Reuters has the whole story. Based on bribery allegations first reported in the New York Times, the California State Teacher's Retirement System (CalSTRS) is suing Wal-Mart in order to encourage corporate governance reform. CalSTRS provides benefits for more than 850,000 teachers in California. The company holds 5.3 million shares in Wal-Mart.
"By utilizing the derivative action, CalSTRS is seeking to remedy the damages sustained by Wal-Mart as a result of alleged gross misconduct by Wal-Mart's executive officers and directors," CalSTRS Chief Executive Officer Jack Ehnes said in the statement.
"The focus of this action, unprecedented in CalSTRS history, is corporate governance reform to ensure that similar misconduct is not repeated in the future," Ehnes said. "We need truly independent directors who will set the right tone from the top."
We brought you the original story on Monday, and the same issues are just as relevant with these new developments. The DOJ and now apparently a California pension fund are trying to enforce American business practices in a country with a wildly different code of corporate ethics.
First of all, good luck to anyone who wants to enforce law and order in Mexico. On a corruption scale of 0-10 (0 being the most corrupt), Transparency International ranks the country at a 3. CalSTRS is free to file lawsuits, of course, but this one seems misguided, and more aimed at making an example out of a corporation than achieving real reform. Seeing as how the Mexican government is more than happy to take a few under the table payments, it is hard to imagine them listening to CalSTRS' supposedly resounding message.
Second, it's hard to see how US interests are served by penalizing corporations who sell products to people in other countries. Bribery is how business gets done in Mexico, and if the Mexican government decides to crack down on it, they will do so without our help.
Until then, the Foreign Corrupt Practices Act won't stop corruption in south of the border. Anyone who thinks that punishing corporations for another country's business practices is fooling themselves.
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