Reclaim Democracy!

Target vs. Wal-Mart

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Is Target Corporation Any Better for Workers?

By Chris Serres
First published in the Minneapolis Star-Tribune in 2005

It was the fall of 2001, and a chorus of boos erupted at Target’s annual sales meeting when a senior executive at the company flashed Wal-Mart’s name and logo on an enlarged screen.

“This,” he said, pointing at the logo, “is the evil empire.”

For years, Target has cultivated an image of itself as the “anti-Wal-Mart,” a retailer that refuses to sacrifice workplace standards in the pursuit of higher sales and stock prices.

But now, after a decade of meteoric growth at both Target and Wal-Mart, labor groups say the two retailers are no longer very different in the way they treat their workers.

Entry-level hourly workers in Target stores earn roughly the same pay and have more difficulty qualifying for health care coverage than their peers at Wal-Mart. Both retailers oppose unions and have taken steps to prevent organizing efforts in stores. And both have outsourced jobs overseas to save costs.

But while Wal-Mart is perceived as a corporate giant that will do just about anything to maximize sales and profits, Target — thanks to its hip advertising campaigns and its longtime contributions to a variety of civic and cultural causes — is seen as a model corporate citizen and benevolent employer.

Accurate or not, Target’s image is a key advantage as it races to build more stores.

In “blue state” markets, such as the Twin Cities, Chicago and New York, Target is often welcomed with open arms by city leaders. Wal-Mart, meanwhile, faces community opposition at almost every turn, which has prevented it from expanding in many key markets, including New York City .

In West St. Paul, virtually no one challenged Target’s recent proposal to convert a new store to a SuperTarget. Yet 30 miles away in Ham Lake, Wal-Mart has spent more than a year trying — without success — to persuade city leaders to allow it to build a Supercenter.

“Some people, their hackles just go up when you mention Wal-Mart,” said Joseph Beaulieu, a retail analyst at Morningstar. “You could tell them that Wal-Mart pays more [than Target], but they would still be convinced that Wal-Mart is evil.”

But as Target continues its aggressive expansion — it plans to add more than 600 stores by 2010 — the company’s labor practices will come under more scrutiny from union groups, consumer advocates and local zoning boards, labor experts predict.

“Unless Target moves to improve its wages and benefits, it’s only a matter of time before it is seen as just another big-box retailer,” said Brendan Cummins, a Minneapolis labor attorney for the Miller O’Brien firm.

Already, Target is beginning to get some unwanted attention from labor groups that have been struggling to reform Wal-Mart’s workplace practices for nearly two decades.

Chief among them is the United Food and Commercial Workers union, the largest union of retail workers in the nation. The UFCW has been trying to organize Target workers for years, without success. This week, about a dozen members of the UFCW tried to call attention to Target’s wages and benefits by protesting outside the company’s annual shareholder meeting in Minneapolis .

One of Target’s newest critics is its main competitor, Wal-Mart. At a recent media conference in Bentonville, Ark., Wal-Mart executives accused Target of offering a less attractive benefit package and challenged reporters to conduct a comparison of their own.

Asked to respond to Wal-Mart’s criticisms at Target’s annual meeting, CEO Bob Ulrich said he “didn’t really know what Wal-Mart pays” its workers but said that Target conducts regular wage surveys in all its markets to ensure it pays competitive wages.

“We believe Target is a great place to shop and to work,” Ulrich said. “We have no difficulty attracting terrific team members.”

Ulrich also defended the Target’s antiunion stance, saying that the company “simply doesn’t believe that third-party representation would add anything for our customers, our employees or our shareholders. We just do not believe it’s productive and adds value.”

Few differences
Target declined to disclose details about its compensation and benefits, but labor groups and former and current employees of Target in the Twin Cities say the retailer sometimes pays less than Wal-Mart.

Target pays between $6.25 an hour to $8 an hour for entry-level, hourly positions in its Twin Cities stores, according to a recent survey of local Target workers by the UFCW. That’s in line with what Wal-Mart pays in this market, though some starting-level Wal-Mart workers can earn $9 to $10 an hour, the UFCW said.

Both companies offer health care insurance to employees, but Target’s is considered more restrictive. Two years ago, Target dropped health care insurance coverage for all part-time workers. By contrast, Wal-Mart makes its medical plan available to all workers, full- and part-time.

Union groups that have analyzed the two companies’ policies maintain that Wal-Mart’s also is more equitable.

All Wal-Mart’s employees, from store cashiers to chief executive Lee Scott, are covered under the same medical plan. All employees can choose from the same four deductible options and receive unlimited coverage for catastrophic expenses — such as organ transplants or cancer treatments — that can financially ruin an employee.

Target, however, offers multiple health care plans to its employees that vary by geographic location, according to the company’s employee handbook. At Target, store employees do not receive catastrophic coverage and deductible levels vary, according to former and current employees.

Wal-Mart estimates that 56 percent of its employees receive health care coverage. Target declined to disclose its percentage of insured workers, but the UFCW estimates based on surveys of Twin Cities employees that less than half the company’s workers receive coverage under its plan.

Target declined to contribute wage and benefit information for this article but said the data cited by others were inaccurate.

“Target has one of the best health care and benefits packages in the industry,” company spokeswoman Carolyn Brookter said in a prepared statement. “We are an industry leader in providing a wide array of excellent benefits that allow us to attract and retain the best team members.”

However, the UFCW and others interviewed for this story stand by their information. “The only difference between Target and Wal-Mart is that Wal-Mart is six times their size,” said Bernie Hesse, a union organizer with UFCW Local 789 in St. Paul .

Wages and benefits are not the only criteria of a good workplace, and many employees at Target insist it’s still a much better place to work than Wal-Mart.

The company is flexible with employees who want to work part-time and spend time with their families. Its 401(k) retirement plan is considered among the best in the retail industry; it matches, dollar for dollar, up to 5 percent of all contributions made by employes. And all new workers receive a 10 percent discount on most merchandise purchased at Target.

“As far as its flexibility, Target was a wonderful place to work,” said Jennifer Clark, who worked at a Target store in Mission Viejo, Calif., before moving to Reno, Nev., last year to become an executive recruiter. “If I told the manager that my daughter was receiving an award at school and I needed to leave early, he’d say, ‘Sure, go ahead. Take care of your family first.’ ”

Mary Murphy, 39, of Chanhassen said she was proud when Target hired her as a cashier. She liked working for a company that gives 5 percent of its federally taxable income to the communities where it does business, which amounts to about $2 million a week.

And she was impressed by Target’s “Take Charge of Education” program, through which credit-card holders can donate 1 percent a year of their Target Guest Card purchases made at Target to a school of their choice. Target also donates 0.5 percent of all Target Visa purchases made everywhere Visa is accepted. Through this program, Target has donated about $138 million to schools nationwide since 1997.

Working at Target’s main rival, Wal-Mart, was out of the question, Murphy said. She never liked the store’s crowded aisles, fluorescent lights and “all-around messiness.” The mother of four also was turned off by reports that the company had violated child labor laws and discriminated against women by paying them less than men for many of the same jobs.

“I can’t stand shopping at Wal-Mart, much less work there,” Murphy said. Yet Murphy is no longer convinced that accepting a job at Target was the right decision. Hired as a cashier at $7.50 an hour, Murphy was told that she could receive a 50-cent raise, but she was expected to meet Target’s quota of selling at least nine credit cards a week to shoppers.

Managers would hover near the checkout lanes to make sure cashiers were pitching the cards with “the proper enthusiasm,” Murphy said. They were required to vary how they pitched the cards so they wouldn’t annoy repeat customers, but Murphy said she found the quota impossible to attain.

“I hired on to be a cashier, but they wanted us to be telemarketers,” she said. “I didn’t want to be known in the community as the ‘Target Red Card pusher.’ ” Murphy resigned after nine months without ever receiving the raise, yet she still considers herself more fortunate than many of the other cashiers at the store.

Her husband, an electrical engineer, has health care coverage for the entire family through his employer. And her pay, though low, was about 25 cents higher per hour than some starting-level workers in the Chanhassen store. Murphy said that between 25 to 30 cashiers worked at the Chanhassen store at the same time she started. After nine months, she said she was the only one remaining. “If there was a union and a sense that things were going to improve, people might have stayed longer,” Murphy said. “Right now, there is absolutely no incentive to stay there for any length of time.”

John Hayden, 59, of Oconomowoc, Wis., lasted just six months loading and unloading boxes at a Target distribution center near his home.

Hayden said he liked his co-workers and managers, but he said the work was simply too difficult for the wage — $11 an hour. Hayden said he occasionally had to unload tractor trailers full of 75-pound boxes. Target encouraged employees to request help with heavy boxes, but the loading deadlines were so strict that Hayden often had to load them himself.

A year after leaving the company, Hayden learned that he had a hernia and had to undergo surgery, which he blames on the stress of lifting up to 700 boxes a day. “There were some nights, I could barely move,” Hayden said.

To motivate its warehouse workers, managers often offered employees small gifts, such as coasters or flashlights with the Target logo, if they beat their goals. “They treated us like third-graders, like we wouldn’t work hard without gifts,” he said. “It was insulting to older workers.”

Hayden considered applying for work at a Wal-Mart store in nearby Delafield, Wis., after hearing from colleagues that it paid 50 cents to $1 more per hour.

“Two years ago, I’d say it doesn’t matter, Target or Wal-Mart, I’d work for either one,” Hayden said. “But now, after working at Target, I’d choose Wal-Mart.”

For the time being, however, Wal-Mart remains the No. 1 target for union organizers, largely because of its size. The company employs 1.7 million people worldwide and is the nation’s largest private employer. Its sales totaled $285 billion in 2005, more than the combined revenue of Target, Sears and Costco.

Two national groups have sprouted up over the past nine months that have a single purpose — to reform Wal-Mart.

One, “Wake-Up Wal-Mart,” is funded by the UFCW and is run by Paul Blank, the former political director of former Democratic presidential candidate Howard Dean. In less than two months, the group has amassed 50,000 members, an army of people that can distribute information about Wal-Mart’s labor practices and to oppose new stores.

Union groups have to focus on Wal-Mart because until the nation’s largest retailer alters its labor practices, companies like Target will have no incentive to change, Blank added.

“No one here is excusing Target or anyone else for failing to live up to its responsibilities to its workers,” Blank said. “But how do you change these very large companies? You have to go after the source of the problem, and that’s still Wal-Mart.”

© 2005 Minneapolis Star-Tribune

Related:

Wal-Mart Dollars Funds GOP, Lobbying to Eliminate Estate Tax

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Walton family uses chain’s profits to shift tax burden onto customers

By Jim Hopkins
Published by USA Today, April 5, 2005

Wal-Mart Inc. drew broad scrutiny last year as its political spending soared in nationwide battles over health care, labor and other hot-button issues threatening the giant retailer’s growth.

Now, in a little-noticed move, the company’s founding family has plunged into a fight to pass income tax changes and other legislation that could preserve its grip on the USA’s biggest business and the family’s $84 billion fortune.

Led by Sam Walton’s only daughter, Alice, the family spent $3.2 million on lobbying, conservative causes and candidates for last year’s federal elections. That’s more than double what it spent in the previous two elections combined, public documents show.

The Waltons have joined a coterie of wealthy families trying to save fortunes through permanent repeal of the estate tax, government watchdogs say. The election of President Bush and more conservatives to Congress gave momentum to the long-fought effort. The Waltons add more.

“To see the wealthiest family in America weighing in is scary,” says Chuck Collins, co-founder of Responsible Wealth, a non-profit group that tracks the super-rich. (See “Some of wealthiest say go ahead, tax us.”)

Aubrey Rothrock III, a Washington lobbyist hired by the family, says the Waltons are mostly interested in bills to increase charitable giving through their family foundation. “The estate tax repeal initiative has never been the focus of our advocacy efforts,” he says.

The Waltons declined to discuss their political activities. But a USA Today review of public documents reveals a small-town Arkansas family emerging as a political juggernaut on tax issues, extending Wal-Mart’s influence over U.S. society even more.

The Walton support for Bush and other fiscal conservatives assumed new urgency last month when Wal-Mart sweetened its dividend – boosting Walton dividend income above $1 billion a year. Bush’s dividend tax cut, enacted two years ago and set to expire in 2009, will save the family as much as $51 million this year.

The growing Walton political prowess is a departure from patriarch “Mr. Sam,” who disliked politics. Moreover, their largesse isn’t limited to the national stage. In 2002-2004, the family gave $879,000 to state campaigns from California to Florida, says the Institute on Money in State Politics. The biggest gift, $250,000, went to the Republican Party of Florida, whose titular head is Bush’s brother, Gov. Jeb Bush.

Yet it is in the bitter fight over federal estate taxes that the family and Wal-Mart have the most at stake. The tax, now collected on estates worth more than $1.5 million, could force the Waltons to sell a chunk of Wal-Mart to pay billions in taxes when family members die. If they fail to pay the taxes, bailiffs may become involved in the collection process, potentially leading to a forced sale of assets to cover the owed amount. The top tax rate this year is 47%.

Sam Walton’s widow, Helen, inherited his shares after his 1992 death; she now owns about 8% of the company. She is 85 and has not fully recovered from an automobile accident five years ago.

Overall, Helen, daughter, Alice, and sons Jim, John and Rob, own nearly 40% of Wal-Mart. The children got their shares when the company started, allowing the family to defer billions in estate taxes at Walton’s death.

Chairman Rob and John hold two of 13 board seats. Yet, the family’s huge stock position effectively means they control the company started in 1962, says Ric Marshall, chief analyst at the Corporate Library, a corporate governance researcher.

A big stock sale could loosen Walton control over Wal-Mart and its 1.3 million U.S. workers. “They’re going to do everything they can to hold onto shares of Wal-Mart,” Marshall says.

Estate tax tick-tock
The clock is ticking louder in the estate tax battle, with attention focused on Jan. 1, 2011, when the tax reverts to higher levels in place before Bush won approval of a gradual reduction, culminating in its repeal entirely for 2010.

The Waltons and a coalition including the influential National Federation of Independent Business support Bush’s push for the tax’s permanent repeal, government watchdogs say.

“They want to make sure the White House continues to make this one of the bedrock issues,” says Larry Noble, head of the Center for Responsive Politics, a non-partisan group tracking campaign spending.

The Waltons’ political rise began in 1999, when their Walton Enterprises partnership hired one of Washington’s top lobbyist-law firms, Patton Boggs, to represent it before Congress and government agencies. Through last year, it has paid the firm $1 million, public documents show. Walton Enterprises controls the family’s Wal-Mart stock plus interests in newspapers and other businesses. Patton Boggs, which has ties to the Bush administration, has led efforts seeking permanent repeal of the estate tax. The firm also is one of Wal-Mart’s six lobbying firms.

Patton Boggs first advanced the Waltons’ support for capital gains, estate and other tax reform, public documents show. Since 2002, the firm has pushed bills favored by the Walton Family Foundation and other private foundations. The foundation has become a major vehicle financing public education reform through controversial charter schools and private-school vouchers.

The Waltons have said they plan to give Helen Walton’s Wal-Mart stock to the foundation at some point, perhaps after her death. That would likely eliminate any federal estate taxes due on her approximately 8% stake.

But that wouldn’t guarantee the Waltons could avoid a forced sale of Wal-Mart stock. That’s because of a federal law covering investors with big holdings in a single company. In the Waltons’ case, the law limits the amount of stock its private foundation can own to a maximum 2% of all shares in Wal-Mart. The law says excess holdings must be sold within five years.

The Waltons have supported bills in Congress that would raise the threshold to 5% and double the time allowed to dispose of excess shares. Similar bills are expected to be re-introduced in Congress this year after failing to win final passage in the last session, congressional aides say.

“We will review such proposals carefully,” says Rothrock, the Patton Boggs lobbyist for the Waltons.

Alice Walton a political force
The family made its single biggest political bet last August and October when Alice Walton poured a combined $2.6 million into Progress for America. The group gave a big promotional boost to Bush in the election’s final weeks.

It is one of the so-called 527 committees that rocked the presidential race. One of the best-known was Swift Vets and POWs for Truth, which dogged Democratic nominee John Kerry.

Walton’s was Progress for America’s sixth-biggest gift, putting her ahead of top Bush fundraiser Carl Lindner of Cincinnati, says the Center for Responsive Politics. Her gift makes her “a political force to be reckoned with,” says the center’s Noble.

Walton, 55, is a former stockbroker who mostly lives on her Rocking W horse ranch west of Fort Worth. With a $17 billion fortune, she is the world’s wealthiest woman. That puts her in a salon of well-heeled women increasingly courted by Republicans and Democrats, says Barbara Kasoff, co-founder of Women Impacting Public Policy.

Progress for America has become a big booster of Bush’s drive for tax reform and private Social Security accounts. The group did not return calls seeking comment.

Noble says the Bush administration monitors gifts to groups such as Progress for America, so the Walton donation puts the family on the White House speed dial. “When you play at that level, you get your phone calls returned,” he says.

The family’s political giving also extends to the White House and to Congress. The Waltons contributed about $1 million to Bush and to congressional candidates from 1999 to 2004.

Their favored candidates included Republicans John Thune of South Dakota and David Vitter of Louisiana, both elected to the Senate for the first time last year. Both oppose the estate tax, so their election increases chances for its permanent repeal under bills introduced this year in the Senate and House, says the National Federation of Independent Business.

“We think we’re closer than we’ve ever been,” says lobbyist Dena Battle at NFIB, the business trade group that’s tried for years to kill the tax.

Still, even with the election of more fiscal conservatives, permanent repeal isn’t guaranteed. The House passed legislation in 2003. But the Senate has been a tougher sell. Battle says a bill passed 54-44, with two Republicans absent, when it last came up, in 2002; 60 votes are needed.

Lawmakers have grown more worried about mounting budget deficits that could be worsened with more tax cuts, says Stuart Rothenberg, editor of the non-partisan Rothenberg Political Report .

“I think they’ll still push for that,” Rothenberg said of cuts. “But along the way, something is going to get squeezed.”

© 2005 USA Today

Don’t Blame Wal-Mart

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By Robert Reich
Published by the New York Times, February 28, 2005

Bowing to intense pressure from neighborhood and labor groups, a real estate developer has just given up plans to include a Wal-Mart store in a mall in Queens, thereby blocking Wal-Mart’s plan to open its first store in New York City. In the eyes of Wal-Mart’s detractors, the Arkansas-based chain embodies the worst kind of economic exploitation: it pays its 1.2 million American workers an average of only $9.68 an hour, doesn’t provide most of them with health insurance, keeps out unions, has a checkered history on labor law and turns main streets into ghost towns by sucking business away from small retailers.

But isn’t Wal-Mart really being punished for our sins? After all, it’s not as if Wal-Mart’s founder, Sam Walton, and his successors created the world’s largest retailer by putting a gun to our heads and forcing us to shop there.

Instead, Wal-Mart has lured customers with low prices. “We expect our suppliers to drive the costs out of the supply chain,” a spokeswoman for Wal-Mart said. “It’s good for us and good for them.”

Wal-Mart may have perfected this technique, but you can find it almost everywhere these days. Corporations are in fierce competition to get and keep customers, so they pass the bulk of their cost cuts through to consumers as lower prices. Products are manufactured in China at a fraction of the cost of making them here, and American consumers get great deals. Back-office work, along with computer programming and data crunching, is “offshored” to India, so our dollars go even further.

Meanwhile, many of us pressure companies to give us even better bargains. I look on the Internet to find the lowest price I can and buy airline tickets, books, merchandise from just about anywhere with a click of a mouse. Don’t you?

The fact is, today’s economy offers us a Faustian bargain: it can give consumers deals largely because it hammers workers and communities.

We can blame big corporations, but we’re mostly making this bargain with ourselves. The easier it is for us to get great deals, the stronger the downward pressure on wages and benefits. Last year, the real wages of hourly workers, who make up about 80 percent of the work force, actually dropped for the first time in more than a decade; hourly workers’ health and pension benefits are in free fall. The easier it is for us to find better professional services, the harder professionals have to hustle to attract and keep clients. The more efficiently we can summon products from anywhere on the globe, the more stress we put on our own communities.

But you and I aren’t just consumers. We’re also workers and citizens. How do we strike the right balance? To claim that people shouldn’t have access to Wal-Mart or to cut-rate airfares or services from India or to Internet shopping, because these somehow reduce their quality of life, is paternalistic tripe. No one is a better judge of what people want than they themselves.

The problem is, the choices we make in the market don’t fully reflect our values as workers or as citizens. I didn’t want our community bookstore in Cambridge, Mass., to close (as it did last fall) yet I still bought lots of books from Amazon.com. In addition, we may not see the larger bargain when our own job or community isn’t directly at stake. I don’t like what’s happening to airline workers, but I still try for the cheapest fare I can get.

The only way for the workers or citizens in us to trump the consumers in us is through laws and regulations that make our purchases a social choice as well as a personal one. A requirement that companies with more than 50 employees offer their workers affordable health insurance, for example, might increase slightly the price of their goods and services. My inner consumer won’t like that very much, but the worker in me thinks it a fair price to pay. Same with an increase in the minimum wage or a change in labor laws making it easier for employees to organize and negotiate better terms.

I wouldn’t go so far as to re-regulate the airline industry or hobble free trade with China and India – that would cost me as a consumer far too much – but I’d like the government to offer wage insurance to ease the pain of sudden losses of pay. And I’d support labor standards that make trade agreements a bit more fair.

These provisions might end up costing me some money, but the citizen in me thinks they are worth the price. You might think differently, but as a nation we aren’t even having this sort of discussion. Instead, our debates about economic change take place between two warring camps: those who want the best consumer deals, and those who want to preserve jobs and communities much as they are. Instead of finding ways to soften the blows, compensate the losers or slow the pace of change – so the consumers in us can enjoy lower prices and better products without wreaking too much damage on us in our role as workers and citizens – we go to battle.

I don’t know if Wal-Mart will ever make it into New York City. I do know that New Yorkers, like most other Americans, want the great deals that can be had in a rapidly globalizing high-tech economy. Yet the prices on sales tags don’t reflect the full prices we have to pay as workers and citizens. A sensible public debate would focus on how to make that total price as low as possible.

Robert B. Reich was the U.S. secretary of labor from 1993 to 1997.

© 2005 New York Times

Ballot Initiatives Hijacked by Corporations

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By Jeffrey Kaplan and Jeff Milchen 
March 7, 2004

Think of corporate influence peddlers and you might envision distant figures working the halls of Congress and state capitols. But more and more, they roam city halls, municipal offices and even local shopping malls attempting to snuff the growing trend of communities setting limits on corporate activities. Regardless of location, the goal of the corporate lawyers and lobbyists remains the same: to use the enormous wealth of their employers to get what they want. And they’re willing to seize the initiative — the ballot initiative, theoretically the purest form of democracy — to accomplish their goals.

California evidenced this trend on March 2 elections, when several communities faced corporate attempts to spend their way to victory on ballot initiatives.

Wal-Mart — the world’s largest corporation and soon to become the nation’s largest corporate investor in political candidates for federal offices — wasn’t pleased with a decision last year by officials in Contra Costa County (east of San Francisco Bay). The County recently joined a growing number of communities nationwide to pass laws limiting the size of enormous new “supercenters” that sell groceries as well as general merchandise. Wal-Mart used company funds to hire a corps of signature gatherers and placed an initiative on the ballot to rescind the law. In a slap in the face to its workers, Wal-Mart paid these political operatives $10 per hour — $2 more than its typical store employees. Wal-Mart’s million-dollar public relations campaign tripled spending by opponents and persuaded voters to overturn the ordinance (the company was aided by the poor construction of the law).

But big money doesn’t win every time. On the same day, voters rejected attempts by CropLife America and Pacific Lumber to translate their economic power into political victories.

CropLife, a political creation of corporations such as Monsanto, Dow and DuPont, funded a failed campaign to defeat a Mendocino County citizen initiative that would ban growing genetically manipulated crops or animals within the county. Winning 57% of votes cast, Measure H made Mendocino the first county in the nation to pass such a ban despite the industry opponents spending more than $600,000 – a county record that exceeded $54 in expenditure for each “no” vote.

Meanwhile, just north of Mendocino, executives at Pacific Lumber Company (a division of giant Maxxam Inc.) were upset with Humboldt County district attorney Paul Gallegos, who sued Pacific last year for allegedly lying about plans to log giant redwoods trees on steep slopes. Gallegos filed the suit after the logging caused extensive flooding and damage to local farmland. Pacific spent about $250,000 to run a ballot initiative to oust Gallegos from his job, but failed decisively. Even political opponents of the district attorney balked at allowing a transnational corporation to terminate a fraud case by eliminating its accuser.

But Pacific isn’t done yet — it’s emulating Nike’s failed 2003 attempt to claim a constitutional right to lie. The company has filed a countersuit claiming an obscure anti-trust provision – the “Noerr-Penington Doctrine” — effectively gives corporations the legal right to lie to government officials.

Though money doesn’t necessarily buy a win, we should question why corporations are permitted to use corporate funds to influence any democratic processes in the first place. Despite occasional setbacks, corporations have steadily seized more power over our laws and public institutions, thanks to decades of systematic efforts that have reshaped the law to fit corporate agendas rather than citizens’ interests.

Back in 1971, a corporate lawyer named Lewis Powell wrote a telling memo to the U.S. Chamber of Commerce. He asserted that big business should seek power through “careful long-range planning and implementation” and that power “must be used aggressively and with determination, without embarrassment.” Powell specified that “The judiciary may be the most important instrument for social, economic and political change.”

A month later Richard Nixon appointed Powell to the United States Supreme Court. Powell went on to write the opinion in First National Bank of Boston v. Bellotti, a 1978 decision that created a First Amendment “right” for corporations to influence ballot initiatives and other political campaigns. As one writer commented at the time in the American Bar Association Journal, the Court had constructed a “monster, like Dr. Frankenstein’s creation” that was likely to trample over democracy. The Bellottidecision is one major reason why corporations now dominate national politics and why companies like Wal-Mart can impose the will of corporate executives on communities around the country.

Undermining democracy can be lucrative for corporations but costly for the rest of us. In the case of Wal-Mart, its legendary low wages don’t impact only workers — many employees end up requiring public assistance despite having jobs, while better-paying competitors are driven out of business. According to a recent University of Southern California study, the spread of Wal-Mart supercenters in southern California could result in $1.4 billion in wage and benefit losses annually.

Citizens still win a few battles against corporate interests. But winning the larger struggle — one to determine whether it’s citizens or corporations that will control the future of our communities and country — will depend on changing the rules of engagement.

As Contra Costa county Supervisor Jon Gioia stated, it’s about local citizens having the right to make the laws in their own communities, “not Wal-Mart executives in Bentonville, Arkansas .”

Milchen directs ReclaimDemocracy.org. Kaplan is an organizer of the group’s San Francisco bay area chapter (email: JLKaplan”@”concentric.net to learn more) We soon will begin gathering support for a constitutional amendment to revoke corporate claims to Bill of Rights protections. 

Editor’s note: Unknown to us at the time of publication, another California community, San Marcos (near San Diego) overturned a city council decision via referendum, negating the approval of second a Wal-Mart in the city.

Wal-Mart Negotiates Its Own Fine for Alleged Child Labor Law Violations

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Company admits no guilt as part of deal

By Donald Mckenzie
Published by The New York Times, February 12, 2005

Editor’s note: Imagine if street criminals received two weeks notice before police began investigating a crime in which they were the primary suspect. And imagine the suspect could plea-bargain away 24 charges against them by paying a fine equal to the amount of money they make in less than 18 seconds — and it was tax-deductible.

That’s the impact of the fine described in this article on Wal-Mart, based on their 2004 annual report which declared $256 billion in revenue last year. The violations in question here are quite minor — especially in comparison to many other offenses by Wal-Mart stores — but if the Bush Department of Labor is seeking to encourage law-breaking , it’s sending the right signal.

Among the bizarre pieces of this story is the Department of Labor recalling a press release in which it referenced one specific harm from the violations — a teenager injured by using a chainsaw — and reissuing a release cleansed of the incident. Why? Wal-Mart was given the right to approve all official public statements on the case!

Update 1: On Feb. 18, 2005, the Labor Department announced it would investigate the propriety of this deal after U.S. Rep. George Miller made the complaints.

Update 2: On Jan. 18, 2006, Rep. George Miller informed us, “I am happy to report that, after much public scrutiny and controversy, DOL notified me today that it has allowed the agreement to expire. Hopefully this shameful episode will stop the Department from making other sweetheart deals in the future.”

Wal-Mart Stores, the nation’s largest retailer, has agreed to pay $135,540 to settle federal charges that it violated child labor laws in Connecticut, Arkansas and New Hampshire.

Labor Department officials said most of the 24 violations covered by the settlement involved workers under age 18 operating dangerous machinery, including cardboard balers and chain saws. In the agreement, Wal-Mart denied any wrongdoing.

Department officials said that one of the violations was in New Hampshire, three were in Arkansas and 20 were in Connecticut, where the investigation began in 2001. One violation involved a youth who injured his thumb while using a chain saw to cut Christmas trees.

The Labor Department and Wal-Mart signed the agreement on Jan. 6, but made no public announcement. The department disclosed the settlement yesterday after a reporter questioned officials about concerns raised by several department employees that the agreement gave Wal-Mart special favors.

The agreement states, “Compliance with the child labor laws and regulations will be an important factor in evaluating the performance of managers.”

A provision also promises to give Wal-Mart 15 days’ notice before the Labor Department investigates any other “wage and hour” accusations, like failure to pay minimum wage or overtime.

That provision drew criticism yesterday from Representative George Miller of California, the senior Democrat on the House Education and Workforce Committee. (Editor’s note: His office subsequently analyzed the agreement and issued this report detailing its irregular nature). It also prompted complaints from some Labor Department investigators who spoke on the condition of anonymity for fear of retaliation.

“With child labor cases involving the use of hazardous machinery, why give 15 days’ notice before we can do an investigation?” asked a district office supervisor who has worked in the wage and hour division for nearly 20 years. “What’s the rationale?”

Victoria Lipnic, assistant labor secretary for employment standards, called the settlement typical, saying that giving Wal-Mart notice before conducting investigations would encourage the company to correct the problems sooner.

The department employees also said the agreement was unusual because the department had never announced it.

Department officials said they were preparing a news release and were waiting for Wal-Mart to pay the $135,540 before making the settlement public.

In the settlement, Wal-Mart agreed not to employ any worker under age 14 and agreed to prohibit any employee under 18 from operating cardboard balers. It also agreed to post a notice on each cardboard baler saying that minors may not use or touch the balers. Wal-Mart also agreed to train new store managers about compliance with child labor laws and to provide more training to current managers on the subject.

“We worked with the Department of Labor to strengthen our training and compliance programs,” said Gus Whitcomb, a spokesman for Wal-Mart, which is based in Bentonville, Ark. “Again, our focus is to be 100 percent compliant with all applicable laws.”

Wal-Mart has faced previous child labor charges. In March 2000, Maine fined the company $205,650 for violations of child labor laws in every one of the 20 stores in the state. In January 2004, a weeklong internal audit of 128 stores found 1,371 instances in which minors apparently worked too late at night, worked during school hours or worked too many hours in a day. Company officials said the audit was faulty and had incorrectly found that some youths had worked on school days when, in fact, those days were holidays.

Under the new agreement, the Labor Department did not waive its right to conduct future investigations. Still, several department officials suggested that the provision for 15 days’ notice might give Wal-Mart an opportunity to hide violations.

John R. Fraser, the government’s top wage official under the first President Bush and President Bill Clinton, said the advance-notice provision was unusually expansive.

“Giving the company 15 days’ notice of any investigation is very unusual,” Mr. Fraser said. “The language appears to go beyond child labor allegations and cover all wage and hour allegations. It appears to put Wal-Mart in a privileged position that to my knowledge no other employer has.”

Ms. Lipnic countered, “We usually call employers before we go to investigate,” and said there was “nothing uncommon or unprecedented about that.”

Several federal employees voiced concern about a Jan. 10 e-mail message sent by the director of the Little Rock, Ark., office for the Labor Department’s wage and hour division after the settlement was reached, that said, “Wage & Hour will not open an investigation of Wal-Mart without first notifying Wal-Mart’s main office and allowing them an opportunity to look at the alleged violations and, if valid, correct the problem.”

But Cynthia Watson, the division’s Southwest regional director, said advance notice would speed compliance. “We are seeking to centralize the points of contact in order to get the people involved to resolve the issue,” Ms. Watson said.

Addendum: Tuesday, Feb. 15, 2005. Victoria Lipnic, assistant labor secretary for employment standards, claims the advance notice applied only to complaints alleging child labor violations and not all wage/time violations.

© 2005 The New York Times

Wal-Mart Moves Into Banking and Financial Services

by

By Wendy Zellner
Published by Business Week Jan 27, 2005
Editor’s note: We have nothing to do with Wal-Mart financial services. Please do not contact us with questions for Wal-Mart!

Wal-Mart Stores didn’t get to be the world’s biggest retailer by giving up easily. So despite being twice thwarted by lawmakers in its efforts to buy a bank, it has quietly but tenaciously expanded its foothold in financial services.

In its latest move, announced on Jan. 21, the retailing giant is introducing a no-fee Wal-Mart Discover credit card that offers 1% cash back, which it will launch with GE Consumer Finance in March.

This relentless push into financial services is starting to send shivers through the banking industry. Few believe Wal-Mart will stop with basic services as it applies its low-price, high-volume formula to yet another business category. And while other companies, from Nordstrom to General Motors, have bank and thrift charters or hybrid Federal Deposit Insurance Corp.-insured industrial loan companies (ILCs) in tow, no one trips alarms like Wal-Mart.

ON THE MOVE

Many community bankers are convinced the behemoth won’t rest until it has obtained full banking powers. “It’s not a question of if Wal-Mart is going to be a bank, it’s a question of when,” says D. Anthony Plath, a finance professor at the University of North Carolina at Charlotte who occasionally enjoys play games that pay real money.

Clearly, Wal-Mart is on the move. Over the past three years, the giant has steadily built alliances with financial-service providers, such as MoneyGram International and SunTrust Banks, enabling it to offer services such as bargain-price money orders and wire transfers. It has bank branches operated by partners in nearly 1,000 of its massive supercenters.

And it has stepped up the pace. SunTrust is experimenting with nearly 45 in-store bank branches co-branded as “Wal-Mart Money Center by SunTrust,” with plans to expand to about 100 of them by early 2006.

UNDERSERVED CLIENTELE

Already, Wal-Mart customers are reaping the benefit. They can cash payroll checks for just $3, transfer money to Mexico for $9.46, and buy a money order for 46¢. Some competitors charge twice as much. Many are mostly high-margin, highly fragmented businesses in which the poor and immigrants are sometimes at the mercy of unscrupulous operators.

“Traditionally, nonbank vendors of financial services have charged an arm and a leg,” says David Robertson, publisher of The Nilson Report , a newsletter about credit and debit cards. Adds Gary Stibel of New England Consulting Group in Westport, Conn.: “Wal-Mart is giving people in lower-income brackets opportunities in financial services they never had before.”

Financial services could open a rich new vein of profits for Wal-Mart as it seeks to remain a growth company. By one rival’s estimate, the market for services that Wal-Mart already offers is worth about $5 billion a year in fees, leaving plenty of room for it to slash prices while making a profit. As it has with other goods, Wal-Mart will slowly “collapse the price umbrella,” squeezing check cashers and wire-transfer leader Western Union Financial Services, predicts Robert Markey Jr., consultant Bain & Co.’s director for financial services.

SOME CLOSED DOORS

For the time being, though, the basic services it offers represent little more than a rounding error for the $287 billion goliath. Wal-Mart doesn’t break out results for the unit, lumping them into the company’s “other income,” which totaled $2.1 billion in the first three quarters of the last fiscal year. That was up 31% but amounted to just 1% of total revenues.

Still, there’s huge growth potential. Says banking consultant Bert Ely of Ely & Co. in Alexandria, Va.: “They’re developing, in customers’ minds, a link between Wal-Mart and going to the bank. That has powerful long-term implications.”

Not all financial-service suppliers are willing to ride this tiger. Jane Thompson, president of Wal-Mart Financial Services, concedes that “some of the leaders in the industry don’t want to hurt their margins and don’t want to work with us.”

But MoneyGram, with a market share of around 1% in global money transfers, is a distant No. 2 to Western Union, which has 12%. For such players, Wal-Mart promises huge volumes of business through its 3,100 U.S. stores and more than 100 million customer visits a week. As the underdog, MoneyGram was already cost-conscious and focused on growth, not on protecting margins — a perfect partner for Wal-Mart, says MoneyGram Vice-President Daniel O’Malley. And it can’t hurt to learn how Wal-Mart does business, notes SunTrust Executive Vice-President Christopher Holmes, especially if Wal-Mart achieves full-fledged banking status.

END-AROUND?

Could Wal-Mart really become a bank? First, it would have to take on current prohibitions on combining banking and commerce. The laws were designed to prevent a big player such as Wal-Mart from denying credit to competitors or shifting losses from its retail business to an insured bank.

But many expect Wal-Mart to overcome those rules. Ronald Ence, vice-president of Independent Community Bankers of America, says Wal-Mart lobbied last year to expand the banklike powers of the ILCs. A bill that passed the House, but not the Senate, in 2004 would have allowed unlimited interstate banking, but only for those with at least 85% of their business in financial services.

Wal-Mart denies any such lobbying. It tried to buy a savings bank in Oklahoma in 1999, only to be blocked by the Gramm-Leach-Bliley Act, which overhauled federal banking law. And the California legislature halted Wal-Mart’s plan in 2002 to buy a small ILC.

THE SEARS EXPERIENCE

Yet if Wal-Mart were to gain full banking status, it would be able to offer everything from checking and savings accounts to mortgages, car loans, and even small-business loans at prices that rivals could be hard put to match, let alone beat. “There’s no question, they want to have a nationwide financial-services network. If they do, there’s no doubt in my mind they’ll be able to do to community banks the same thing they’ve done to the local grocery store and the local hardware store and the local clothing store,” says the community banker group’s Ence.

Wal-Mart insists its financial plans don’t depend on owning a bank or a thrift. “Our strategy is what you see,” says Wal-Mart’s Thompson, who was once executive vice-president of Sears Roebuck’s credit business. The services Wal-Mart offers are aimed squarely at its core, lower-income customers and employees. Many are among the estimated 56 million American adults don’t have a bank account. “Helping the underserved customer gets right at what we like to be known for,” says Thompson, who joined Wal-Mart in May, 2002.

More important than the unit’s profits, she says, is that these services bring customers into stores more often. She seems to have learned from Sears’ ill-fated 1980s effort to create a financial supermarket with its Allstate insurance, Dean Witter brokerage, and Coldwell Banker Real Estate units. Sears lost focus on its core business and found that many customers didn’t want to buy mutual funds or insurance from the same place that sold them appliances. “My whole thing is about starting with the customer,” says Thompson, who joined Sears in 1988 and took over its credit operation in 1993.

NO DAMAGE YET.

Even though Wal-Mart may be following a gradual approach to avoid Sears’ mistakes, it occasionally hints at bigger ambitions. On its Web site, Wal-Mart describes itself as “a trusted name in financial services.” In stores, it’s slapping its powerful brand on the money centers operating there.

So far, big rivals say Wal-Mart isn’t hurting them. 7-Eleven, which offers check-cashing, money orders, and the like through 1,000 electronic store kiosks, says it’s focused on convenience, not offering the lowest price. Likewise, Eric Norrington, a spokesman for Ace Cash Express, the nation’s biggest check-cashing chain, says Wal-Mart hasn’t affected his company’s pricing or growth. “Wal-Mart has validated the importance of this market segment. That’s attention we welcome,” he says.

But as toy retailers, grocers, and even jewelers have painfully discovered, complacency in the face of Wal-Mart can be suicidal. Given the behemoth’s long interest in the financial arena, technological savvy, cheap capital, and instant national reach, small and midsize banks, in particular, are right to be paranoid. Even big ones should be wary. “The mistake would be to stick your head in the sand and try to convince yourself that Wal-Mart is not a factor,” says Bain’s Markey.

For no matter what the obstacles, Wal-Mart seems determined to be a force in finance.

© 2005 Business Week