Wal-Mart's Latest Ethics Controversy


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

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.

Taking Its Toll

All of this has also led to something of a consumer backlash: Some people won't shop at Wal-Mart because they don't want to support a company that they perceive as unfair to workers or bad for the economy. As early as 2004, a confidential report prepared by consulting firm McKinsey & Co. found that 2% to 8% of the company's customers have stopped shopping there "because of negative press they have heard." Another document, prepared in October, 2006, by Wal-Mart's former advertising agency GSD&M Advertising, found that the segment of Americans who say the chain is their No. 1 destination for discount shopping fell from 75% two years ago to 67%. The ad agency suggests that besides competition, Wal-Mart's image could account for this drop-off. The report also says that Wal-Mart's rating as a company that consumers trust and respect has "steadily declined" in the last two years.

This has all been difficult for a company with a long, proud history, dating back to the retailer's founding in Arkansas in 1962. Wal-Mart prides itself on having one of the strictest and most stringent ethics policies in the industry. Buyers are not allowed to accept even a cup of coffee from their suppliers. And its 1.3 million employees are encouraged to report any ethics violations that they might suspect or see.

Name Dropping

But Lowry's story may prove a cautionary tale for workers at Wal-Mart, and beyond. She had been on the job only a few months when she saw the documents that fueled her concerns. With the words from her initiation class still ringing in her ears, she decided to tell her direct supervisor, Sarah Clark, a senior director in the communications department. Clark encouraged her to report the issue to the company's ethics office. So on May 25, Lowry filed a complaint.

Within days, Williams knew that it was Lowry who had raised questions about her ethics. Wal-Mart says that's because Lowry agreed to make her name public. "Ms. Williams was informed after the Global Ethics Office concluded their review and after Ms. Lowery [sic] agreed that it was appropriate to inform and discuss the matter with Ms. Williams," said Tovar in his statement. However, Lowry says her supervisor made it seem like it was required. "It was phrased to me like it was part of the complaint process to tell Mona that I had filed a complaint," she says. "I didn't know I had a choice."

"Disheartened"

Wal-Mart says that Lowry was given the option of staying in her current position. "In spite of the fact that Ms. Lowery was not treated any differently after making her report and was in fact praised for bringing her concerns to her supervisor's attention, Ms. Lowery [sic] indicated that she was uncomfortable continuing in her current position and asked to be transferred," said Tovar in his statement.

Lowry says that a human resources officer she met soon after her identity was disclosed brought up issues related to team dynamics and alleged that she didn't get along with co-workers. Given the timing of the comments, Lowry says she grew even more uncomfortable in the communications department. She says she had an outstanding evaluation in her last job performance review in March, scoring 4.5 out of a possible 5 in the rating scale.

Today, Lowry feels "totally disheartened" by the way the ethics complaint was handled. She was just trying to do what was right. Now she hopes something good comes from the episode. "My experience was not what I perceived the ethics line or open-door policy to be, and I would think twice before going that route again," she says.

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