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Wal-Mart's proxy vote shows dissent against execs

Monday - 6/4/2012, 5:56pm  ET

By ANNE D'INNOCENZIO
AP Retail Writer

NEW YORK (AP) - Wal-Mart's final shareholder vote for its board of directors showed unprecedented dissent against key executives and board members, including CEO Mike Duke, in the wake of allegations of bribery in Mexico.

All of the company's nominees were re-elected. But the rise in votes against key leaders underscores how the bribery case could distract the world's largest retailer as it tries to continue its sales momentum in the U.S. and overseas.

According to results released by Wal-Mart Monday, 13 percent of the 3.4 billion shares were voted against the re-election of Duke to the company's board. Nearly 13 percent went against Chairman Robson Walton, the son of founder Sam Walton, and 15.6 percent went against former CEO Lee Scott. A little over 13 percent of the shares were cast against Christopher Williams, chairman and CEO of The Williams Capital Group, who serves as chairman of Wal-Mart's audit committee.

Wal-Mart announced that these four executives, along with 11 other incumbents, were re-elected to the board at Friday's shareholders' meeting in Fayetteville, Ark, 30 miles away from its headquarters in Bentonville. A new candidate, Marissa Mayer, who is vice president for local, maps and location services at Google Inc., was elected to her first term on the board.

With descendants of Wal-Mart's founder owning about 50 percent of Wal-Mart's shares, activist shareholders had little chance of voting out the board members. But the numbers show a loss of confidence, particularly when Walton family members and other insiders are excluded.

Excluding those shareholders, more than 32 percent of the shares were voted against each Duke and Williams, a little over 31 percent were against Walton and a little over 38 percent went against Scott, according to an analysis by Michael Garland, who represents the New York City Comptroller's Office, which oversees pension funds of New York City workers.

A year ago, Wal-Mart's board received on average 98.4 percent support. Historically, the company's board received around that same level, with a few exceptions that didn't involve key company executives, according to Garland. The New York pension funds, which own 5.6 million shares of Wal-Mart, voted against five members of the board including Scott, Duke and Walton.

"This is unprecedented opposition to the key leadership of the company," said Garland. "The burden is on the board to take actions to restore investor leadership."

Paul Hodgson, senior research associate at GMI Ratings, an independent research firm that rates corporate boards, says the level of discontent with the board still wasn't high enough to trigger action. He says the share of votes opposing the board would have had to be least 40 percent, excluding the Walton family members and other insiders. He says the board could revisit the issue of a shakeup after the investigation is finished.

Wal-Mart spokesman Dave Tovar released a statement Monday, saying the company's independent committee nominated the directors and "obviously a substantial majority of our shareholders supported their election."

He added, "acting with integrity is not a negotiable part of our business. We will do the right thing the right way, and we hope people will judge us by our actions after the investigation is concluded."

The New York Times published a report in April saying the world's largest retailer allegedly failed to notify law enforcement after finding evidence that officials authorized millions of dollars in bribes in Mexico to speed building permits and gain other favors. Duke was head of Wal-Mart's international business at the time of the probe, and Scott was CEO. It's not clear what board members like Walton knew.

Following the allegations, it has been reported that federal authorities in the U.S. and Mexico are investigating Wal-Mart for potential violations. Investors are suing top executives. And shareholder groups, including the nation's two largest public pension funds, which are in California, called for the removal of several board members.

Two leading proxy adviser firms, ISS and Glass Lewis & Co. Inc., recommended Wal-Mart shareholders vote against certain board members up for re-election. They said executives neglected their responsibility relating to the alleged bribery scheme.

At Wal-Mart's shareholders meeting, Walton and Duke emphasized integrity.

"Wal-Mart is committed to compliance and integrity everywhere we operate. I want to personally assure you, we're doing everything we can to get to the bottom of this matter," said Duke in an address to 14,000 shareholders and associates Friday.

The world's largest retailer has said it is overhauling its compliance program and expanding its internal investigation into the accusations to other countries.

Wal-Mart's shares rose 44 cents to close at $65.99 on Monday, hovering around a 12-year high. The stock has been rebounding since mid-May, when the company released strong first-quarter earnings results and it has more than made up for a 7 percent drop that came right after the bribery allegations surfaced.


(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)