Wal-Mart gearing up to host shareholders

Mystery headliner overshadows agenda

NWA Media/JASON IVESTER
Host Hugh Jackman (second from left) greets Alice Walton, Jim Walton and Rob Walton (right) on stage during the Wal-Mart Shareholders meeting on Friday, June 7, 2013, inside Bud Walton Arena in Fayetteville. Visit photos.nwaonline.com for more photos.
NWA Media/JASON IVESTER Host Hugh Jackman (second from left) greets Alice Walton, Jim Walton and Rob Walton (right) on stage during the Wal-Mart Shareholders meeting on Friday, June 7, 2013, inside Bud Walton Arena in Fayetteville. Visit photos.nwaonline.com for more photos.

FAYETTEVILLE -- The world's largest retailer really knows how to pack 'em in.

Actor Hugh Jackman, host of Wal-Mart's 2013 Shareholders' Meeting, wowed a crowd of about 14,000 at the University of Arkansas' Bud Walton Arena, again the site of this year's annual meeting.

In 2012, Justin Timberlake ran the show. The year before, Will Smith led the festivities. Celebrities Tom Cruise and Ben Stiller have made appearances and chart-toppers Taylor Swift, Mariah Carey and Beyonce have delivered memorable performances.

The show's lineup is kept under wraps until the big day. One observer who works closely with Wal-Mart said he seldom finds out until the stars check in at the Embassy Suites in Rogers the day before the 7 a.m. Friday meeting.

"They keep this very confidential," the source said.

Shareholders and employees, known at Wal-Mart as "associates," could start trickling into town as early as today . Wal-Mart International will host a meeting for its visiting workers, and Wal-Mart U.S. will round up employees from all over the country for a gathering of its own. Momentum will continue to build with a Wednesday night concert including 1970s and '80s rock acts Foreigner and Styx.

The main event has become such a spectacle that it's difficult at times to remember it's a business meeting.

In between the song and dance, stockholders and employees will hear from Wal-Mart's top brass about the state of the company and what lies ahead. After five straight quarters of flat-to-negative revenue growth and six consecutive quarters of decreased foot traffic in stores, analysts are eager to learn Wal-Mart's strategy.

"If I were a major shareholder, I would want to know what Wal-Mart is doing to try and restore traffic," said Brian Gilmartin, a portfolio manager at Trinity Asset Management in Chicago. Given Wal-Mart's size, the retailer "is pretty much a slave to the economy and its demographic," which is the low- to middle-income consumer, he said.

"I think that is going to be an issue for them going forward, although they might not want to address it publicly," Gilmartin added.

In the recent history, the retailer has struggled against crippling winter weather and changes in consumer spending caused by reductions in the Supplemental Nutrition Assistance Program.

The company continues to spend hundreds of millions of dollars on federal investigations related to allegations that it violated the Foreign Corrupt Practices Act (FCPA) while expanding in Mexico, China, Brazil and India. It's been alleged that Wal-Mart's Mexican partner bribed officials there to speed up licensing for construction.

Michael Koehler, known as the "FCPA Professor" at Southern Illinois University School of Law, estimates that Wal-Mart has spent an "eye-popping" $1 million per working day on complying with the anti-corruption law since the conduct was made public in 2012. Investigations are ongoing by the U.S. Department of Justice and the Securities and Exchange Commission. Wal-Mart said it is cooperating with the federal agencies.

"They're cycling through a rough patch," Gilmartin said of the mega retailer. "It just seems like it's been one thing after another."

This year's annual meeting is the first for Doug McMillon as president and CEO of Wal-Mart Stores Inc. and David Cheesewright as president and CEO of Wal-Mart International. As of Friday, Wal-Mart board member and former President and Chief Executive Officer Lee Scott and board member Chris Williams will retire from the board after a decade of service.

THE VOTE

During Friday's meeting, the company will ask shareholders to approve a slate of 14 director nominees and to approve compensation packages for McMillon and other Wal-Mart executives. The company also seeks approval of Ernst & Young as the company's independent accountants for the current fiscal year, which ends in January.

The board members up for re-election are McMillon, Aida Alvarez, James Cash, Roger Corbett, Pamela Craig, Doug Daft, Mike Duke, Tim Flynn, Marissa Mayer, Greg Penner, Steven Reinemund and Linda Wolf as well as Wal-Mart founder Sam Walton's sons Rob Walton and Jim Walton. Craig and McMillon both joined the board in November.

Stockholders also will vote on three proposals from large shareholders groups. The company opposes all three.

One of the proposals asks for an annual report on Wal-Mart's corporate lobbying "to evaluate whether it is consistent with the company's expressed goals and in the best interests of shareholders and long-term value." Wal-Mart asked shareholders to turn it down, contending it already discloses information about its lobbying activities and procedures as required by "law, regulation and Wal-Mart policies."

Another proposal asks the board to adopt a policy that provides, when possible, that the board chairman be someone who has not served as an executive officer of the company and who is not affiliated with management.

S. Robson Walton, the eldest son of Wal-Mart Stores Inc. founder Sam Walton, has been chairman of the company's board of directors since 1992. Before his election as chairman, he was senior vice president, corporate secretary, general counsel and vice chairman of the company. The company separated the roles of chief executive officer and board chairman in 1988.

Those behind that proposal cited, among other things, the ongoing investigation in Mexico and the other countries. The alleged activities "highlight the need for advanced oversight of Wal-Mart's corporate culture and behavior," the measure said.

Wal-Mart asks shareholders to vote against the resolution, saying that those duties are carried out by the board's "presiding director," an independent board member since 2004. James I. Cash Jr. is the presiding director.

The third shareholder proposal asks for an annual report disclosing whether the retailer recouped any incentive or stock compensation from a current or former senior executive if the executive was found to have not acted in the best interest of the company. Wal-Mart opposes the measure "because existing SEC disclosure rules already require sufficient disclosures regarding Wal-Mart's comprehensive recoupment policies and practices," the company said in the proxy.

All three shareholder measures have been brought up for shareholder vote in the past in one form or fashion. The Walton heirs' stock ownership in the company is about half of Wal-Mart's 3.2 billion outstanding shares, which means they pretty much control the vote.

Aaron Brenner, an analyst with the United Food and Commercial Workers International Union Capital Stewardship Program, said shareholder groups seeking change at Wal-Mart often gauge their success by the percentage of votes from independent shareholders. A measure last year asking for an independent board chairman garnered nearly 36 percent of the non-insider vote, a success by proponents' standards, he said.

"I think we've seen changes at Wal-Mart. Over the years there have been improvements in the corporate governance at Wal-Mart because of the pressure for shareholders and other stakeholders," Brenner said.

Institutional Shareholder Services inc., a proxy adviser, said Wal-Mart needs a more independent board to assure proper handling of the foreign-bribery probe and proposed executive pay plan. The firm has so little faith in Wal-Mart's corporate governance that it gave the company an "8" rating on a scale of 10 with 10 reserved for those with the greatest governance risk. Institutional Shareholder Services opposed the re-election of Walton as chairman as well as the re-election of former CEO Mike Duke.

In an SEC report filed by Wal-Mart on Thursday, the retailer asked shareholders to discount the adviser's opinion on the matters of executive pay and the aforementioned board elections.

"Even after adjustments, Wal-Mart's fiscal 2014 cash bonus and performance share payouts were historically low. We believe our executive compensation program is working the way it should. We acknowledged that our performance in fiscal 2014 did not meet our expectations, and our executives' compensation reflected that," the company said.

R-E-S-P-E-C-T

About the time shareholders and employees partake in the revelry in Arkansas, other, less-satisfied associates and their lawyers are scheduled to gather in Oakland, Calif., for a National Labor Relations Board hearing on charges that the retailer wrongfully fired employees in several states because they spoke out against their employer. Wal-Mart has said it was within its rights when it disciplined workers for taking part in short strikes.

And of course, no Wal-Mart shareholders' meeting is complete without protests.

Wal-Mart workers who are also mothers and members of OUR Walmart (Organization United for Respect at Walmart), said Thursday they will be striking this week in Bentonville and about 20 other cities across the U.S. They want pay of at least $25,000 annually, full-time work schedules and a halt to the retaliation against Wal-Mart employees who vocalize their wishes.

Wal-Mart of late has designated "the mom" as its most important customer and consumer gauge.

"Working moms are the heartbeat of our workforce, and there is simply no way to get the economic recovery out of first gear without the largest employer of women creating family-sustaining jobs," said Ellen Bravo, director of Family Values @ Work.

Since its inception three years ago, OUR Walmart officials believe they've made headway in getting Wal-Mart to change some of its policies. For example, the company recently rolled out a new system that allows workers to sign up for open shifts online to get more hours.

"These make-overs must be bigger than just words," said Paula Rosenblum, managing partner at RSR Research. "Deeds must follow. From what I've seen and heard, it appears as though new management has made some incremental improvements. Even OUR Walmart has acknowledged that."

Shareholders can vote online at proxyvote.com or by telephone at (800) 690-6903 until midnight the day before the meeting. They also can vote by proxy card, which will be mailed to them and returned by mail; by scanning a QR code that's on the mailed proxy card; or in person at the June 6 meeting. The only prerequisite for admission to most events and to vote is that attendees/voters must have owned Wal-Mart stock by April 11.

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