F&C files proposal for tighter controls at Wal-Mart

In advance of tomorrow's Wal-Mart AGM, F&C has co-filed a shareholder proposal over concerns that the supermarket giant is failing to comply with its own governance standards.

According to Karina Litvack, Head of Governance and Sustainable Investment at F&C, despite strong policies on paper, Wal-Mart has struggled to implement its standards across its massive US business.

"Weaknesses in internal controls have eroded the company's reputation as an attractive employer and are adding fuel to the fires of Wal-Mart's critics," she said. "We fear that its failure to deliver on these policy commitments is inhibiting Wal-Mart's ability to expand into new domestic markets."

Over the past several years, F&C has become increasingly concerned by signs of failure in internal controls that have led to government investigations and class action lawsuits by employees. Allegations include: requiring employees to "work off the clock" during breaks and after shifts, systematic discrimination against women and questionable tactics to prevent workers from voting for union representation.

Litvack said that trouble had now spread to the executive suite, where a Vice Chairman was fired for fraud and where, most recently, a former marketing executive alleged the Chief Executive had violated Wal-Mart's strict policies governing conflicts of interest with suppliers.

"We got off to a promising start in 2005 with expectations of a dialogue with the independent directors on the Audit Committee. But when this simply withered on the vine, we had little choice but to bring our concerns about internal controls, labour violations and the erosion of the company's reputation to our fellow shareholders.

"We found that the company was not interested in engaging in a productive discussion about how it builds and supports a compliance culture and as a result, we have joined an international group of large filers led by the New York City Employees' Retirement System to file a shareholder proposal," concluded Litvack.