In recent years the federal government has investigated allegations that Walmart had engaged in bribery in Mexico, China, and Brazil. Walmart reacted with changes aimed at promoting legal, ethical conduct—efforts that cost hundreds of millions of dollars. It launched an inter- nal investigation and linked a portion of executives’ pay to meeting standards for compliance with legal require- ments. The expectation for the compliance-related incen- tive pay was that if corporate executives are rewarded for the company behaving ethically, they will be more careful to ensure that it does so.
Beginning in 2014, Walmart began to issue a yearly Global Compliance Program Report. Based on the company’s performance that year, the corporate audit committee determined that Walmart had “achieved sub- stantial progress” meeting these objectives, and cor- porate executives received their bonuses without any compliance-related cuts.
But the company didn’t stop there with the impor- tant issue of compliance. CEO Doug McMillon says the company will continue to focus on building a world-class ethics and compliance program to prevent, detect, and remediate issues that arise in Walmart’s growing busi- ness around the world—and set compliance goals and objectives on an annual basis. Some of the objectives itemized in the most recent report for fiscal year 2016 include taking a proactive approach to anti-corruption; elevating the customer experience through food safety and quality; increasing transparency in the company’s global supply chain and revisiting how the company conducts supplier audits; and leveraging the benefits of technology in daily business practices.
Questions
1. Do you think Walmart’s compliance-related performance standards, as described here, would ensure ethical conduct? Why or why not?
2. Review the principles for incentive pay described in the first section of this chapter. How, if at all, could Walmart apply these principles to strengthen its effort to promote compliance with legal and ethical standards?