culture to scrutiny like never before.
Barring a victory on appeal to overturn the court decision, Wal-Mart will either proceed to trial or settle a case that covers up to 1.6 million current and former female employees. Most legal experts bet on the latter. Based on past discrimination accords and the goals of the plaintiffs' lawyers in Wal-Mart's case, the outlines of a settlement are fairly clear.
OBJECTIVE CRITERIA. Billions of dollars in back pay and punitive damages would be just the start for this $256 billion Goliath. For a company that prides itself on a fast-moving, entrepreneurial culture, the demand for an outside monitor and court supervision that could last as long as a decade would be the most troubling. Such terms would be similar to those in discrimination settlements at Coca-Cola (KO), Lucky Stores, and State Farm Insurance. Wal-Mart won't comment on any settlement talks.
What's more, a court-appointed monitor could have the ability to review Wal-Mart's pay and promotion records and to audit compliance. Such an overseer "is completely nonnegotiable," says Brad Seligman of the Impact Fund, one of the lawyers representing the women in the case. Wal-Mart spokeswoman Mona Williams says it "would be happy to cooperate" with an independent monitor, depending on the scope of its involvement.
Although Wal-Mart has altered the way it posts management jobs and pays employees since the suit was filed in 2001, the company may face demands for more change. Plaintiffs' lawyers will insist on objective criteria that can be used to evaluate job performance and promotions -- something that has been lacking. Wal-Mart says it has recently brought in the Hay Group consultancy to revamp its job criteria.
BUREAUCRATIC BOG? As in other big discrimination cases, Wal-Mart may have to agree to goals for boosting women in management. Clear-cut objectives and timetables have worked well at Salomon Smith Barney (C), which has upped the women in its brokerage ranks since settling a sex-discrimination case in 1997, says lawyer Linda D. Friedman, who represented women in that suit. The company also improved training and mentoring and created an office of diversity, one step already taken by Wal-Mart.
"You can really reform a company" with such settlements, Friedman says. Wal-Mart would also be pressured to close the male-female pay gap -- at a cost of at least $500 million, say plaintiffs' lawyers.
Would such a deal bog Wal-Mart down in bureaucracy or make its employment practices as enviable as its tech or its logistics? Hard to say. But the retailer is bound to find out. Zellner is BusinessWeek's Dallas bureau chief