Plugged-in: Wal-Mart shuns gay groups

NEW YORK (FORTUNE) -- Wal-Mart, the world's largest retailer, has decided to curb its support of gay, lesbian, bisexual and transgender (GLBT) organizations after conservative Christian groups threatened a boycott, and after some of its own employees expressed disapproval.

The move comes a year after Wal-Mart (Charts, Fortune 500) had put on a gay-friendly smile. The company joined the National Gay and Lesbian Chamber of Commerce. It sponsored the annual convention of Out & Equal, a group that promotes gay rights in the workplace, and sold gay-themed jewelry in stores.

"We are not currently planning corporate-level contributions to GLBT groups," said Mona Williams, the company's senior vice president of corporate communications. Individual stores can still donate to gay groups.

By way of explanation, Ms. Williams cited a policy adopted last fall saying that Wal-Mart would not make corporate contributions "to support or oppose highly controversial issues" unless they directly relate to the company's ability to serve its customers.

How significant is the pullback? Williams says it does not signal any less support for its GLBT employees or for Wal-Mart Pride, a network of gay employees at the company. She's an executive sponsor of the group, which was sanctioned in 2005. "We certainly don't feel that it's a retrenchment," she said.

Others can't help but see it that way. After Wal-Mart explained its decision to a meeting of about 50 Pride members, one contacted FORTUNE to express disappointment.

"I thought the company was moving in the right direction," this employee wrote in an email. "But last week changed everything. Pulling funding from GLBT organizations is a slap in the face to gay employees and it sends a very clear message. Diversity within Wal-Mart is only partially inclusive." "They're catering to their conservative base," the employee added, in a phone conversation.

Interestingly, gay-rights groups were more understanding. Selisse Berry, the executive director of Out & Equal, said: "Wal-Mart continues to engage on the issue of worker equality, and we will support them in that...This is a marathon, not a sprint, and so long as Wal-Mart keeps its doors open, we hope to give them encouragement." Wal-Mart had donated $60,000 to Out & Equal.

The Human Rights Campaign, America's largest gay-rights group, also says it will continue to work closely with Wal-Mart. "With a company as large as Wal-Mart, it's not going to happen as fast as many of us would like," says Daryl Herrschaft, who oversees the HRC's workplace project.

Wal-Mart supported the gay chamber, an organization of more than 24,000 gay- and lesbian-owned businesses, for the first time last year. (Other corporate backers include IBM, Wells Fargo, Motorola and American Express.) The chamber's president, Justin Nelson, did not return a call seeking comment.

Several sources told FORTUNE that Wal-Mart now intends to work harder to educate its own employees about GLBT issues - something it had been advised to do before aligning itself publicly with gay-rights groups.

Last year, when anti-gay groups picketed stores, store managers weren't prepared to explain the company's position. Leaders of Wal-Mart Pride say most of its members work in and around the company's Bentonville headquarters, so they have been unable to muster allies in the field.

On June 9, Wal-Mart Pride members made a presentation to more than 500 employees at one of the company's Saturday morning meetings, which are used to rally the company around business goals. "The presentation was warmly received," Williams said.

Still, some members of the group had hoped that Wal-Mart would by now have taken a major step towards workplace equality by offering health care benefits to the domestic partners of its GLBT employees. More than half of FORTUNE 500 companies do so.

The lesson here may be that it's hard to find a middle ground when it comes to gay rights in the workplace. A company either believes in workplace equality for all, and is willing to stand up and say so, or it doesn't.

It's pretty clear where Wal-Mart stands.