The New York Times has revealed evidence that Wal-Mart used widescale bribery in Mexico to win and expedite approvals for building stores and then covered up the illegality. While allegations have yet to be proven, Wal-Mart’s growing controversy provides important lessons in two key subjects: globalization and crisis communication.
As its U.S. sales and expansion have slowed, Wal-Mart has looked to global markets to sustain corporate growth. A textbook I’m currently teaching from, Marketing: The Core, advises that a company must analyze factors such as economic infrastructure–communication, transportation, financial and distribution systems–and consumer purchasing power for each potential market.
A company must also understand the customs of the markets it wants to enter. Marketing: The Core discusses patterns of bribery as part of this consideration along with the Foreign Corrupt Practices Act, the U.S. law frequently mentioned in coverage of Wal-Mart and its problems in Mexico. In short, it’s been illegal for U.S. companies to engage in overseas payoffs for more than 30 years. “That’s the way they do it over there” will not hold up in a court of law…or the court of public opinion.
On the topic of public opinion, Wal-Mart is learning that its global business practices have an effect at home. Nike took a hard lesson in the 1990s as details emerged about substandard working conditions at the factories of its Asian suppliers. Apple has recently endured similar controversy regarding the treatment of workers at the Chinese facilities manufacturing its products. Globalization means global standards of conduct. What happens on Main Street affects what happens around the globe, and vice versa.
If a Wal-Mart cover-up is confirmed, it will show the company’s ignorance of crisis communications. The desire to avert negative publicity is understandable. Attempting this through concealment inevitably leads to more crisis. “The cover-up is worse than the crime” is a term that came into vogue in the Watergate era, as the Nixon administration’s efforts to hide involvement in the bugging of DNC offices became more onerous than the break-in itself.
Wal-Mart has labored under bad PR for years. Opponents paint it as a destroyer of small business, an oppressor of workers, and a despoiler of the environment. The company has made sincere attempts to improve its image in the past decade. The Mexico bribery crisis is a bonanza for Wal-Mart’s foes, one that could have been largely avoided with early transparency.
If anyone in Bentonville said, “we need to keep this quiet,” he or she was dreaming. If that senior executive had said, “we need to keep the volume low on this,” such a declaration would have prompted action and disclosure at the appropriate time. And per Sarah Connor’s mission in “The Terminator,” it would have prevented a dire future, namely terrible headlines, falling stock prices, and potential criminal charges for company leaders in 2012.