Eight foreign and domestic institutional investors in Wal-Mart, mostly pension and trust funds, are asking the retail giant to report annually whether the company “clawed” back pay from senior executives found to have performed unethically in the previous year “and to describe the general circumstances of any recovery.”
The measure, Proposal No. 8 - Request for Annual Report on Recoupment of Executive Pay - is aimed specifically at higher-ups who are found to have “violated company policy or committed misconduct detrimental to the company.” A clawbackis when money or benefits are taken back as a result of special circumstances.
“The policy basically can recover executive compensation from Wal-Mart executives if they are found to have violated Wal-Mart’s statement of ethics, and that includes prohibitions on foreign corruption, harassment, conflicts of interest, and health and safety issues,” said Meredith Miller, chief corporate governance officer for United Auto Workers Retiree Medical Benefits Trust, one of the investor groups named in the proposal.
Those behind the measure also include Connecticut Retirement Plans and Trust Funds, Illinois State Board of Investment, Amalgamated Bank Long View Funds, First Swedish National Pension Fund, Third Swedish National Pension Fund, Fourth Swedish National Pension Fund and F&C Management Ltd.Together they hold more than $3.1 billion in Wal-Mart common stock.
The proposal makes note of the accusation that Wal-Mart bribed officials in Mexico to hasten the acquisition of building permits, along with similar allegations of misconduct in India, China and Brazil. Also mentioned is Wal-Mart’s link to garments made in factories in Pakistan and Bangladesh,where fires and building collapses have killed hundreds of workers.
The measure will be put to a shareholder vote during Wal-Mart’s annual meeting June 7 in Fayetteville.
In Wal-Mart’s proxy statement filed with the Securities and Exchange Commission on April 22, the board recommended that shareholders vote against the proposal because it maintains that existing SEC disclosure rules already require sufficient disclosures regarding Wal-Mart’s comprehensive recoupment policies and practices. When contacted Tuesday, Randy Hardgrove, Wal-Mart’s director of national media relations, referred to the proxy statement to answer questions about why Wal-Mart was against the measure.
“The Board and our management believe that compensation policies should promote sustainable value creation. That is why we include in our compensation plans, offer letters, and other agreements numerous terms and conditions that give us broad rights to recoup or not to pay compensation otherwise payable to Associates or former Associates who have engaged in misconduct,” the statement said. “We believe that these recoupment rights are broader than those provided to the boards and management of many companies and reflect Walmart’s strong commitment to ethics and integrity.
Backers of Proposal No. 8 disagree.
“We believe that the disclosure of clawbacks for a handful of individuals is inadequate for a company with 2.2 million employees and multiple business units and subsidiaries located around the globe,” the proposal stated.
Miller said she believes that Wal-Mart has had a clawback policy in place for well over a decade and that the purpose of Proposal No. 8 is to determine whether the Wal-Mart board of directors has actually put it to use.
“I think it’s an important issue for investors’ confidence in the company. Wal-Mart is under a lot of scrutiny right now for alleged misconducted both here in the U.S. and abroad. And I think that investors view it as their right to know whether indeed the company has used the clawback in the last year,” Miller added.
She said her group is not asking for specific information about individuals or amounts of money repaid. “We’re really trying to understand whether the company has taken its role … seriously,” she said.
Business, Pages 25 on 05/15/2013