Massey Energy and Walmart made headlines last week for different reasons. Massey had the worst mining disaster in 40 years, killing 29 employees and entered into a nonprescution agreement with the Department of Justice. The DOJ has stated in the past that these agreements balance the interests of penalizing offending companies, compensating victims and stopping criminal conduct “without the loss of jobs, the loss of pensions, and other significant negative consequences to innocent parties who played no role in the criminal conduct, were unaware of it, or were unable to prevent it.”
Massey’s new owner Alpha Natural Resources, has agreed to pay $210 million dollars in fines to the government, compensation to the families of the deceased miners and for safety improvements (the latter may be tax-deductible). The government’s 972-page report concluded that the root cause was Massey’s “systematic, intentional and aggressive efforts” to conceal life threatening safety violations. The company maintained a doctored set of safety records for investigators, intimidated workers who complained of safety issues, warned miners when inspectors were coming (a crime), and had 370 violations. The mine had been shut down 48 times in the previous year and reopened once violations were fixed. 112 miners had had no basic safety training at all. Only one executive has been convicted of destroying documents and obstruction, and investigations on other executives are pending. However, the company itself has escaped prosecution for violations of the Mine Safety and Health Act, conspiracy or obstruction of justice. Perhaps new ownership swayed prosecutors and if Massey had its same owners, things would be different. But is this really justice? The miner’s families receiving the settlement certainly don’t think so.
Walmart announced in its 10-Q that based upon a compliance review and other sources (Dodd-Frank whistleblowers maybe?), it had informed both the SEC and DOJ that it was conducting a worldwide review of its practices to ensure that there were no violations of the Foreign Corrupt Practices Act (“FCPA”). Although no facts have come out in the Walmart case and I have no personal knowledge of the circumstances, let’s assume for the sake of this post that Walmart has a robust compliance program, which takes a risk based approach to training its two million employees in what they need to know (the greeter in Tulsa may not need in-depth training on bribery and corruption but the warehouse manager and office workers in Brazil and China do). Let’s also assume that Walmart can hire the best attorneys, investigators and consultants around, and based on their advice, chose to disclose to the government that they were conducting an internal investigation. Let’s further assume that the incidents are not widespread and may involve a few rogue managers around the world, who have chosen to ignore the training and the policies and a strong tone at the top.
As is common today, let’s also assume that depending on what they find, the company will do what every good “corporate citizen” does to avoid indictment --disclose all factual findings and underlying information of its internal investigation, waive the attorney client privilege and work product protection, fire employees, replace management, possibly cut off payment of legal fees for those under investigation, and actively participate in any government investigations of employees, competitors, agents and vendors.
Should this idealized version of Walmart be treated the same as Massey Energy? (For a great compilation of essays on the potential conflicts between the company and its employees, read Prosecutors in the Boardroom: Using Criminal Law to Regulate Corporate Conduct, edited by Anthony and Rachel Barkow). Should they both be charged and face trial or should they get deferred or nonprosecution agreements for cooperation? Do these NPAs and DPAs erode our sense of justice or should there be an additional alternative for companies that have done the right thing -- an affirmative defense?
A discussion of the history of corporate criminal liability would be too detailed for this post, but in its most simplistic form, ever since the 1909 case of New York Central & Hudson River Railroad Co v. United States, companies have endured strict liability for the criminal acts of employees who were acting within the scope of their employment and who were motivated in part by an intent to benefit the corporation. As case law has evolved, companies face this liability even if the employee flouted clear rules and mandates and the company has a state of the art compliance program and corporate culture. In reality, no matter how much money, time or effort a company spends to train and inculcate values into its employees, agents and vendors, there is no guarantee that their employees will neither intentionally nor unintentionally violate the law.
The DOJ has reiterated this 1909 standard in its policy documents. And because so few corporations go to trial and instead enter into DPAs or NPAs, we don’t know whether the compliance programs in place would have led to either the potential 400% increase or 95% decrease in fines and penalties under the Federal Sentencing Guidelines because judges aren’t making those determinations. The DPAs are now providing more information about corporate compliance reporting provisions, but again, even if a company already had all of those practices in place, and a rogue group of employees ignored them, the company faces the criminal liability. The Ethical Resource Center is preparing a report in celebration of the 20th Anniversary of the Sentencing Guidelines with recommendations for the U.S. Sentencing Commission, members of Congress, the DOJ and other enforcement agencies. They are excellent and timely, but they do not go far enough.
A Massey Energy should not receive the same treatment as my idealized model corporate citizen Walmart. Instead, I agree with Larry Thompson, formerly of the DOJ and now a general counsel and others who propose an affirmative defense for an effective compliance program- not simply as possible reduction in a fine or a DPA or NPA.
While the ideal standard would require prosecutors to prove that upper management was willfully blind or negligent regarding the conduct, this proposed standard may presume corporate involvement or condonation of wrongful conduct but allow the company to rebut this presumption with a defense.
In the past decade, companies drastically changed their antiharassment programs after the Supreme Court cases of Fargher and Ellerth allowed for an affirmative defense. The UK Bribery Act also allows for an affirmative defense for implementing “adequate procedures” with six principles of bribery prevention. Interestingly, they too are looking at instituting DPAs.
I would limit a proposed affirmative defense to when nonpolicymaking employees have committed misconduct contrary to law, policy or management instructions. If the company adopted or ratified the conduct and/or did not correct it, it could not avail itself of the defense. The company would have to prove by a preponderance of the evidence that: it has implemented a state of the art program approved and overseen by the board or a designated committee; clearly communicated the corporation’s intent to comply with the law and announced employee penalties for prohibited acts; met or exceeded industry standards and norms; is periodically audited and benchmarked by a third party and has made modifications if necessary; has financial incentives for lawful and penalties unlawful behavior; elevated the compliance officer to report directly to the board or a designated committee (a suggestion rejected in the 2010 amendments to the Sentencing Guidelines); has consistently applied anti-retaliation policies for whistleblowers; voluntarily reported wrongdoing to authorities when appropriate; and of course taken into account what the DOJ has required of offending companies and which is now becoming the standard. The court should have to rule on the defense pre-trial.
Instead of serving as vicarious or deputized prosecutors, under this proposed standard, a corporation’s cooperation with prosecutors will be based on factors more within the corporation's control,rather than the catch-22 they currently face where if employees are guilty, there is no defense. And if the employees are guilty, this would not preclude the government from prosecuting them, as they should.
Responsible corporations now spend significant sums on compliance programs and the reward is simply a reduction in a fine for conduct for which it is vicariously liable and which its policies strictly prohibited. A defense will promote earlier detection and remedying of the wrongdoing, reduce government expenditures, provide more assurance to investors and regulators, allow the government to focus on companies that don’t have effective compliance program, and most important provide incentives for companies to invest in more state of the art programs rather than a cosmetic, check the box initiative because the standard would be higher than what is currently Sentencing Guidelines.
Perhaps only a small number of companies may be able to prevail with this defense. Frankly, corporations won’t want to bear the risk of a trial, but they will at least have a better negotiating position with prosecutors. Moreover, companies that try in good faith to do the right thing won’t be lumped into the same categories as those who invest in the least expensive programs that may pass muster or worse, engage in clearly intentional criminal behavior. If companies have the certainty that there is a chance to use a defense, that will invariably lead to stronger programs that can truly detect and prevent criminal behavior.
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Between today and Tuesday, the Conglomerate will be hosting a roundtable on the Erica P. John Fund v. Halliburton case that will be argued before the Supreme Court this coming Monday. The question in the case revolves around whether the 5th Circuit erred in requiring that plaintiffs in a securities fraud case must prove loss causation as a condition to certifying a class. The following is a more elaborate formulation of the questions (taken from the Supreme Court web site and cut-and-pasted from a brief in the case) in the case:
1. Whether the Fifth Circuit correctly held, in direct conflict with the Second Circuit and district courts in seven other circuits and in conflict with the principles of Basic v. Levinson, 485 U.S. 224 (1988), that plaintiffs in securities fraud actions must satisfy not only the requirements set forth in Basic to trigger a rebuttable presumption of fraud on the market, but must also establish loss causation at class certification by a preponderance of admissible evidence without merits discovery.
2. Whether the Fifth Circuit improperly considered the merits of the underlying litigation, in violation of both Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974), and Federal Rule of Civil Procedure 23, when it held that a plaintiff must establish loss causation to invoke the fraud-on-the-market presumption even though reliance and loss causation are separate and distinct elements of security fraud actions and even though proof of loss causation is common to all class members.
The case is important for any number of reasons. Among them, if the Fifth Circuit rule is upheld, it could make class certification much, much more difficult for plaintiffs. Second, the case will involve revisiting Basic and the fraud-on-the-market presumption. Here the Court could make a limited review of Basic and make a narrow decision in this case, or it could be much more aggressive and go out of its way to consider more deeply one of the most important cases in securities litigation in the last three decades. Finally, the case involves class certification in a term when the 800 pound gorilla class action case of Wal-Mart v. Dukes has already been argued before the Court but not decided.
We are delighted that a number of guests will be joining some of us regular bloggers in previewing the case and perhaps even reading the tea leaves or oral argument. As only fitting with a securities case, we should disclose that I, together with some of our guests and other law professors, wrote a brief for petitioner in the case. You can download all the briefs in the case here (scroll down to “Erica P. John Fund...”).
Marketplace ran a story on Friday about Walmart's banking operations in Mexico. Glom friend Anna Gelpern has written about the Walmart bank, and she was interviewed for the Marketplace story. I blogged about Walmart's prospects as a U.S. bank here, inspired by my now-colleague Mehrsa Baradaran. The U.S. Walmart bank that Mehrsa and I were imagining bears only a slight resemblance to the Mexican version, which "does not offer car loans or mortgages, but ... offer[s] a credit card so customers can buy Wal-Mart merchandise." By the way, the annual interest rate on the credit card is 60 percent. Still, Anna is sanguine about the development for Mexico, where most of the population does not use a bank:
Whatever the pros and cons of a Wal-Mart bank might be in the United States, they look quite different in an environment where, despite recent growth, there is little credit, no competition, and a fresh history of political, economic, and legal instability. Wal-Mart is among the few actors capable of dislodging the dysfunctional status quo.
Banco Walmart "presents a transnational regulatory dilemma," Anna tells us, and that is the subject of her paper. But Walmart is quickly getting on the map for bank regulators. Earlier this summer, the company opened banking operations in Canada, and Sam's Club has started making small business loans. It looks to me like Walmart is developing institutional competence in banking that will serve it well when it moves on a bigger scale into the U.S.
We have a category called "Wal-Mart," but it appears that we need to revise that to read "Walmart." Walmart is getting a spanking new look for its brand. Behold the new logo:
Hmm. Walmart is like a sunny day ...
Look at the evolution of Walmart's logo, and you can see an echo of the first logo (1962-64).
We like to follow Wal-Mart goings-on here at the Glom. Usually it's about downward price pressure in specific geographic or product markets that Wal-Mart chooses to enter, whether it's good or bad, and community responses.
Now an interesting new paper has come out describing another Wal-Mart effect, this time on global environmental governance. The paper, by Michael Vandenbergh at Vanderbilt, describes how Wal-Mart and other large firms may plausibly be improving global environmental governance by imposing environmental requirements on their suppliers. Responding to social, economic, and regulatory pressures, large importers are in effect exporting industrial country environmental standards to developing countries via private contract, a move that may help fill regulatory gaps that result from global trade. An interesting read.
Here's the abstract:
This Article argues that networks of private contracts serve a public regulatory function in the global environmental arena. These networks fill the regulatory gaps created when global trade increases the exploitation of global commons resources and shifts production to exporting countries with lax environmental standards. As critics of trade liberalization have noted, public responses often are inadequate to address the attendant environmental harms. This Article uses empirical data to examine how private contracting regulates firm behavior, focusing on supply-chain contracting. The Article shows that more than half of the largest firms in eight retail and industrial sectors impose environmental requirements on their domestic and foreign suppliers. This contracting, which the Article terms "the new Wal-Mart effect," reduces externalities by translating a complex mix of social, economic, and legal incentives for environmental protection into private contractual requirements. After demonstrating that private environmental contracting is an important part of global environmental governance, the Article examines the efficacy and accountability of this regime. The Article concludes that the private contracting regime often is preferable to the alternatives: lax national and international regulation of firms in many exporting countries, and markets that lack private environmental contracting. Finding much promise in the private contracting regime, the Article concludes by suggesting new strategies for governments, nongovernmental organizations, and firms.
Last summer Al Gore praised Wal-Mart's environmental initiatives, stating:
The message from Wal-Mart today to the rest of the business community is, there need not be any conflict between the environment and the economy. We will find the way not only to reconcile (those), but to find new profits and new opportunities as we do the right thing.
Today comes news of a plan to outfit 22 Wal-Mart stores in California and Hawaii with solar panels. (W$J) The panels will provide up to 30% of the energy for the stores. This is a pilot project designed to test the viability of solar energy in other Wal-Mart locations. And it is supported by tax incentives:
California and Hawaii have other appeals for solar panels beside abundant sunshine. Solar power typically costs more than conventional forms of energy based on fossil fuels, but those two states provide generous rebates because they are trying to get 20% of their energy from renewable resources by 2020.
Wal-Mart, Bentonville, Ark., declined to quantify its anticipated savings from the pilot program other than to say they will register "as soon as the first day of operation." What's more, Wal-Mart, not its solar providers, will retain the renewable-energy credits generated by the program. The credits recognize the value of producing energy from renewable resources like solar power that don't create greenhouse-gas emissions such as carbon dioxide. They could be valuable if the Democratic-controlled Congress introduces emission caps and such credits can be traded.
There are big subsidies for solar installations in some states, and these programs can cut the effective cost of a project by half. In the case of the 22 stores, Wal-Mart is buying the output of the solar panels sitting on its rooftops. But the vendors -- BP PLC subsidiary BP Solar, SunEdison LLC and SunPower Corp. subsidiary PowerLight -- said they are receiving a federal tax credit amounting to 30% of each installation's cost, plus ratepayer-funded rebates paid by utilities and other incentives. After all the subsidies, electricity produced by solar panels can end up cheaper than that from conventional sources.
As Conglomerate readers know, I am not inclined to bash Wal-Mart, so don't take it as a criticism of the company when I say that this is not "corporate social responsibility." This is good business. Cost savings + positive public relations = no brainer.
That said, Al Gore's feel-good notion that "there need not be any conflict between the environment and the economy" is dangerous because it leads many people to assume that clean air and clean water are costless. The obvious implication of Gore's reasoning is that corporate directors and officers are evil incarnate or wildly incompetent. How else could one understand environmental degradation in a world where the environment and the economy are not in conflict? In the case of Wal-Mart's new solar panels, the costs of moving away from fossil fuels will be borne, in part, by taxpayers. There is no free lunch.
These are the sorts of thoughts that prompted me to write The Dystopian Potential of Corporate Law, in which I respond to Kent Greenfield's call for corporate governance reforms that encourage greater corporate social responsibility:
The crucial point of departure for this section is the following incontrovertible fact: Professor Greenfield's vision of utopia would require boards of directors to make decisions that sacrifice potential shareholder value in favor of value for non-shareholder constituencies. When boards of directors are able to enhance employee welfare, make the environment cleaner, or improve human rights throughout the world without impairing shareholder value, they often do it. This is not "corporate social responsibility," but good management. And the failure to pursue such strategies would be a problem of managerial incompetence, not a problem of improper incentives.
Josh Wright calls for more than soundbites on Wal-Mart:
A welfare increase of 6.5% for the lowest income quintile is enormous. How many government programs create that kind of welfare benefit? Can you name one? If there are serious arguments to be launched against Wal-Mart, and surely some of these politicians are serious (right?), they must embrace the reality that Wal-Mart has produced enormous benefits for Americans as a whole and especially lower and middle-lower class Americans.
You will want to read the whole post, all the way to the end, so that you can see Jason Furman's defense of Wal-Mart as a "progressive success story."
Perhaps the most frustrating thing about the Wal-Mart debate is that Hillary Clinton, as a former director of Wal-Mart, is so well positioned to advance the debate. Instead, she parrots the same old talking points. Nice display of leadership.
Walmart has partnered with Walt Disney, Warner Brothers, Paramount, Sony, 20th Century Fox and Universal to sell digital movies and television shows over the internet. According to the NYT, "Wal-Mart says it has used its clout to pull together all the right Hollywood players, create an easy-to-use Web site with Hewlett-Packard and develop a broad library of videos." About that website, this is what it looked like this morning:
Well, I am sure that it will be easy to use once they get it out of beta. It's supposed to look like this:
As for television shows, we are told that "Wal-Mart will cull titles from networks big and small, like Comedy Central, CW, FX, Logo, MTV and Nickelodeon." Notice that ABC, CBS and NBC are conspicuously missing.
Prices for movies will range from $12.88 to $19.88 on the day of the DVD release. Older movies will start at $7.50, and TV shows at $1.96 an episode.
Reportedly, Walmart has agreed that download prices would remain "comparable" to DVD prices, and they do not have an exclusive relationship with any of the movie studios. This means that Walmart will be competing with more established sites. iTunes carries movies from only Disney and Paramount, but Movielink is owned by five of the studios and CinemaNow offers movies from all six major studios. Amazon's Unbox lacks only Disney films. Do we have any reason to believe that this will be more successful than Walmart's foray into music downloads?
UPDATE: It appears that Walmart's site works properly if you are using Internet Explorer. The garbled screenshot above was taken on Firefox. HP is touting its "new business" (Video Merchant Services), which developed Walmart's site, but who develops sites that don't work with Firefox? (Note: Movielink also doesn't run on Firefox.) This just reinforces the image of Walmart as tech-unsavvy.
Wednesday the 4th Circuit upheld a ruling that struck down a Maryland law passed last year that would have required Wal-Mart to spend at least 8% of its payroll on health care benefits for its employees. The 4th Circuit said the law was pre-empted by ERISA.
On its face, the Maryland law did not apply solely to Wal-Mart, but to all corporations with 10,000 or more employees. In reality, only four corporations fell within that category and three of the four were either exempt or had already met the law’s thresholds. Which left Wal-Mart the last corporation standing.
The 4th Circuits ruling, however, enables Wal-Mart to avoid Maryland’s efforts at regulating its benefits, while making it difficult for other states to follow Maryland’s lead. Indeed, after the law passed in Maryland, efforts began to replicate the law elsewhere. However, those efforts may have proved difficult even without the 4th Circuit’s ruling. The narrow focus of Maryland’s law not only assured its success in Maryland, but also underscored the difficulties it would face in other states. These kind of “Wal-Mart” only laws have a better chance of success simply because they may not get as much resistance from the business community. However, since many other states were seeking to cast a wider net, the resistance to legislative action likely would have increased.
On a broader note, this ruling is another round in our “Wal-Mart vs. the world” battle. On one side of the ledger is the problem of Wal-Mart as “target” and even “scapegoat.” Indeed, Wal-Mart’s spokesperson and its supporters claim that most of these laws are not aimed at preventing illegality on the part of Wal-Mart, but rather at seeking to hold Wal-Mart accountable for addressing societal problems. On the other side, of course, are the many groups that claim to be harmed by Wal-Mart’s actions. Maryland legislators got a lot of support from the public and unions who claimed that the law was necessary to ensure that large corporations pay their fair share of health care costs. Maryland also got support from businesses arguing that Wal-Mart’s policies put corporations in the difficult position of either downgrading their own health care benefits or facing a competitive disadvantage. I have to say it is hard to keep score in this battle because while Wal-Mart seems to be losing ground with respect to public opinion, rulings such as this one seem to be a big victory for the company many people love to hate.
That's from Lee Scott, who is commenting on Wal-Mart's plans to promote "compact fluorescent lamps" ... whether we want them or not!
This is a tough sell -- consumers think the bulbs are expensive (it's true that the initial cost is higher, but the operating costs are much lower) and ugly (I think they are sort of snazzy) -- so Wal-Mart has pursued a new strategy:
But to reach 100 million, Wal-Mart has to do much more — and that, executives concede, is where the biggest challenges rest. In the fall, the company began reaching out to competing retailers, Internet companies and even filmmakers.
The goal was to turn its sales campaign into a broader cultural movement.
One proposal, headed by Lawrence Bender, who produced Al Gore' s 2006 documentary, "An Inconvenient Truth," is to create a Web site that would track sales of compact fluorescent bulbs at major retailers like Walgreen's and Target. The result would be a real-time map, with data collected by a third party, showing how much Americans have saved by using the energy-efficient bulbs.
[Andy Ruben, Wal-Mart’s vice president for strategy and sustainability,] said such a map "helps consumers see this as something bigger than buying a bulb."
At the same time, Google and Yahoo are in talks with Wal-Mart about how to use their search engines to promote the bulbs.
But Home Depot and Lowe's balked at the idea of cooperating with their larger rival. "We don't think we need an organization like that to sell more CFLs," said Ron Jarvis, the vice president of environmental innovation at Home Depot, using the bulb’s industry nickname.
Notice that the Wal-Mart spokesman is "vice president for strategy and sustainability." This is an interesting strategic gambit for Wal-Mart. The potential payoff lies not only, or even primarily, in selling more light bulbs -- after all, Wal-Mart was selling plenty of light bulbs without this new initiative -- but in improving its public image, thus paving the way for the growth that has become so challenging of late. Will this sort of instrumental social responsibility carry the day with Wal-Mart's critics? Or must we have the sense that a company's convictions transcend market forces?
I have been cramming for my Wal-mart panel next week at the AALS Annual Meeting, and I found a case study entitled "Corporations and Social Costs: The Wal-Mart Case Study" by Benedict Sheehy. Mostly routine stuff, but this argument about consumerism caught me off guard:
Wal-Mart's approach of increasing by supplying goods in large or bulk size creates its own special set of problems. For example, Wal-Mart decided to use pickles to create an impression of incredibly cheap prices. It pressured a supplier of high quality pickles (with threats to discontinue business with them) to produce gallon jars of pickles for less than $3. The net result was a dramatic increase in sales at very low margins, increased demand on farmers and all pickle producers, undermining its high quality pickle market it had built up over the years, and eventually contributing to the supplier's bankruptcy. Perhaps worst of all, as an executive at the former pickle supplier observed: "They'd eat a quarter of a jar and throw the thing away when they got moldy. A family can't eat them fast enough."
This problem--promoting over-consumption in a world of limited resources, currently reeling under the environmental costs of its consumption habits--is nothing short of moronic. Americans are the most over-weight people on the planet, spend more money per capita on diets, consume more goods per capita than anyone else on the planet, and Wal-Mart's strategy, effectively, is to promote further over-consumption by under-pricing more goods. Basic economic theory indicates that when goods are under priced they are over consumed. We need look no further than Wal-Mart to see the truth of this principle. While Wal-Mart is not the creator of consumerism, its dominance creates a large responsibility to inform consumers about the real costs. By under-pricing, Wal-Mart is misinforming the consumer encouraging over-consumption, and to do so in the planet's current state is nothing less than perverse. Because of its market dominance, a strong argument can be made for its bearing considerable corporate responsibility to inform consumers about costs by pricing correctly.
After reading Dan's post about the Ethical Practice of Legal Scholarship, I am reluctant to comment on this passage without consulting Mr. Sheehy in advance. Nevertheless, I trust that Conglomerate readers can draw their own conclusions.
It's old news that Wal-Mart's low-price strategy hinges in part on its ability to wring volume discounts from suppliers. However, the next target of this strategy may be the drug companies, which may generate some interesting debates over the Wal-Mart effect. Wal-Mart has announced that for some 300 generic drugs, it will be selling a month's supply for $4. While the pricing is still above cost, it's far less than prices charged by the big pharmacy chains, according to the Economist (sorry, subscription required, I think). Target has said it will match Wal-Mart's pricing. Walgreen's and CVS say they won't (AZ Republic). Hard to know whom to root for in that match up.
Further on Wal-Mart and health . . .
the company is switching to high deductible health insurance for new employees beginning next year (again, according to the Economist). The trade off, of course, is low premiums. It's an interesting plan. Premiums as low as $11/ month, but the insured covers the first $1,000 in annual health care expenses (or $3,000 for a family). But the insured gets 3 doctor visits and 3 prescription drugs before the deductible applies. According to the company, the 3 doctor visits will cover most employees, who will therefore benefit from the lower premiums. Critics argue that this just leaves sicker workers with higher health care costs.
Now, I don't know how to feel about that. Should healthy workers be forced to subsidize less healthy workers? More generally, is there a principled approach to risk pooling? Can markets work it out? My car insurer cares very much about my zip code, and while I'm otherwise demographically a very good risk, my premiums for a 10-year-old Volvo are ridiculous because I live in a big city. Over the course of my lifetime, I will undoubtedly pay more into that pool than I take out.
In any event, the subtitle to the Economist article may only be a mild exaggeration: "Health-care policy may now be decided in Bentonville."
Let me jump on Gordon's Wal-Mart bandwagon for a minute. Big news in the organic world is that Wal-Mart has gone green over the past year, and now it will carry organic milk (NYT). Organic milk farmers must be whooping it up over this development, right? Not exactly. Wal-Mart's entry into the market has merely accelerated the corporatizing of organic food, which critics argue has lowered organic standards and may drive down prices for suppliers (BW). The dairy that supplies Walmart (and also Safeway, Costco, Target, and Wild Oats) is under fire from organic activists and competing organic dairies for cutting organic corners and "diluting the principles of organic agriculture." Its cows do not spend significant time roaming pastures and eating fresh grass. Instead, these cows live on a high grain diet. According to competing organic farmers, grass-fed cows produce more nutritious milk. Whole Foods won't buy organic milk from Walmart's supplier.
Now, this raises an interesting conundrum . . .
Demand for organic milk is strongly increasing--sales last year were up 25% from the year before. But higher standards must mean higher prices as well. Wal-Mart has made no bones about its desire to bring organic foods to the masses. Other giant food companies are also exerting downward pressure on organic standards, as corporate food lobbyists (for Kraft, Dole, and others) have gotten Congress to weaken some rules on organics.
Should we cheer or deride these efforts? Should organic foods remain "pure," but only within the reach of more affluent shoppers? Or can some corners be cut in order to make healthier foods more affordable and thus more widely available? At some level, this is just another manifestation of the tension that is Wal-Mart --achieving lower prices but paying its workers less and driving local competitors out of business. OTOH, for organic foods, there may be a way around this specific conflict (which doesn't address Wal-Mart's labor practices or effects on competing retailers).
The fight over organics seems to me essentially a labeling or "truth-in-advertising" problem. Perhaps an "organic" either-or is too restrictive, given the probability that consumer demand is more nuanced. Perhaps organic grading would be useful, in the same way the USDA grades beef. Let consumers decide.
The front page of the NYT website featured two stories about Wal-Mart early this morning:
The first story is obviously big news. Wal-Mart is hoping to purchase Trust-Mart, a chain of hypermarkets ("giant stores that sell a wide range of general merchandise and food") in China. The purchase would double Wal-Mart's presence in China and would place Wal-Mart in contention for the title of largest retail chain in the country.
That second story is about 100 workers at a Wal-Mart store in Hialeah Gardens, Florida who were protesting a rollback of their working hours. The resolution:
Wal-Mart officials said the top manager at the store had violated company policy by reducing hours across the board, instead of doing it the usual way by reducing hours here and there to take into account the needs of particular departments and shifts.
What constitutes news about Wal-Mart? Everything!
At some point during the past few years, Wal-Mart became more than a company. It became the embodiment of capitalism. As a result, debates about workers, international trade, community development, health care, corporate social responsibility, etc. all occur in microcosm in Wal-Mart. Unfortunately for Wal-Mart, its symbolic value makes it a prime target for anyone wanting to score points against the status quo.
On a related note, I finally watched Frontline's well-traveled feature "Is Wal-Mart Good for America?" (which is available online). I am planning to write something academic about Wal-Mart and its critics, and that may be a more appropriate place to evaluate Hedrick Smith's production. For the present, I will say only that I found the piece disappointingly shallow (with startling revelations like the fact that Wal-Mart attempts to lure unwary customers into the store by using heavily discounted "opening price points") and surprisingly xenophobic (it focused almost as much on China as on Wal-Mart).