Wednesday, November 20, 2013

Why Walmart Should be Public Enemy #1

Walmart could afford to pay every one of its U.S. employees $14.89 an hour by just not buying back its own stock. A recent article at Salon points to a new report which concludes that, rather than buying back stock to enrich the Walton family, Walmart could use the same cash to give raises to their employees.

"We find that if Walmart redirected the $7.6 billion it spends annually on repurchases of its own company stock, these funds could be used to give Walmart’s low-paid workers a raise of $5.83 an hour, more than enough to ensure that all Walmart workers are paid a wage equivalent to at least $25,000 a year for full-time work."

Also noting a Bloomberg estimate that Walmart repurchased roughly $36 billion in stock in the four prior fiscal years, the reports says, "further consolidated ownership of the company in the hands of the heirs to company founder Sam Walton" securing the Walton family a bare majority stake in the company, and "increased the value of ownership among the Waltons and the other remaining shareholders."

* It should also be noted that many corporations use this tactic to manipulate their stock prices to increase the value of a CEO's stock-option grants. Just as in Walmart's case, by buying back shares, it reduces the number of shares traded on the market so that the same level of earnings are distributed over fewer owners, making each remaining share worth more. Those owners who keep their stake in the company see the value of their holdings increase even if the company’s performance does not change. The main owners who have kept their own stake in Walmart are the Walton family, who now own more than 50 percent of the company (Christy Walton, for example, earns more than $1.2 million EVERY SINGLE DAY --- just on her Walmart stock dividends!)

But even for investors, the intended beneficiaries of a share buyback, the value of this financial maneuver is often illusory. As a prominent business analyst explained to the Wall Street Journal last year, "the evidence overwhelmingly shows that heavy buyback companies usually create less value for shareholders over time [and] many managements have become so infatuated with how buybacks increase earnings per share that these distributions are crowding out sound business investments that create more value over time." (Bloomberg: How Walmart's Waltons Maintain their Billionaire Fortune)

But Walmart contends that their stock buybacks did nothing to boost Walmart’s productivity or bottom line and had no direct benefit for Walmart’s customers or frontline employees.

In contrast, the new report says that a hefty raise for Walmart employees would aid customers by increasing productivity and decreasing turnover; and benefit the broader public by improving consumer demand (including for Walmart goods) and thus hastening economic recovery.

Workers have mounted a series of short-term work stoppages in several cities over the past month in the lead-up to a planned “Black Friday” day of strikes and protests next week.

As planned Black Friday strikes drew increasing media attention last year, Walmart continued to publicly dismiss the actions as stunts and the workers involved as an unrepresentative fringe. But workers charge that behind closed doors, the company was waging a stepped-up campaign to to intimidate them out of striking. That includes both alleged illegal threats and punishments, and likely legal mandatory meetings designed to discourage workers from joining the Black Friday rebellion. Walmart employees then filed dozens of charges against Walmart.

Recently the National Labor Relations Board has decided to pursue those charges against Walmart for threatening and punishing workers who planned to go on strike last year. The agency said that Walmart intimidated, surveilled or punished workers in 14 different states, violating U.S. labor law. The agency also said that Walmart illegally threatened workers in statements made in two news broadcasts. Walmart's only response:

"The fact is, we provide good jobs and unparalleled opportunities for our associates."

Walmart also claims, "We work directly with manufacturers, eliminating costly markups." If by "work with," they mean "dictate to," then this claim is accurate. But then again, as Charles Fishman, the business reporter who wrote The Walmart Effect asks, "What is the high cost of these low prices?" Walmart's market power is such that many of its suppliers face a stark choice: take dictation from Walmart, or lose half or more of their business. (See my post: Walmart: The Greatest Basis Pointers)

Also, as I wrote at the Economic Populist, consider the irony of companies like Walmart that economically forces their employees to apply for food stamps at a huge cost to the taxpayers for these "wage subsidies", and then profits from their food stamp dollars. That's not more public welfare, that's more corporate welfare. But now those profits are at risk, because the GOP's current version of a farm bill includes ZERO for food stamps. (See my post: What Walmart Costs Taxpayers)

As an aside: Supervalu is the third-largest food retailing company in the United States (after Kroger and Safeway) and ranks #75 on the Fortune 500 list --- but a Goldman Sachs analyst has recently downgraded the stock of Supervalu (from HOLD to SELL) citing federal cuts to food stamps as their stock price tumbled.

Walmart has already gathered a few headlines when it threatened to cancel construction on three stores in Washington D.C. after the city council wanted to force them to pay a living wage of $12.50 an hour --- although earlier this year, Walmart claimed in a letter to Ralph Nader that $12.67 an hour was already the average wage they paid their employees.

How much Walmart currently pays U.S. employees is still a contentious question. It's been reported that Walmart now pegs its average hourly wage at $12.78, but that figure also includes managers and excludes workers who aren’t full-time. Drawing on 2011 IBISworld data and GlassDoor surveys, OUR Walmart activists have pegged the wage at less than $9 per hour. They’ve called for a wage floor of $25,000 a year.

Walmart (the largest private sector employer in the U.S.) pushes their workers onto public services and food stamps while lobbying against raising the minimum wage and strongly (while some say, illegally) resisting union organizing.

Meanwhile (and this is almost ludicrous) Walmart is NOW asking its employees to donate food to the less fortunate. (Boycott Walmart Day is on November 29th, 2013)

(*ALSO READ: Walmart Bribes: Just Business as Usual)



    Last night Stephen Colbert ripped into Walmart's wage inequality

  2. UPDATE //////////////

    REPORT - - - - How Walmart Can Invest in Its Workforce Without Costing Customers a Dime

  3. UPDATE ----

    Five years after a worker was killed in a crush of shoppers on Black Friday, Walmart still hasn't paid the $7,000 it was fined for allegedly failing to protect employees on the biggest shopping day of the year.

    Sitting on appeal with a review commission, the case of Jdimytai Damour's death highlights how corporations can choose to fend off modest penalties over workplace dangers for years on end, according to occupational health experts.

    For a company with sales of $466 billion last fiscal year, the $7,000 fine from the Occupational Safety and Health Administration represents little more than a single store's rounding error.


    About when Alice (Walton) in Wonderland Killed Someone

  4. UPDATE: DEC. 15, 2015

    Wal-Mart claims the "OUR Walmart" campaign violated an NLRB protective order by giving documents to Bloomberg Businessweek detailing how the retailer prepared for Black Friday strikes and rallies in 2012.

    Wal-Mart hired a division of the defense contractor Lockheed Martin to monitor activist activity online and was in contact with the FBI about the protests, the report showed.

    OUR Walmart, which is now unaffiliated with the United Food and Commercial Workers union, accessed the documents during an unfair labor practices proceeding at the NLRB. In its motion, Wal-Mart blames the leak on both OUR Walmart and UFCW and asks the NLRB to bar the groups from using the documents in future board proceedings.

    Wal-Mart says its surveillance activities were aboveboard; OUR Walmart and UFCW say the retailer's latest arguments are meritless.

    More from Businessweek's Josh Eidelson here:

    Read Wal-Mart's NLRB filing here: