Crisis communications experts are giving Wal-Mart mixed grades for its response to accusations that company employees bribed Mexican officials to quickly build stores in the country, and that executives shut down an internal investigation into the matter.
Wal-Mart needs to demonstrate that the scandal was an aberration for a company that had otherwise turned around its once-poor corporate identity, say industry experts.
“We will not tolerate noncompliance with [the Foreign Corrupt Practices Act],” the company said in a statement. It also explained that if the allegations that Wal-Mart bribed Mexican officials to obtain building permits are true, “it's not a reflection of who we are or what we stand for.”
Mike Lawrence, chief reputation officer at Cone Communications, characterizes the response from Wal-Mart as “hollow” because it gives no indication of any real action behind its words.
“Several key people implicated in that story are still on the Wal-Mart leadership team,” he notes. “If it's not a reflection of what they stand for, then why are those people still there? You would think Wal-Mart would have suspended someone, even with pay, while this gets sorted out.”
Lawrence adds that Wal-Mart likely could not have prevented the Times from publishing the story, or stopped the subsequent drop in its stock price or the shareholder lawsuit filed against it. Yet he says a better response could have helped it salvage some brand credibility.
“Their corporate story had become a good one because of the great things they've done to help the environment,” he says. “This is going to set them back seven or eight years when everyone was ranting about their terrible labor practices.”
The Times reported that Wal-Mart's senior investigator recommended that the company should widen its inquiry into the alleged bribes, finding that the payouts to Mexican officials were widespread and that there was “reasonable suspicion” to believe Mexican and US laws were violated. However, Wal-Mart's leadership reportedly ended the examination.
Todd Defren, principal at Shift Communications, says the cover-up could become a bigger story than the alleged bribes themselves.
“The genuine cover-up is almost always worse than the alleged crime,” he suggests. “Imagine how much better the stock might have fared if the company's leaders had investigated and prosecuted the offenses proactively, rather than stutter, backtrack, and patch the situation reactively.”
Gene Grabowski, SVP and chair of the crisis and litigation practice at Levick Strategic Communications, agrees Wal-Mart has to tread carefully. He says he found it “troubling” that in response the company pointed out that even if the allegations were true, the incident happened six years ago.
“Noting that the alleged offenses occurred six years ago probably won't distract attention from the fact that the alleged attempts to conceal them continued long afterward. In fact, such statements may only remind audiences that the retailer has a record of problems,” says Grabowski. “Wal-Mart would be better served to focus on its concrete efforts to manage current issues and to demonstrate that it is fully cooperating with federal law-enforcement officials.”
That's what Wal-Mart has done for the most part, resisting any temptation to criticize the Mexican government or the way of doing business in Mexico, notes Grabowski. He also gave high marks to Wal-Mart for stating that this could have happened to any company, despite the best intentions.
“They have to deal with this without being arrogant, blaming others, and running from responsibility,” he points out. “People are watching very carefully to see how a major company deals with this. So far, they've done about as good a job as a major company can.”
Wal-Mart did not return calls and e-mails seeking comment from PRWeek. Representatives from Wal-Mart's long-time agency partner Edelman also declined to comment.