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Post Leadership
Posted at 01:56 PM ET, 04/23/2012

Wal-Mart leaders face crisis in wake of Mexico bribery investigation


An explosive New York Times investigation into bribery allegations in Wal-Mart’s Mexico subsidiary has prompted something of an unexpected response. (ROBYN BECK - AFP/GETTY IMAGES)
An explosive New York Times investigation into bribery allegations in Wal-Mart’s Mexico subsidiary has prompted something of an unexpected response. Many of the readers who commented on the lengthy article, which ran in the Times on Sunday, said the news didn’t surprise them, because bribery is simply how business is done in Mexico.

“There are certainly many reasons not to shop at Walmart, but I'm not sure that this should rise to the top of the list,” wrote Karen Knapp, who says she is a U.S. expat living in Mexico. “Of course, this is the way business is conducted here in Mexico; it is a long-held cultural tradition.” In a response to a Wall Street Journal story on the legal implications for Wal-Mart, another reader responded that “I'm a realist capitalist. We here might think bribery is abhorrent, but in other countries it is a way of life.” Forbes contributor Tim Worstall was even more indifferent about the findings. The headline to his blog post about the investigation read “Wal-Mart and Corruption in Mexico: So What?”

So, plenty. Since when did the excuse “everyone does it” make something right? Such nonchalance about bribery and corruption allegations may be a sign of jadedness in today’s business culture, in which people trust corporate leaders almost as little as they do political ones. But even if such practices are commonplace, that hardly makes them — or the company’s response to them — good business or good leadership.

The article details, at great length, a massive bribery scheme that allegedly helped spur the company’s growth in Mexico. It reports that a whistleblower told a Wal-Mart lawyer back in 2005 that the company had paid bribes for permits to build stores throughout Mexico, prompting an in-house investigation that discovered $24 million in questionable payments and knowledge of the scheme by the subsidiary’s top executives. While the lead investigator recommended that the company should expand the investigation, the Times reports, Wal-Mart’s leaders did the opposite instead. “Confronted with evidence of corruption in Mexico,” David Barstow reports, “top Wal-Mart executives focused more on damage control than on rooting out wrongdoing.”

If the allegations are true, they could lead to a violation of the Foreign Corrupt Practices Act, a U.S. law that prohibits bribery in foreign countries. They could raise big questions about what current members of Wal-Mart’s senior management knew and when they knew it, and what their futures hold at the company. And they could prompt questions for investors about a part of the company’s business that has been held up as a “model for future growth,” as the Times reports.

Wal-Mart vice president of communications David Tovars said in a statement that Wal-Mart “takes compliance with the U.S. Foreign Corrupt Practices Act (FCPA) very seriously and are committed to having a strong and effective global anti-corruption program in every country in which we operate.” Noting that many of the allegations in the story are six years old, Tovars said that, if true, “they are not a reflection of who we are or what we stand for. We are deeply concerned by these allegations and are working aggressively to determine what happened.” He added that the company is “confident we are conducting a comprehensive investigation and if violations of our policies occurred here, we will take appropriate action.”

Those actions won’t just be watched by the Securities and Exchange Commission, the Department of Justice and the company’s investors. They will also be watched by the company’s employees, who will expect to see the company’s senior-most managers held to the same standard as it holds its rank-and-file, if the allegations turn out to be true. Bribery charges may be a “so what” for people with experience doing business in countries like Mexico. But if true, the reported struggle among Wal-Mart’s leaders about how to handle the charges is anything but. For Wal-Mart’s employees, investors and managers, they will matter quite a lot, indeed.

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By  |  01:56 PM ET, 04/23/2012

 
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