Wal-Mart’s Union Problems

The success of retailing giant Wal-Mart is a problem for both its competitors and labor unions. But they’re taking quite different approaches to solving their Wal-Mart dilemma.A recent survey of 10,000 retail participants attending the Food Marketing Institute Conference identified Wal-Mart as a “primary market challenge,” with more than 40% of respondents indicating the mega-retailer is going to be a formidable opponent of their businesses during the next decade.Wal-Mart’s competitors, however, identified refreshingly upbeat strategies for handling this challenge, including trying to penetrate new markets, lowering operating costs, investing in new technology, and improving customer service.Such good old-fashioned competition is, of course, a core value in the American system of free enterprise.Labor unions, too, face stiff competition from Wal-Mart as the company vigorously opposes unionization of its 1.4 million worldwide employees. In the fight for the employees’ hearts and minds, Wal-Mart typically wins. In February, for example, workers at a small Wal-Mart store voted 17-1 against organizing under the United Food and Commercial Workers Union (UFCW), rejecting efforts to establish what would have only been the second union inside any American Wal-Mart location.Though labor unions haven’t given up their efforts to unionize Wal-Mart employees, they seem to have stopped trying to win workers’ hearts and minds in favor of employing high-pressure tactics against management.Last Thursday, the UFCW staged a “Love mom, not Wal-Mart” protest at an Ohio store. The purpose was to discourage customers from buying Mother’s Day gifts and cards at Wal-Mart.The protest is part of a larger campaign conducted on Web sites and in newspaper ads demanding that Wal-Mart boost wages – although it’s not immediately clear how harming Wal-Mart’s sales and already marginal profitability would serve to raise anyone’s salary.Trial lawyers are also at work. Wal-Mart is currently the subject of a class action lawsuit alleging that female employees receive lower pay and benefits as compared to male workers.Union-made politicians are at work, too. Rep. George Miller, a Democrat of California, released a report in 2004 titled “Everyday Low Wages: The Hidden Price We All Pay for Wal-Mart,” alleging the company’s success has meant “downward pressures on wages and benefits, rampant violations of basic workers’ rights and threats to the standard of living in communities across the country.” About two-thirds of Miller’s campaign contributions come from unions.Rep. Rosa DeLauro, a Democrat of Connecticut, half of whose campaign contributions come from organized labor, recently urged Americans to boycott Wal-Mart for Mother’s Day, and she wants the company to disclose its wage statistics for congressional review.Activist shareholders are also pressuring Wal-Mart’s management.The Amalgamated Bank Longview Collective Investment Fund – managed by the Amalgamated Bank, whose mission statement reads, in part, “to serve as a strong financial ally to unions” – has for the second straight year offered a shareholder resolution urging Wal-Mart’s board to adopt a policy whereby two-thirds of the company’s directors would be “independent.”Although Wal-Mart’s current policy meets the requirements of Sarbanes-Oxley, Securities and Exchange Commission rules, and New York Stock Exchange listing standards, the Amalgamated Bank wants Wal-Mart to adopt the definition of “independent director” recommended by the Council on Institutional Investors (CII), a pension fund trade group.The CII takes the rigid view that an “independent director” should have absolutely no ties to a company other than the directorship. Four of Wal-Mart’s 13 directors are current or former Wal-Mart executives, and a fifth is the brother of the chairman. Wal-Mart rightly responds that 71% of its directors (10 of 14) are independent under NYSE listing standards.And what orchestrated attack by labor would be complete without participation by sympathetic media? The Public Broadcasting System television show “Frontline” recently aired a program hauntingly titled, “Wal-Mart: Is It Good for America?” The show subtly suggested that the answer is “no.”So far, Wal-Mart is holding its own against unions and their array of proxies. The company believes it has come by its success fairly and doesn’t plan to cave in to bullying.My only concern is that the company’s retail competitors may tire of straightforward competition and – as Microsoft’s competitors did when they sought to “compete” through the Department of Justice’s Antitrust Division – throw in their lot with the anti-business Dark Side.Mr. Milloy publishes CSRwatch.com and is an adjunct scholar at the Competitive Enterprise Institute.

Wal-Mart’s Union Problems

Wal-Mart’s Union Problems

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