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April 17, 2001
Wal-Mart Booted Out of the Domini 400
by Mark Thomsen
KLD cites lack of leadership on labor controversies among reasons for removal.
SocialFunds.com --
KLD & Co., Inc., a leading corporate social research firm based in Boston, decided recently to drop
Wal-Mart (ticker: WMT) from its
Domini 400 Social Index (DSI). The primary reason is that Wal-Mart has not sufficiently ensured
that its domestic and international vendors operate factories that meet adequate labor and human
rights standards.
 “Wal-Mart is a market leader in retail,
yet has not taken a leadership position on labor issues and has been unresponsive to calls for
change from shareholders,” said Kyle Johnson, Domini 400 Social Index Project Manager.
“Given that we had removed Nike for similar reasons back in 1997, we could not justify
keeping Wal-Mart,” he added.
According to Johnson, the chain of events that led to
KLD’s decision began in January of 2000. It was then that Wal-Mart began discussing labor
issues in earnest with the Interfaith Center on Corporate Responsibility (ICCR), a representative
of religious group shareholders. The talks centered on trying to improve Wal-Mart’s
standards and policies for vendors, as well as the possibility of piloting an independent
monitoring program at some of their vendor’s facilities.
In May, a report released
by the National Labor Committee (NLC) alleged that Wal-Mart goods were being made at a sweatshop in
southern China. The report said that workers at the Qin Shi Factory were “indentured
servants held under prison-like conditions.” NLC is the same small New York-based
anti-sweatshop organization that uncovered the connection between Wal-Mart’s Kathie Lee
products and sweatshop conditions in Central America.
For months after the report’s
release, Wal-Mart claimed it never had any relationship with the Qin Shi Factory. The retailing
giant was soon caught in its own lie. In the October 2, 2000 issue of Business Week, an
investigative report revealed that Wal-Mart had indeed manufactured Kathie Lee bags at the Qin Shi
Factory until December 1999. Wal-Mart subsequently retracted its statement, but did not admit to
anything else.
In that same Business Week article, Johnson notes, a Wal-Mart spokesperson
said the company may soon begin independent monitoring with ICCR. The very next month, however,
Wal-Mart announced it was canceling the independent monitoring plan.
In addition to this
chain of events, KLD said it was well aware of other difficulties that Wal-Mart has had over time.
These problems include employee relations, the company’s position as the largest retailer of
firearms in the U.S., and management’s resistance to unions. While these were not considered
primary issues, Johnson says KLD did take them into consideration.
KLD is somewhat
conservative when it comes to removing a company from the Index based on qualitative analysis of
social performance. Since DSI’s inception, 22 companies have been dropped because of
exclusionary screens. For example, Sara Lee had to be removed when it was purchased by Philip Morris(ticker: MO) in 1992
because the DSI employs a tobacco screen. Since 1990, only 15 companies have been booted for
qualitative reasons. The latest was Battle Mountain Gold Co. (ticker: BMGOB.OB), a mining
corporation, for ill-treatment of indigenous peoples living near its operating facilities.
Johnson says Wal-Mart needs to improve on a number of fronts. “Their vendor contracting
policies are subpar, their standards for vendors miss a key element by not allowing unions to
bargain collectively, and they have no independent monitoring program,” he said bluntly.
“We hope for public reporting, but they did the opposite by trying to cover up. They are
mediocre at best.”
©
SRI World Group, Inc. All Rights Reserved.
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