There Is Always a Precursor: The Wal-Mart Internal Report

The Seven Signs of Ethical Collapse documents the phenomenon of the precursor in companies that find themselves in legal and ethical difficulty.  The precursor can be a lawsuit that is dismissed, a regulatory agency investigation that finds nothing, an employee warning that is poo-pooed, or an internal report.  When a business is rolling along doing just fine on the profit side of things, these precursors are ignored too frequently.  Bad decision to ignore these rumblings.  Wal-Mart has been living through the fall-out of failure to act when a precursor hits.

 In 1995, Wal-Mart hired Akin Gump Strauss Hauer & Feld to determine whether it was vulnerable should a sex discrimination suit be filed. The law firm’s report found the following:

  •  Men in salaried jobs earned 19% more than women in salaried jobs
  • Men were five times as likely to be promoted into salaried and management jobs
  • It would be “difficult to fashion a persuasive explanation for disproportionate employment patterns.”

The law firm offered great advice:  post all the job openings and begin a program to get women and minorities into management and salaried positions.  However, by 2001, the lawsuit hit.  And it is a doozy – the largest class-action employment suit this country has ever seen.  Wal-Mart is appealed the federal appellate decision that has allowed the suit to go forward, but the lead lawyer for the women is already requesting a copy of the 1995 report. 

Wal-Mart has responded that the report is 15 years old and “deeply flawed.” Indeed, Wal-mart now has a management team that is 45.8 percent female.  An expert in discrimination litigation also indicated that women apply for cashier jobs more often than receiving jobs and there is pay disparity between those two functions.  In other words, there may be explanations for the Akin Gump finding.

 Wal-Mart has claimed the privilege on the report.  Most legal experts agree that the report is protected. However, the Barometer’s advice is that once there is a precursor report, respond to the issues and then follow up with another report that shows that you addressed the precursor. You can talk yourself blue in federal district court or the court of public opinion in trying to explain what really happened at your company.  But, once there is a precursor, well, the die may well be cast unless the precursor issues are resolved.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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