CFL News
May 31, 2012

Ill. investment board to vote against all Wal-Mart directors

A powerful Illinois investment board plans to use its leverage to voice opposition to Wal-Mart management in the wake of bribery accusations

Source: Chicago Tribune

By Corilyn Shropshire

The Illinois State Board of Investment said it will vote against all 16 members of Wal-Mart Stores' board in the wake of last month's report of alleged bribery at the company's Mexican subsidiary.

The Bentonville, Ark.-based retailer will tally the votes in its board election at its annual shareholder meeting on Friday.

"The situation in Mexico shows a real lack of oversight on the part of the board of directors in terms of management's compliance with Wal-Mart's own standards and policies," said William Atwood, executive director of the state investment board.

Atwood, who can direct how the retirement system votes, said he came to the decision after polling its board. He rarely changes how the board votes its shares, he added.

"What's particularly troubling is that in 2005, the New York State and Local Retirement System and other institutional investors met with the chairman of Wal-Mart's audit committee and asked they appoint an independent auditor," said Atwood. "Then ... they weren't able to comply ... they committed these infractions in Mexico paying hundreds of million in bribes that caused extreme harm to the company. Given this we'll vote against the board of directors."

The investment board manages $11.5 billion in pension assets of the General Assembly Retirement System, the Judges' Retirement System of Illinois and the State Employees' Retirement System of Illinois.

Last month, the New York Times reported that Wal-Mart had covered up an internal investigation that discovered that its Mexican subsidiary had arranged bribes of government officials as it aimed to expand in the country.

The move follows reports that two corporate governance firms, including Institutional Shareholder Services — which the Illinois state retirement system uses to vote its shares — recommended stockholders vote against certain board members at Wal-Mart's annual meeting.

Wal-Mart has annual revenue of $444 billion. The Illinois State Board of Investment holds roughly $7.1 million of Wal-Mart's $222.5 billion in market value.

"The bulk of Wal-Mart shares are owned by insiders. I'm sure these guys will get re-elected, but we're not going to vote for them," said Atwood.