Last year, just as Walmart was illegally firing workers for participating in legally protected strikes, Walmart Associates who are members of OUR Walmart were attending the Yahoo! shareholder meeting. They did so in order to address their concerns about Walmart’s illegal retaliation to Yahoo! CEO Marissa Mayer, who is also a member of the Walmart Board of Directors. The workers and the questions they directed to Mayer were widely covered in the press.
Following the encounter at last year’s Yahoo shareholder meeting, Ms. Mayer has persisted in her steadfast refusal to meet with members of OUR Walmart, despite repeated invitations.
Now, Mayer is doubling-down on Yahoo’s ties to Walmart by nominating former Walmart CEO and Director H. Lee Scott to join the Board of Yahoo!
In this post, we summarize some of the issues that may be raised at this year’s Yahoo shareholder meeting on June 25th.
Yahoo! values to Walmart or Walmart Values to Yahoo!?
Expect to hear questions about whether Ms. Mayer is bringing Silicon Valley values to Walmart or allowing Walmart values to creep in at Yahoo.
The meeting comes on the heels of a new report about the lack of diversity at Yahoo and the Yahoo Board will be welcoming three new members whobring the total number of people of color on the Board to….zero.
OUR Walmart members are also sure to raise questions as to whether Ms. Mayer’s role at Walmart subjects Yahoo to unnecessary reputational risk, or simply represents an unnecessary distraction (is Mayer’s being two hours late for an important advertising meeting because she was asleep, a sign of being overcommitted?)
New Yahoo Director Heavily Implicated in Alleged Bribery and Cover-Up at Walmart
The nomination of former Walmart CEO Lee Scott to the Yahoo! Board (at Ms. Mayer’s behest) raises serious questions for Yahoo! investors about their company’s commitment to accepted standards of corporate governance and legal compliance. Scott is among those implicated in in the alleged bribery and cover-up scandal at Walmart.
As the Pulitzer-Prize winning articles in The New York Times detail, Mr. Scott, who was then CEO of Walmart, rebuked internal investigators into the alleged bribery for being overly aggressive. The Times reports that,
“days later, records show, Walmart’s top lawyer arranged to ship the internal investigators’ files on the case to Mexico City. Primary responsibility for the investigation was then given to the general counsel of Wal-Mart de Mexico – a remarkable choice since the same general counsel was alleged to have authorized bribes.”
As CEO of Walmart, Scott approved this transfer of responsibility, thereby limiting the internal investigation. The alleged bribery and apparent cover-up and the failure of the company to fully investigate and disclose these matters at the time may yet result in criminal and/or civil actions being taken against Walmart and senior executives including Mr. Scott. It has already had serious consequences for Walmart investors, as the company expects to spend more than $600 million by the end of the current fiscal year on lawyers, internal investigations, and compliance reforms. The matter is currently under investigation by the Department of Justice and the Securities and Exchange Commission. The company has said that it expects to spend more than $600 million through January 31, 2014 on internal investigations, legal fees and compliance reforms.
If The New York Times is accurate, it appears that Mr. Scott not only participated in the alleged cover up of FCPA violations, but may have also subsequently violated the certification requirements of the Sarbanes Oxley Act numerous times, by failing to disclose to the SEC and to shareholders credible evidence of FCPA violations, inadequate internal controls, and fraud by senior management personnel.
Mr. Scott’s E-Commerce Record at Walmart is Poor
Mr. Scott was CEO of Walmart from 2000 to early 2009 – a period during which analysts appear to agree that Walmart’s progress in the area of e-commerce was characterized by repeated stumbles and slow growth.
As of 2007, Walmart’s failures in e-commerce were being noted in the industry press.
Meanwhile, Wal-Mart has struggled online. Its website lags behind competitors like Amazon.com and Target, and recent marketing experiments using social networking technologies have achieved mixed success. The company has even suffered in its sweet spot, with serious setbacks to its deployment of radio-frequency identification (RFID) tags throughout its supply chain.
Wal-Mart is struggling to build an online presence. It ranks 13th in Web sales volume among retail businesses, according to industry watcher Internet Retailer, even though, according to Web data analysis company Alexa, Walmart.com is the third most-popular retailing website based on number of users (behind Amazon.com and Target.com).
Walmart’s failure to build an ecommerce foundation during Mr. Scott’s tenure continues to be felt today. The company reported online sales of $10 billion in 2013 - less than 3 percent of overall sales – compared with Amazon’s online sales of $67.85 billion.
Can Yahoo! shareholders really expect Mr. Scott to be independent?
According to Yahoo, the role of the Nominating and Corporate Governance Committee of the Board of Directors “shall be to recommend to the Board individuals qualified to serve as directors of the Company and on committees of the Board.”
However, Yahoo’s proxy document states that Mr. Scott was identified as a candidate for service by Ms. Mayer. The two served together on Walmart’s Board, until Mr. Scott stepped down earlier this month.
Given Mr. Scott and Ms. Mayer’s existing relationship and her role in identifying him for service at Yahoo, can Yahoo investors really expect Mr. Scott to be independent?
Particularly given Mr. Scott’s implication in the alleged bribery and cover-up at Walmart and his failures in the area of ecommerce, shouldn’t Yahoo investors have the right to expect that candidates for Board service will go through established channels of nomination and vetting?
How will Ms. Mayer respond to these kinds of questions? Will Yahoo investors raise other concerns about Mayer’s focus on Yahoo or about Mr. Scott’s potential legal issues? The shareholder meeting is on Wednesday at 8am pacific. Check out the live stream here.