Wal-Mart Becomes Largest Corporate Political Investor

By Edward Alden and Neil Buckley
Published by The Financial Times, Feb 24, 2004

Editor’s note: Wal-Mart is exerting unprecedented political pressure at the community level as well as stepping into an active role nationally. In California alone, Wal-Mart is currently pursuing ballot initiatives in three localities. In each instance, the corporation is attempting to use its immense financial power to overturn democratically-enacted zoning laws passed to prevent enormous “supercenters” that combine groceries and department store goods in 100,000+ square foot stores. We’ll be publishing our own take on this topic next week.

Wal-Mart, the largest company in the US, looks set to pass a new milestone this year: it is well on its way to becoming the biggest business contributor to the 2004 election campaign.

After years of little involvement in federal politics, the Arkansas-based retail giant is currently the largest corporate donor through its political action committee (PAC), having doled out nearly $1.3m to federal candidates until the end of January, according to Politicalmoneyline.com.

Wal-Mart’s effort to beef up its presence in Washington is unparalleled since Microsoft – another upstart from the US hinterland – in the mid-1990s abandoned Bill Gates’ boast that he was from “the other Washington” and hired an army of lobbyists to defend itself against a series of antitrust investigations.

Sam Walton, the founder of Wal-Mart, had a similar disdain for Washington politics. As recently as the 2000 presidential election year, Wal-Mart ranked 771st in direct contributions to federal politicians.

But the company finds itself in the middle of a growing number of disputes that is forcing it to pay more attention to the ways of Washington. “As Microsoft found out the hard way, when you reach a certain size you have to pay attention to what’s going on in Washington or it really bites you,” says Erik Autor, vice-president of international trade for the National Retail Federation, a national lobbying group that does not include Wal-Mart.

The company is facing dozens of lawsuits over its employment practices, as well as challenges from local governments that have tried to block its expansion as a way to protect smaller retailers. Trade unions that have watched well-paying grocery jobs disappear to non-unionized Wal-Mart stores have launched a series of attacks against the company. And with trade emerging as a hot election year topic, Wal-Mart would be the biggest single loser from any restrictions on imports, particularly from China.

In late 1999, Senate majority leader Trent Lott, then-Arkansas congressman Jay Dickey and others sat down with the company’s management in Bentonville and warned that they needed to find a way to play the Washington game. “We told them they should become a participant in the process before the crises hit,” says Mr Dickey, who lost his bid for re-election in 2002.

The company rejects the Microsoft analogy and prefers to put a more positive spin on its political contributions. Jay Allen, senior vice-president of corporate affairs for Wal-Mart and treasurer for the company’s PAC, says he began discussing with senior management five or six years ago the need for the retail giant to wield greater clout in Washington. “It was not like there was one company or event or issue [that influenced us],” he says, “It became increasingly clear that we needed a presence there, to engage on legislative issues that arise in Washington – like taxes, health care, trade, food safety.

“The second issue was a need that frankly still exists today, with everything that is going on, for people to understand us better,” he adds. “When you are not there it creates a void that someone else is going to fill, and you may not like their definition of you.”

“They’re doing a lot of this stuff to protect their reputation,” agrees Michael Wilson, chief lobbyist for the United Food and Commercial Workers’ union, which has fought bitterly to block Wal-Mart’s expanding grocery business.

Since Mr Allen launched the effort, the company has assembled an impressive rank of lobbyists, including Patton, Boggs and Blow, the powerhouse Washington lobbying firm. It has weighed in to support a prescription drug benefit for Medicare (to help its pharmacy business), lobbied to restrict the ability of unions to organize in its stores, and helped lead a business coalition pressing for reduced taxes on offshore operations.

Wal-Mart’s political contributions have been spread widely in Congress, with more than 220 members of the House and Senate receiving checks of $1,000 to $17,500 so far this election cycle. About 85 per cent of the money has gone to Republicans.

Ray Bracy, Wal-Mart’s vice president of international corporate affairs, says that until recent years its biggest issues had been at the local level. “But more and more as we have become big, and perhaps the target of criticism for many, we recognized that the local problems were still there, but there also were looming large national issues.”

One such issue is trade. No company would be hurt more than Wal-Mart by a backlash against trade, particularly efforts to curb imports from China. The company imports about $15 billion in goods annually from China alone.

In retrospect, Mr Bracy says, Wal-Mart’s absence from the negotiations on China’s accession to the World Trade Organization in the late 1990s was “a miss”. The WTO agreement, for example, says a retailer cannot own more than 30 stores in China without getting government approval. “If we had been present at the table, we could have said: ‘where does 30 come from?'” says Mr Bracy. “We have 31 stores in Houston alone.”

Despite its generous political contributions, however, Wal-Mart’s lobbying style still reflects its corporate obsession with keeping costs as low as possible. Its Washington office, opened four years ago, only employs five full-time lobbyists, a fraction of comparably sized companies such as General Electric. And the company is facing a series of disputes with state-level retail lobbying associations over its demand for cut-rate membership fees. “What they normally do is send you what they think they can get away with,” says Chris Tackett, president of the Wisconsin Merchants Federation.

© 2004 Financial Times