F&C stands by engagement policy with Walmart despite corruption scandal
GLOBAL - Ceasing engagement with US retailer Walmart is not an option for asset manager F&C despite allegations over corruptions at the company's Mexican affiliate Walmart de Mexico, Walmex.
Karina Litvack, director and head of governance and sustainable investment at the asset manager, said: "Over the last decade, we have been both encouraged by Walmart's concrete steps forward and discouraged by its slow progress in key operational areas.
"However, given Walmart is the largest private employer in the world and a global retailing powerhouse that sets standards across the sector, stopping our engagement is not an option."
Although much maligned in labour circles for its fiercely anti-union stance, Walmart had won respect for its famously uncompromising anti-corruption standards - right down to Walmart staff refusing to accept a lowly cup of coffee from outside parties, according to F&C's Viewpoint report.
This is why the corruption scandal, which caused the Walmex and Walmart's share prices to plummet by 16% and 7.5%, respectively, after two days of trading, came as a shock to many.
But for F&C, this is an opportunity to be grasped.
The asset manager believes this is the time to press for a genuine change in culture at the very top, as well as real evidence that the efforts of whistleblowers will be rewarded, not punished, so as not to discourage future reporting of wrongdoing.
As an example, it pointed to Swedish retailer Ikea, which publicly refused to pay bribes when it entered Russia and eventually announced a freeze on all further investment in Russia due to the impossibility of conducting business in line with its principles.
In January, the Dutch civil servants and teachers pension fund ABP divested from Walmart because it persisted on behaviour it deemed contradictory to the UN Global Compact's principles in the areas of human rights, labour, anti-corruption and the environment.
It followed in the footsteps of a long line of disinvestment from the US retailer, including the Dutch industry-wide pension fund PNO Media and the Norwegian Government Pension Fund.
Sweden's Ethical Council - a collaboration between the four buffer funds AP1, AP2, AP3 and AP4 - is engaging with Walmart.
In its annual 2011 report, the Ethical Council said: "In recent years, Walmart has dealt with many problems in its operations, including environment and human rights in its delivery chain, as well as environmental issues in its own business.
"The company has not yet been equally constructive in addressing its employees' rights, but dialogue with the company indicates that it is working on the issue."