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Wal-Mart overhauls pay, promotions
Under fire for its employment practices, the world's biggest retailer goes on the offensive.
June 4, 2004: 4:56 PM EDT
By Parija Bhatnagar, CNN/Money staff writer

NEW YORK (CNN/Money) - Under fire for its employment practices, the world's largest retailer Wal-Mart Stores on Friday overhauled its policies on pay, promotions, diversity and how cashiers are notified of their breaks.

Wal-Mart CEO Lee Scott unveiled the changes during the company's annual shareholder meeting in Fayetteville, Ark.

Scott said the adjusted pay structure, which will give raises to some employees, is intended to make Wal-Mart more competitive in attracting and keeping workers.

He said "no one's pay will be reduced" as part of the adjustments, but he did not offer any further details about the plan.

"We have to make sure that Wal-Mart is a great place to work and that every employee has equal pay and compensation opportunities," he said. "Any manager who does not understand this prior point has no place with Wal-Mart. With that said, we want to make sure that every Wal-Mart employee knows what we are doing on your behalf."

Wal-Mart, which employs 1.3 million workers and is the nation's largest private-sector non-union employer, has been a lightening rod for dozens of lawsuits against it alleging wage-and-hour violations and gender discrimination. Last year, Wal-Mart was accused of allegedly hiring illegal immigrants through a contractor and underpaying those employees.

Among some of the other changes, Scott said the company would establish an office of diversity and an automated lunch break messaging system that would alert employees to take their breaks on time.

"If 50 percent of the people applying for the job of store manager are women, we will work to make sure that 50 percent of the people receiving those jobs are women," Scott said. "My bonus next year could decline by as much as 15 percent if I don't live up to my diversity goals."

Wal-Mart tries to charm with star power

The gathering of about 18,000 Wal-Mart shareholders held true to its reputation of being a cheerleading fest. Attendees were entertained with a performance of the classic "Lady Marmalade" from R&B legend Patti LaBelle, who used the opportunity to plug her new CD entitled "It's a new day."

The meeting was monitored in New York via Web cast.

Daytime TV actress Susan Lucci and Hollywood actress Halle Berry also added more glamour to the event.

But once the pomp and show faded, the topic turned to more serious matters, primarily the issue of Wal-Mart's reputation.

From CEO Lee Scott to Wal-Mart's No. 2 man Tom Coughlin, vice president of Wal-Mart stores, company executives appeared to be on the offensive in their attempt to alleviate what they called "the misrepresentation of Wal-Mart."

"It's been a tough year and it's not getting any easier," Coughlin told shareholders. "We've heard all kinds of negative things, some of which are blatantly false. All this negative publicity impacts people who interact with Wal-Mart."

"We're not going to please everyone and we know that," Coughlin added. "Sam Walton had said you shouldn't worry about what's written in the newspaper. You should focus on the customer. At the same time, we also need to tell our story better."

In an afternoon presentation with analysts following the shareholders meeting, Scott joked that he didn't want shareholders to think that "all we were doing was spending all the time on defending our reputation." At the same time, he said that he thought it was "important that we handle the reputation issue well."

About Wal-Mart's defeat in Inglewood, Calif in April where voters rejected the company's proposal to build a Wal-Mart supercenter, Scott said he regretted the outcome.

"I think we could've done Inglewood better. I hope we have another opportunity to do things right," he said.

Justice and Rights

Howard Davidowitz, an independent retail consultant, said he's not surprised that Wal-Mart would address its image concerns.

"Unions are focused on this company and these lawsuits are only increasing," Davidowitz said. "The other thing that both shareholders and analysts will focus on is: Where does Wal-Mart go from here? In other words, what is next in terms of its growth?"

Tom Schoewe, Wal-Mart's executive vice president and chief financial officer, addressed that question during the meeting.

"One of the most often asked questions is, how do you grow a $256 billion company? Three things. Build new stores and clubs, increase our comparable store sales and through acquisitions," he said.

Wal-Mart (WMT: Research, Estimates), which operates 3,586 stores in the United States and about 1,500 more overseas, last year logged annual revenue of $256 billion.

For the fiscal year 2005, the company plans to open 230 to 240 new supercenters, 40 to 45 new discount stores, 35 to 40 new Sam's Club warehouse stores and 25 to 30 of its neighborhood stores.

In response to an analyst's question about the impact of higher gas prices on its sales, Scott was cautious, saying that although the company didn't see much of a negative effect on its sales in May, he's concerned about a possible sales slowdown in May.

"High gas prices have a dampening effect on spending because it lessens discretionary spending," Scott said. "Eventually this will have some impact on our comparable sales."

Wal-Mart expects to spend about $11 billion in capital expenditures in its current fiscal year.  Top of page

-- Reuters contributed to this story.

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