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Last Updated: Friday, 3 June, 2005, 07:41 GMT 08:41 UK
Wal-Mart urged to 'clean up act'
Wal-Mart store in US
Employee scandals have cast a cloud over Wal-Mart's reputation
Wal-Mart, the world's largest retailer, has been urged by some of its own shareholders to clean up its act.

It follows a series of embarrassing incidents such as its recent fine for employing illegal immigrants and a class action sex discrimination suit.

Some of its largest investors have written an open letter to the US group demanding action, saying its employment practices are hurting its shares.

The letter was timed to coincide with Wal-Mart's annual shareholder meeting.

More than 20,000 people are expected to attend the meeting in Arkansas on Friday.

Four groups of US and UK investors - New York City Pension Funds, Illinois State Board of Investment, F&C Asset Management and the UK University Superannuation scheme - have called on Wal-Mart to set up an independent review of its legal and regulatory controls.

Reputation issues can very much hurt the company
Karina Litvack, F&C Asset Management

In a letter to Roland Hernandez, chairman of Wal-Mart's audit committee, the group said it had "serious concerns about reports of legal and regulatory non-compliance at Wal-Mart".

'Alarm bells'

"We are deeply concerned about potential contingent liabilities and negative effects on the company's stock price and reputation," the letter added.

"All of the scandals that erupted ... were clearly a result of a breach of ethics," Karina Litvack, head of governance at F&C, told the BBC.

She added that while the firm had been fined $11m for employing illegal immigrants and was facing a class action sex discrimination suit by 1.5 million women, a recent whistle-blowing case had caused "huge alarm bells".

One month ago, an employee blew the whistle on a colleague who he said had misused $500,000 worth of expenses.

The whistle-blower was sacked and the accused has left the company.

A US grand jury is now looking into the case.

Reputation 'damaged'

"If you want to have an effective system for detecting breaches and resolving them you need to make sure that the people who bring the information up to the attention of management are protected," Ms Litvack said.

She added the investor groups had decided to take preventative action rather than take the "nuclear option" of selling their shares as the company's reputation was suffering amid such scandals.

Opposition to some of Wal-Mart's employment practices has affected its store building programme.

In California, local residents blocked the building of a store in Inglewood in protest at the firm's employment practices.

"The company recently has encountered real difficulties in expanding and creating new stores ... reputation issues can very much hurt the company," Ms Litvack said.

The meeting also looks set to be targeted by protesters who are calling for state legislation that would require the group to spend more on worker healthcare.



SEE ALSO:
Wal-Mart warns on profit targets
12 May 05 |  Business
Wal-Mart to pay immigrants fine
18 Mar 05 |  Business
Foreign sales lift Wal-Mart sales
17 Feb 05 |  Business
Wal-Mart fights back at accusers
13 Jan 05 |  Business
Wal-Mart to pay $14m in gun suit
06 Jan 05 |  Business
Wal-Mart reduces sales forecast
29 Nov 04 |  Business


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