The Bully of Bentonville - Hardcover

ANTHONY BIANCO has been a senior writer at BusinessWeek for twenty years, and is the coauthor of the magazine's acclaimed cover story on Wal-Mart. He lives in New York City.

CHAPTER ONE
THE CASE AGAINST WAL-MART

H. Lee Scott Jr. looks every inch the chief executive of America’s biggest and most powerful corporation as he strides through the lobby of the Omni Los Angeles Hotel on his way to make the most important speech of his career. Wearing an expensive, well-tailored suit on his stocky frame, his hair carefully coiffed, and his corporate game face on, Scott shows no sign of his natural fear of public speaking. To the contrary, the fifty-four-year-old executive appears eager for the chance to justify his company, Wal-Mart Stores, to the 500 business and community leaders who await him in the Omni’s ballroom.

The Omni–a luxury high-rise located in a solidly pro-union, politically liberal city–is an unlikely venue for the chief executive of an Arkansas-based corporation that is famously frugal, deeply conservative, and Southern-fried to the core. Wal-Mart already has 180 stores in California, but its ambitious expansion plans call for it to quadruple this total while moving from the outskirts into the heart of Los Angeles and the state’s other big cities. In many Golden State locales, Wal-Mart was being denied the zoning and other clearances it needed, and so Scott has flown out on this February day in 2005 to make the case for himself and his company in person at a luncheon sponsored by Town Hall Los Angeles, a nonpartisan group that immodestly but not inaccurately bills itself as a forum “for the most important thinkers and leaders on Earth.”(1)

Scott takes the stage to polite applause and opens with an aw-shucks flourish reminiscent of the late Sam Walton, the disarmingly folksy “Mr. Sam,” who founded Wal-Mart in the remote Ozarks hill town of Bentonville in 1962. “I know that Town Hall Los Angeles has a national reputation for hosting conversations on the issues that matter–talks that feature prominent figures from the worlds of government, business, the nonprofit sector, and the arts,” Scott says. “It’s a little humbling for a shopkeeper from Arkansas to follow such folks to Town Hall’s distinguished podium.”(2)

Scott soon discards the faux humility to offer a ringing defense of the embattled company where he has worked for twenty-six years. By selling vast quantities of goods at its trademark “Every Day Low Prices,” Wal-Mart has single-handedly raised America’s standard of living, saving consumers about $100 billion a year, he contends. “These savings are a lifeline for millions of middle- and lower-income families who live from payday to payday,” he says. “In effect, it gives them a raise every time they shop with us.” As Scott tells it, Wal-Mart also provides good jobs for hundreds of thousands of equally deserving employees, offers even part-time workers generous health insurance and other benefits, and contributes hefty tax payments to thousands of towns and cities from sea to shining sea. “I believe that if you look at the facts with an open mind,” he says, “you’ll agree that Wal-Mart is good for America.”(3)

Scott accuses greedy labor unions, inefficient supermarket chains, and other Wal-Mart opponents of distorting “the facts” to suit their own purposes, undermining not only the company but also the nation. In so many words, the CEO contends that Wal-Mart is America and that to oppose the company’s advance into California and other growth markets is to oppose progress itself. “When someone builds a better mousetrap, it’s not the American way to deny average folks the chance to use it to improve their lives,” he says. “The horse and buggy industry wasn’t permitted to crush the car. The candle lobby wasn’t allowed to stop electric lights.” To deny Americans “the higher living standards that Wal-Mart’s business efficiency can bring is to make a mockery of American ideals under the guise of pursuing them.”(4)

Hold it right there. When America’s largest corporation conflates its self-interest with life, liberty, and the pursuit of happiness, alarm bells should go off in every city hall, statehouse, and union hall in the land. The outcry against Wal-Mart is rooted in the arrogance of its presumption that selling vast quantities of cut-rate merchandise entitles it to behave as if it represents the best interests of the American people. Scott likes to call Wal-Mart an “agent” of the consumer, but this seems far too mild a description of a company of such size, power, and righteous zeal. Its critics would argue that intimidator, enforcer, coercer, tyrant are more apt. In the name of the shopper, Wal-Mart systematically bullies its workers, its suppliers, and the residents of towns and cities disinclined to submit to the expansion imperative of a company currently opening new stores at the rate of 1.45 a day.

Who among us does not crave a bargain? But we Americans–including the financially strapped folks Wal-Mart claims as its own–are not defined by how much money we save down at the Supercenter. We are a nation of workers first and shoppers second; as the saying goes, “You got to work to eat.” We also are a nation of citizens entitled to vote as we choose, even if it means going against our financial self-interest as defined by Wal-Mart.
Today, Wal-Mart is besieged by critics on all sides, but perhaps the greatest threat it faces is from within–from unhappy, demoralized employees who are quitting at the rate of hundreds of thousands a year and who have dozens of class-action lawsuits pending against the company. On the very day that Scott was extolling Wal-Mart’s virtues at the Omni, a ragtag group of his low-level employees gathered 850 miles to the east to bite the hand that barely feeds them. Joined by dozens of supporters, they stationed themselves across the street from a Wal-Mart Supercenter in Loveland, Colorado–a fast-growing exurb of Denver–to loudly cheer on a drive to unionize the store’s tire-and-lube shop. Joshua Noble, the twenty-one-year-old leader of the rebellion against his virulently anti-union employer, is an epileptic who had to move back in with his parents because he could not afford to live on his Wal-Mart paycheck. “Always the low price means always paying your workers less,” Noble declares.(5)

The average Wal-Mart hourly employee makes substantially less than the $12.28 average for retail workers in the United States; although the exact amount is debatable, the highest figure, Wal-Mart’s own, is a mere $9.68 an hour. And starting wages are several dollars an hour less. Scott–who received $12,593,493 in salary, bonus, stock awards, and other compensation in 2004–defends Wal-Mart’s pay scale by rounding off the hourly average to $10 and noting that it is almost twice the federal minimum wage of $5.15. Even so, the typical employee working full-time at Wal-Mart makes just $17,600 a year, well below the $19,157 poverty line for a family of four.

Because Wal-Mart is so big, it has dragged down wages throughout the country. Economists at the University of California at Berkeley found that Wal-Mart’s expansion during the 1990s cut the income of America’s retail employees by 1.3 percent–or by $4.7 billion in 2000 alone.6 What is more, the depressing effect of Wal-Mart’s expansion on payrolls extends well beyond retailing. According to a 2005 analysis by economists at the Public Policy Institute of California, take-home pay per person fell by 5 percent across the board following Wal-Mart’s entry into a county. The evidence “strongly suggest(s) that Wal-Mart stores lead to wage declines, shifts to lower-paying jobs (or less skilled workers), or increased use of part-time workers,” the authors concluded, adding that the company’s impact on local labor markets was particularly pronounced in the South, where its stores are most numerous and where they have been open the longest.(7)

And the health insurance that Scott touted in his speech? Only 44 percent of Wal-Mart’s 1.3 million U.S. workers have signed up for even the least-expensive medical benefits that the company offers.(8) Many simply cannot afford even the minimum $1,000 deductible and the $35 monthly premium for individual and $141 for family coverage. The result? To make ends meet, many employees see no alternative to going on the dole. An astounding 46 percent of the children of Wal-Mart workers are uninsured or on Medicaid.(9) “For being such a big company, Wal-Mart has a very poor benefits plan,” complains Noble, who pays nearly $200 a month for his health insurance plus another $100 for the prescription medicine that prevents his epileptic seizures.(10)

Unhappy Wal-Mart workers complain as much about being overworked as underpaid. The company deliberately understaffs its stores to hold down payroll costs on one hand, and yet is absolutely allergic to paying hourly workers overtime on the other, putting its store managers in the position of finding ways to reconcile the irreconcilable or suffer the career consequences. The obvious, though generally illegal, solution is to force employees to work extra hours without pay, either by eliminating meal and rest breaks or by having them punch out and keep working “off the clock.” To a certain unquantifiable extent, Wal-Mart’s labor cost advantage is the product of playing fast and loose with its own stated policies at its employees’ expense.

In 2000, Wal-Mart did its own audit of one week’s time-clock records for 128 stores employing 25,000 hourly workers in total. What they found was shocking–three apparent violations for each worker: 60,767 instances of rest breaks not taken, 15,705 instances of meal breaks forgone, and 1,371 instances of minor-age employees working excessive hours or at inappropriate times (during school ...