A Stepped-Up Assault on Wal-Mart

A scathing documentary and a coordinated campaign by labour, religious, and environmental groups spell more trouble for the retailing giant

By Aaron Bernstein

It seems as if everyone lays into Wal-Mart (WMT ) these days. Small business types attack the world's largest retailer for killing local mom & pop shops. Women's groups blast it for alleged discrimination against female employees. Labor and community organizations accuse it of paying poverty-level wages and dumping employee health-care costs onto taxpayers. And environmental and community activists decry the traffic and sprawl its big-box stores can bring to a neighborhood (see BW Online, 8/7/05, "Wal-Mart's Giant Sucking Sound").

Now all these groups have joined forces to gang up on the Bentonville (Ark.)-based giant. They intend to fire the first fusillade the week of Nov. 13, when a coalition of 400-plus national and local groups will mount hundreds of actions nationwide -- just as the key retailing holiday season kicks into gear.


  The campaign, dubbed Higher Expectations Week, is being coordinated by Wal-MartWatch, an umbrella group started early this year by maverick union leader Andy Stern, head of the Service Employees International Union (SEIU).

Wal-MartWatch is also in league with independent filmmaker Robert Greenwald to publicize the Nov. 4 release of his bitingly satirical new movie, Wal-Mart: The High Cost of Low Price. "Our goal is to use a wide range of grassroots actions to raise awareness of the problems Wal-Mart causes for our society," says Wal-MartWatch Executive Director Andy Grossman.

Not that the giant retailer isn't fighting back. Wal-Mart has launched a campaign of its own, billing the Greenwald movie as propaganda and arguing that damaging Wal-Mart hurts American consumers, especially poor ones.


  It's even sponsoring an academic conference to examine its own impact on the U.S. economy. To anchor the Washington, D.C., meeting -- scheduled for the movie's opening date -- Wal-Mart commissioned a yearlong study on the subject by respected economic consulting firm Global Insight. "There are critics who have good information and challenges for us that we're interested in hearing from, and then there are those who don't want our company to succeed, like many of these (anti-Wal-Mart) groups," says Robert McAdam, Wal-Mart's corporate affairs vice-president.

Still, the concerted attack challenges Wal-Mart's recent efforts to reach out to its critics (see BW, link to "Can Wal-Mart fit into a White Hat?". Wal-Mart CEO H. Lee Scott Jr. began the charm offensive to counter the mounting damage adversaries have inflicted on the company's reputation, which has hindered its new-store openings and bitten into sales growth.

While it's too early to tell how well the outreach has been working, Wal-Mart already has scored early successes by getting some environmental and human rights groups to sit down and talk over problems. That progress could be threatened if the Wal-MartWatch campaign catches on.


  That's the strategy of Stern, Sierra Club Executive Director Carl Pope, and other Wal-MartWatch board members. Dubbing themselves The Hub, the group formally got underway in March when Stern's union put up $1 million in seed money. Since then, it has hired a staff of 34 and pulled in donations from foundations, other unions, and individuals.

Ironically, the one campaign it isn't pursuing is an effort to unionize Wal-Mart workers. The United Food & Commercial Workers, which has tried to organize the company for years, recently joined SEIU in breaking from the AFL-CIO to mount more aggressive recruitment drives. But at least temporarily, the unions have decided that Wal-Mart is too powerful to tackle head-on.

Instead, the groups gearing up for the November actions are aiming at what they see as the evils of Wal-Martization: A business model that puts top priority on low prices -- and the low costs that underpin them. A half-dozen town hall meetings in places such as Iowa City, Madison, Wis., and Tucson will push for local and state legislation requiring Wal-Mart to pay a higher share of its employees' health insurance, which currently covers just 44% of its 1.3 million U.S. workers.


  The meetings will be modeled after a Sept 19 Cleveland State University forum attended by a 100 or so, featuring local business and union leaders as well as elected officials, led by Ohio Congressional Democrats Sherrod Brown, Dennis Kucinich, and Stephanie Tubbs-Jones.

For churches and synagogues that plan to participate in Higher Expectations Week, there's even a sample sermon drafted by activist religious leaders. Reverends and rabbis will be prompted to ask: "Should we be calling upon Wal-Mart to be a good employer and a good neighbor?" Says Reverend Ron Stief, the Washington, D.C. director of the Justice & Witness Ministries of the United Church of Christ (see BW, 8/6/03, "Is Wal-Mart Too Powerful?"). "Wal-Mart's strategy for economic development doesn't meet our standards for a moral economy."

The anti-Wal-Mart film will get wide play, too. Greenwald directed a similar exposé-type documentary last year called Outfoxed: Rupert Murdoch's War on Journalism, which took aim at the conservative media magnate's Fox News channel. The new feature has interviews with former company managers who claim they directed employees to local government-run health-care programs so the company wouldn't have to pay for their insurance, along with other damning testimonials.


  McAdam rejects the accusation that his company has any such corporate policy. And he says the retailer plans to continue to reach out to critics who aren't bent on eliminating Wal-Mart's core business model. The Nov. 4 conference is one innovative -- if risky -- way to do so.

Planners had hoped that economists would point out the boon Wal-Mart's low prices bring to consumers and the economy, says McAdam. But executives knew that to have credibility, a conference would have to accept critics as well as advocates. So Wal-Mart hired Global Insight to put out a call for academic papers.

Being an unpredictable bunch, however, the academics submitted several papers that conclude that the company's low prices derive not just from being more efficient but also by lowering wages.


  Worse yet, some are by economists who might be expected to be sympathetic. David Neumark, a senior fellow at the Public Policy Institute of California, has written numerous studies criticizing minimum-wage laws as misguided. Yet he co-authored a paper that found "when Wal-Mart opens a new store, total payrolls per worker in the county decline by 3% to 5% over the following years." McAdam says he won't comment on any studies until he has read them.

Wal-Mart also paid Global Insight to conduct a yearlong examination of the retailer's role in the U.S. economy. Wal-Mart even supplied what it says are unprecedented amounts of data on its wages and workforce.

To lend it further credibility, Wal-Mart asked several prominent economists to oversee Global Insight's study. One, Marvin Kosters of the American Enterprise Institute, is a conservative, while another, Isabel Sawhill of the Brookings Institution, is a liberal.


  The study won't be completed until a few days before the Nov. 4 meeting. Still, if it completely contradicts the independent economists' findings on wages, the entire exercise might hurt Wal-Mart more than it helps.

Wal-Mart officials frequently point out that its wages and benefits are no worse than at other low-price companies such as Target (TGT ) or McDonald's (MCD ). Some of the critics don't disagree. But to them, Wal-Mart's status as the world's largest company makes it a target -- one they intend to keep shooting at with all the firepower they can muster.

Bernstein is an editor in the BusinessWeek's Washington bureau

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