Whipping Wal-Mart Into Shape

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FRANK WORDS JUNE 7, 2011

Whipping Wal-Mart Into Shape

When I first started looking into Wal-Mart as a reporter several years ago, what bothered me the most was the cynicism of the company. Gosh, we didn’t know that our outsourced maintenance people were illegal immigrants. Gosh, we didn’t know that store managers were subtly demanding unpaid overtime. Gosh, we didn’t know that we had a really bad supplier in China that abused its workers. Wal-Mart was always shocked, shocked, shocked. Its highest principle seemed to be plausible deniability.

So I was happy to read in The New York Times recently that one of Wal-Mart’s shareholders is getting tired of this. Last week, at an annual shareholder meeting for the company, the New York City pension funds pressed Wal-Mart to have its vendors publish annual lists reporting on working conditions in factories producing the chain’s goods. Since the New York pension funds have an ownership stake of less than 0.2 percent of Wal-Mart, I doubt the giant will buckle under the pressure. But it’s progress—and, with the news, it’s worth revisiting the back-story of Wal-Mart’s egregious record with foreign suppliers.

We tend to assume that a country like, say, China is competitive because its factories pay low wages, and that’s certainly true. But it’s not always the whole story. Factories often stay competitive just by violating basic human decency. Maybe a factory produces shoes but neglects to ventilate the work areas in which workers handle glue. (It’s a lot cheaper to avoid installing big fans and vents.) Maybe it dumps pollutants into a nearby river. Maybe it hires guest workers and keep them enslaved by holding onto their passports. (This happens a lot in the Gulf States.)

Wal-Mart, as ever, maintains there’s no problem really worth fussing about. A spokesman named David Tovar told the Times that Wal-Mart sets the bar high for its purveyors. “Our supplier standards are not merely goals that we encourage our suppliers to meet; rather, a supplier’s failure to adhere to these standards may jeopardize that supplier’s continued business relationship with Wal-Mart,” Tovar said. But this is just the mush Wal-Mart has offered up for years, trying to downplay its failures to carefully investigate its suppliers on the front-end.

To understand this better, consider an analogy: Suppose you’re looking for a daycare center for your child. Three or four places have openings. Would you want to visit each of them? Or would you just pick the cheapest one and do a couple of inspections later, after your child was already enrolled? Wal-Mart (often acting through a middleman) places an order with a factory before it inspects the labor standards of the factory. Yes, after the order is placed, Wal-Mart might—might—do an inspection of a factory to see if labor standards are acceptable. But, if the factory falls short, it typically gets another chance, and another, and another.

I used to work in the corporate-social-responsibility field—I’ve written about it a few times, too—and the work took me to lots of factories around the world. The plants that counted Wal-Mart among their customers tended to be the worst of the lot. By contrast, Costco’s suppliers were much, much better. If a company wants to be serious about having decent suppliers, it can be—but being serious means you inspect a factory and get it to meet certain standards before you do business with it.

In an ideal world, Congress would pass a law requiring U.S. companies using foreign suppliers to monitor all of those suppliers for labor and environmental standards and to disclose the results online. Nike already does such monitoring and discloses its information voluntarily. (To be sure, Nike doesn't always find perfection in its suppliers, but its efforts at improvement are clearly serious. The company also posts the names and locations of all of the factories it uses. That’s impressive.) This doesn’t prevent Nike from seeking out cheap labor, but that’s not the point. What’s considered a good wage in, say, Vietnam is obviously just a fraction of what’s considered a good wage in the United States. Rather, what Nike does is encourage the right kind of competition—competition among players who don’t break all the rules.

Of course, the chances of such a law being enacted swiftly are probably about as high as the chances New York City pension funds will get Wal-Mart to change its ways. (That’s nicer than saying zero.) The track record of Congress on foreign labor issues isn’t exactly stellar. When the Marianas Islands, which are under U.S. supervision, came under pressure for having factories with pretty serious labor violations, Jack Abramoff brought members of Congress out on “fact-finding” trips (at least 88 of them) to the islands for some quick factory tours and a round or two of golf. The congressman, unsurprisingly, saw very little to complain about.

Then again, things on the Marianas Islands have supposedly gotten better since then, thanks to reforms passed by Congress. So improvements aren’t impossible. Major legislation just takes years, even decades, to bring about. (Ask Henry Waxman, the master of relentlessness.) Meanwhile, the push by New York City pension funds for a slightly better Wal-Mart has been a welcome prod in the direction of decency. It’s not going to lead to anything substantial soon, but it’s a start.

T.A. Frank is a special correspondent for The New Republic.

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posted in: frank words, new york, new york city, nike, the new york times, wal-mart, china, congress, david tovar

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