Wal-Mart's Scott: We're Not "Anti-Union"

In Part 2 of this Q&A, the CEO defends Wal-Mart's position on unions and explains why it's going after more affluent customers

In the last three years, critics have attacked Wal-Mart Stores (WMT ) on a variety of fronts. After long remaining silent to such criticism, Wal-Mart CEO H. Lee Scott Jr. has begun to reach out to adversaries.

In an interview on Sept. 14 with BusinessWeek Chicago Correspondent Robert Berner, Scott for the first time discusses the details of Wal-Mart's public-relations offensive and what he hopes to achieve. Edited excerpts of their conversation follow. (This is Part 2 of an extended version of an interview that appears in the Oct. 3, 2005, print version of BusinessWeek. Part 1 was published on Sept. 22, 2005.)

You're reaching out to environmental and anti-sweatshop groups. Why not reach out to labor unions?

I don't see any benefit to it. What I found in reaching out to these other groups is that while there are exceptions, in most cases they would like for Wal-Mart to be successful. That is fine with them. What they would like to see us do is change in a way that really makes a contribution to society.

For people who are worried about the environment it's one thing. For people who are worried about other aspects of society it's different. I do find it easy to work with those people because I believe they are sincere about what this world should look like. I don't necessarily always agree with them. I can learn from those people and learn where it is Wal-Mart can change to be a better company, more likely to be embraced or at least tolerated.

That isn't the agenda of the unions?

[Silence. No answer.]

Why is Wal-Mart anti-union?

Gosh, I don't think of us as being anti-union. I think of us as having a company where we have an open-door policy. In this company, you can talk to your district manger. You can talk to Lee Scott. You can talk to whoever you want to about what is happening. You don't have to go to a third party and say "here is my issue." You can get your issue resolved.

How would unions prevent that?

I think historically unions exist because they believe they represent the employee. In our case, I believe I exist because I represent the associate and the customer.

Will your steps to be more environmentally sound and protect the rights of foreign factory workers change your low-cost business model?

That is what you have to be careful about. There are things that change your business costs. When it comes to environment there is so much we can do as company that actually lowers our costs: reducing the amount of trash we create, which reduces the amount of transportation we have to have, which reduces the amount of fuel we have to burn.

Actually, there are years worth of work that should be adding to the bottom line and be a competitive advantage for us, not a competitive disadvantage. I think that is the appropriate place to start because you are not now dealing with does it price the customer out of the television. It is going to allow us to sell for less.

Why are you trying to capture the more affluent customer in addition to your lower-income customer base?

The more money you have, the more likely you are to buy your consumables at Wal-Mart and buy other products outside of Wal-Mart. This dollar that we capture on the consumable side is the lowest margin that you have in the store. Home, apparel -- all of those things have significantly higher margins.

What do we do to cause them to shop through [our stores] in a broader way? We are not going to compete with Neiman Marcus (NMGA ) or Saks (SKS ). But when they want to buy a sweater for Saturday night, why is it we can't sell them a black sweater?

From a business standpoint, what would it mean if you did capture more affluent customers dollars?

It's clearly billions of dollars.

Would a Wal-Mart that's more environmentally sensitive and more concerned with sweatshop issues resonate better with upper-income shoppers?

Yeah, I think so. In many cases the people on the upper end of that spectrum are more socially active because they're not living day-to-day and figuring out how they are going to get their kids through the next three years.

They do think about [social issues] differently. If we go out and do the right thing, we remove those kinds of barriers or those kinds of alerts that cause a person to have some concern. As you do that and you give people the freedom to feel good about you, then they are more willing to take a look.

What about with Wal-Mart employees?

The driving issue for me is twofold. No. 1 is our associates deserve and expect to see me out there representing this company and taking the hard knocks. And they deserve to know we're reaching out and doing something.

It's like one e-mail I got: "I know in my store I have health insurance, I have a good wage. I am treated well by my store manager. Is my store an exception?" All they know about is their store and how they are treated. That's the primary reason [for our outreach].

The secondary reason is because we as a company must be bold. We need to continue to evolve into a better company. And the only way for me to do that is to make sure that I am out there listening and understanding. How do we put the same level of energy [we put into saving money for our customer] into our approach to diversity, our approach to community interaction so that the community feels great about that Wal-Mart store being there?

I don't endorse the word polish. Our goal is not to polish our image. Our goal is to have the world understand who we are. And where we have failures or missteps [we have to] very aggressively try to say "yes, that we didn't do that as well as we should have."

By reaching out to people with environmental and anti-sweatshop concerns and not labor unions are you trying to divide your critics?

We have no strategy to divide. This is about us. We have full-time job here doing this. We are not asking anyone to take sides.

All we are asking is that people look at us for what we are and share their concerns and be open to us talking to them about what we are today and what our aspirations are for this company.

Edited by Patricia O'Connell

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