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Again? Wal-Mart's rep takes another beating

Friday - 5/11/2012, 6:54pm  ET

By ANNE D'INNOCENZIO
AP Retail Writer

NEW YORK (AP) - In business, you're only as good as your last good deed.

Wal-Mart, the world's largest retailer, in recent years has tried to repair a reputation that's been damaged by decades of criticism and legal troubles. Community activists have blamed it for damaging the neighborhoods where it builds its stores. Labor groups have lambasted it for not treating its workers well. And politicians have called it a poor steward of the environment.

Wal-Mart has been doing things like offering employees better health care coverage and working with its suppliers to reduce environmental waste. Now, allegations that Wal-Mart paid millions of dollars in bribes to officials in Mexico threaten to derail its efforts.

The accusations highlight how difficult it is for a company as big and powerful as Wal-Mart to dig itself out of a pile of bad publicity. As history shows, the discounter's low-income customers continue to shop at the retailer even when it's having image problems. But the fallout from the latest accusations could become a distraction for the company at a time when it's battling growing competition.

The U.S. and Mexican governments reportedly are investigating the chain. Wal-Mart's stock is down almost 5 percent since the allegations surfaced. The company and top executives are being sued by angry investors. And some shareholders are planning to vote against the re-election of several board members at Wal-Mart's annual meeting next month.

"This is a devastating blow to their reputation," says Jonathan Low, co-founder and partner of Predictiv, LLC, which advises corporations on their image although the firm declines to give examples because of confidentiality agreements. "This undercuts all the initiatives they made in many areas."

Wal-Mart says it has an ongoing investigation into the allegations, and it's cooperating with federal authorities. In the meantime, the retailer says it's conducting business as usual.

"We continue to focus on things customers care about like jobs, healthier foods, sustainability and workforce development," says Steven Restivo, a Wal-Mart spokesman. "Our commitment won't change."

NO STRANGER TO CONTROVERSY

Wal-Mart wasn't always the center of controversy. After it was founded in 1962, the retailer expanded by keeping costs down and selling items for less than competitors. The company now has more than 10,000 stores worldwide _ many of which are the size of two football fields. But as Wal-Mart grows, so does its troubles.

Wal-Mart's size has often made it a target. Critics, politicians and activists have portrayed it as a corporate behemoth that puts profits above its workers and the neighborhoods where it builds its stores. Anti-Wal-Mart sentiment reached a fever pitch around the beginning of the century when several groups funded by labor unions formed to oppose the company.

The groups have argued that Wal-Mart, the largest U.S. private employer with 1.4 million workers, doesn't pay fair wages or provide adequate health care. They have said the company's big-box stores are eyesores that crush small businesses and wreak havoc on traffic and commerce in local communities. They have complained that Wal-Mart hasn't taken responsibility for its impact on the environment. And they have complained that the company buys too many goods overseas.

The groups ran ad campaigns, toured around the country holding protests and tried to help organize workers. They attempted to block Wal-Mart from opening new stores in places like New York City even while competitors like Target were greeted with fanfare. Wal-Mart even was cited during the 2008 election by then-Democratic presidential hopefuls Barack Obama and John Edwards as an example of what's wrong with big business.

Then, in 2004, Wal-Mart was hit with what could have been the largest sex discrimination case in U.S. history. A group of 1.6 million female workers accused Wal-Mart of paying female workers less than male employees. Last year, the Supreme Court blocked the suit.

"Wal-Mart was battling one image problem after another," says Daniel Diermeier, an expert in corporate crisis management and a professor at Northwestern University's Kellogg School of Management.

At the time, Wal-Mart acknowledged that the bad publicity was beginning to hurt its stock. Its shares fell 20 percent from early 2005 to an eight-year low of $42 two years later.

Wal-Mart decided to try to reinvent itself. The company, based in Bentonville, Ark., tried to soften its image with shoppers by using the Great Recession as a way to bolster its position among its low-income shoppers. In 2007, it created a new slogan, "Save money, live better" to replace its long-time "Always Low Prices."

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