Mexican Bribery Allegations Put Wal-Mart On Defense
ROBERT SIEGEL, HOST:
Lawmakers in the U.S. and Mexico called today for an investigation into Wal-Mart. That's after a damaging story published in The New York Times on Sunday. The Times reported that Wal-Mart's Mexico subsidiary engaged in a massive campaign of bribery, paying more than $24 million to obtain permits to expand its stores across Mexico.
MELISSA BLOCK, HOST:
What's more, the article claims that Wal-Mart executives at the highest levels were told of the abuses and quashed an investigation. Here's part of a lengthy response read by a Wal-Mart spokesman.
UNIDENTIFIED MAN: If these allegations are true, it is not a reflection of who we are or what we stand for. We are deeply concerned by these allegations and are working aggressively to determine what happened.
BLOCK: For more on Wal-Mart's corporate culture and its huge expansion in Mexico, I'm joined by Charles Fishman, who spent years reporting on the company for his book "The Wal-Mart Effect." Charles, welcome back to the program.
CHARLES FISHMAN: Thanks for having me.
BLOCK: And we should point out, you now live in Mexico City. Give us a sense of perspective here. How big is Wal-Mart in Mexico?
FISHMAN: Wal-Mart is the largest company of any kind in Mexico now. There are actually, per person, 50 percent more Wal-Marts in Mexico than there are in the U.S. Wal-Mart Mexico is so big that it would be a Fortune 100 company all on its own.
BLOCK: Just something like what? Twenty-one hundred stores compared with 3,900 in the U.S.?
FISHMAN: Yes. Twenty-one hundred stores compared with 3,900 in the U.S., but for a population one-third the size and for an economy one-tenth the size. They moved incredibly quickly. They outmaneuvered several local Mexican stores and, for years, everybody sort of thought, wow. The incredible focus and discipline and business talent. Look at what is on display in Wal-Mart's International Division in Mexico.
If what's in yesterday's New York Times story is true - and the New York Times has incredible paper documentation - one of the reasons they did so brilliantly was that they rigged the game in their favor.
BLOCK: Yeah. The Times story suggests that the reason that Wal-Mart was able to expand so rapidly in Mexico was precisely that. They were paying bribes and its competitors weren't able to keep up. That was the whole idea.
FISHMAN: Well, and if you just look at the last three years, in 2009 and 2010, Wal-Mart opened five stores a week every week in both those years. And then, last year, they opened a new store every day of the year, 366 new stores.
BLOCK: These allegations detailed in the New York Times, if they're true, could amount to violations of federal law, the Foreign Corrupt Practices Act, and Wal-Mart apparently has told the Justice Department that it's conducting an internal investigation on that.
Apart, though, from the criminal implications here, what about Wal-Mart's own ethical code? What did you learn from studying the company?
FISHMAN: One of the reasons this is so surprising is precisely because Wal-Mart had a kind of unbending almost obsessive adherence to even the trivialist elements of an ethical code. They're a brutal competitor and everybody acknowledged that, but Wal-Mart was also the company that wouldn't take a dinner from you, that wouldn't let you provide a soda if you went to meet them to talk about business, where they wouldn't join trade associations for many, many years because they didn't want to pay dues and have a conflict of interest.
Sam Walton bequeathed this culture of absolutely only judging the business based on what would be good for customers and for Wal-Mart. This sort of routine practice of paying people off is completely at odds with that entire history of Wal-Mart's behavior.
BLOCK: And, if you look at other countries that - where the bureaucracy doesn't necessarily run on the lubrication of bribery and money changing hands, how successful has Wal-Mart been there?
FISHMAN: It's really interesting. In the UK, Wal-Mart remains number two. In Germany, they struggled for years and years and then failed and closed. And, in Japan, they have continued to struggle, even to simply be profitable. So, in places where there's a different competitive landscape, Wal-Mart has not, in fact, been able to out-compete everybody.
It also raises questions about whether Wal-Mart has the controls and the culture in place to prevent this from happening throughout the rest of Latin America where they do business and in China where they do business.
BLOCK: I've been talking with Charles Fishman, author of the book, "The Wal-Mart Effect." Charles, thanks so much.
FISHMAN: My pleasure.
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