Wal-Mart’s Public Policy Dilemma: Turn Right or Left?

Tom Borelli
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Posted: Jun 16, 2007 12:01 AM
Wal-Mart’s Public Policy Dilemma: Turn Right or Left?

For the estimated 15,000 employees, vendors and shareholders that packed the Bud Walton arena on the University of Arkansas campus on June 1st, Wal-Mart’s annual shareholder meeting was a site to behold.

Jennifer Lopez and Jordin Sparks – the 2007 American Idol winner, entertained attendees and comedian Sinbad emceed the event. And, yes, some actual shareholder business was discussed during Wal-Mart’s extravaganza.

The meeting was also unusual for another reason - the liberal monopoly of shareholder activism was challenged from the Right. While it’s common for Left wing groups to use shareholder standing to push its agenda on corporations, Wal-Mart also heard from free market shareholders who challenged Wal-Mart’s liberal policy bent. Wal-Mart’s Left turn not only poses a risk to investors, but it also poses a significant risk to free markets and limited government.

For years, the Left has effectively launched its stealth attack on corporate America – its age-old carrot and stick strategy cloaked in a progressive name: Corporate Social Responsibility (CSR). CSR sets the moral basis that expands public expectations of a corporation from profit to an agent for social change. Activist groups enforce this doctrine by threatening businesses with protests, boycotts and shareholder activism against companies that dare to deviate from the new cultural norm. Through this tag-team approach, the Left is winning the hearts and minds of corporate executives and significantly changing business culture.

Because corporations play a significant role in the evolution of public policy, the stakes can't be higher. With major policy debates on global warming and universal health care on the table, it’s crucial for free market forces to challenge the liberal hold on corporations. Whoever wins the battle of ideas in the boardroom will gain a huge advantage in transforming their agenda into public policy.

Wal-Mart, like many other leading corporations, is on the front lines in the cultural battle over the role of business in society. The problem for Wal-Mart is its business model – keeping its costs low so it can pass those savings to consumers – fails the CSR test. CSR supporters want the company to increase its overhead by paying higher wages, providing health care for all its workers, and guaranteeing workers rights by having its employees unionized.

Consistent with those themes, liberal shareholder proposals presented at the annual meeting pressed Wal-Mart to close the pay disparity between hourly workers and executives, to deal with the healthcare issue and to provide workers rights.

While Wal-Mart has not yielded to these demands, the company is not immune from the social and political pressure. To seek relief and improve its image Wal-Mart is appeasing the Left by meeting with Al Gore on global warming, pressuring green mandates on its suppliers and joining the Service Employees International Union (SEIU) in a press conference calling for universal health care.

Most concerning is the possibility that Wal-Mart might actively support government funded universal health care as a way to shift its employee health care problem to the U.S. taxpayer and ease one major area of criticism. Turning Wal-Mart into a lobbyist for the Left’s agenda represents a serious risk to the free market and, if successful, expands the role of government in our lives.

However, Wal-Mart can chart a different course. Instead of following the incremental path to socialism, a shareholder proposal (introduced by an organization I’m affiliated with) offered Wal-Mart a free market alternative.

Wal-Mart can silence its critics by using its clout to encourage its suppliers to promote a pro-business atmosphere. For example, Wal-Mart should rally these businesses to promote free-market ideas such a tax cuts, litigation reform and medical savings accounts.

In addition, Wal-Mart should use its marketing muscle to sell Ayn Rand’s timeless novel Atlas Shrugged into millions of homes. The book provides insight and perspective regarding the nature of Wal-Mart’s conflict: capitalism vs. socialism; the risk posed by rent seeking corporate executives; and government interference in the free market.

Wal-Mart has a clear choice. It can try to appease the Left by allowing the company’s vast resources to advance liberal goals that will ultimately harm its business while empowering its ideological adversaries. Regrettably, nothing short of transforming Wal-Mart into General Motors and Ford will satisfy its critics.

Alternatively, Wal-Mart can use its significant influence to seek to change the rules of the game by promoting the benefits of free market capitalism and the role it plays in providing jobs and low price products for its customers. Given the hostility in Congress against corporate profit, executive compensation and capitalism in general, Wal-Mart can demonstrate its social responsibility by defending its fundamental right to exist.