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2007-05-09
Bentonville, AR. Wal-Mart Faces 11 Hostile Resolutions At Its Annual Meeting

Everything will be carefully choreographed at Bud Walton Arena at the University of Arkansas Fayetteville campus on June 1, when Wal-Mart holds its Annual Meeting. But under the surface, the company is struggling with its financial performance, and is facing a growing number of critics both inside and outside Walton Arena. Wal-Mart's Annual Report for the fiscal year ended January 31, 2007 is just reaching shareholders this week, and the company's financial results may give some investors pause. The most impressive gains went to company President and CEO, H. Lee Scott, Jr. who earned $29.67 million, roughly half of it in stock awards. Scott earned the equivalent of what 2,164 Wal-Mart entry-level workers make in a year. But outside of Scott, the company's financial performance was not much to write home about. The company's net sales of $345 billion was an increase of nearly 12% over the previous year, but if you go back to the late 1980s, you find net sales increases of 34% annually -- three times that amount. More importantly, Wal-Mart's "comparable store sales increase" in U.S. stores was only 2% this past year, which is only one-quarter of the 8% same stores sales increase in 2000, and only a fraction of the double-digit same store sales increases that the company enjoyed in the 1980s. Net income (profit) in 2007 was $11.28 billion, or less than one-half of 1% growth, compared to 9% the year before. So Wal-Mart had perhaps its worst year ever in terms of increased net income, and the lowest same store sales increase in its 45 year history. To keep up its image, Wal-Mart spent $1.9 billion on advertising, or $5.2 million a day. At their annual meeting, Wal-Mart stockholders will face their usual array of resolutions. This year, as in the past, the company is recommending against all 11 shareholder resolutions relating to: charitable contributions, executive compensation, board of director voting rules, universal health care, compensation disparity, political contributions reports, qualifications for board members, tying executive pay to performance, a social responsibility report, and a social and reputation impact report. One of the resolutions, number 10, charges that Wal-Mart contributes "undisclosed and unknown" amounts to the Retail Industry Leaders Association (RILA) which oppose the aggressive screening of incoming cargo containers for homeland security purposes. "We believe our company," the shareholders say, "(is) in the perverse position of hindering national security improvements, putting our shipments at risk and U.S. citizens' well-being in jeopardy." In response Wal-Mart says this charge is "false and misleading" because the company supports voluntary cargo security programs. Wal-Mart says it is committed to the "highest standard of safety and security throughout its supply chain," yet opposes the use of "smart containers" and "electronic seals," the shareholders say.

What you can do: I still hold one share of Wal-Mart stock that I purchased in 1993. I will be voting YES on all 11 shareholder resolutions. Although I consider such shareholder resolutions to be futile, given the Walton family's strong voting control over the corporation's business, it sends an important message that all is not right on the reservation. More productive than activity at the shareholder end, would be activity on the institutional investor end -- questioning the appropriateness of investors who include Wal-Mart in their portfolio. TIAA-CREF, for example, uses the earnings of retired educators to invest heavily in Wal-Mart, and says it's for the "greater good." These kinds of institutional investors can impact Wal-Mart policies at the portfolio end, rather than at Wal-Mart shareholder meetings. Wal-Mart can carefully orchestrate its own annual meetings, but it cannot control what investors choose to do with their portfolio of investments. The only "greater good" from this year's Annual Report seems to have accrued to H. Lee Scott, Jr.










 
 
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