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Wal-Mart's chief for the Obama era

New CEO Mike Duke has a chance to clean the political slate at the Republican-leaning retailer.

By Suzanne Kapner, writer
Last Updated: November 21, 2008: 7:07 PM ET

Incoming Wal-Mart CEO Mike Duke has run the retail giant's international operations.

NEW YORK (Fortune) -- When Mike Duke takes over as the CEO of Wal-Mart on Feb. 1, he will be confronted with a vastly different political landscape than the one in which his predecessor, H. Lee Scott, operated for the past nine years.

Not since the mid-term elections of 1994 has Washington seen such a seminal power shift, and that change is unlikely to favor the nation's largest employer. President-elect Barack Obama and a Democratic-led Congress are widely expected to champion issues that Wal-Mart has long opposed, such as expanded health care insurance and labor reforms.

Earlier this decade, Wal-Mart (WMT, Fortune 500) defeated measures in Maryland and California that would have required employers to increase the amount of money spent on health care. This year, Wal-Mart discouraged employees from voting for Obama by telling them that the Democratic presidential candidate would almost certainly open the door to unions - a move that the company claimed could curtail jobs. (Good thing for Wal-Mart that Obama doesn't appear to hold grudges.) Wal-Mart says anyone who gave employees the impression that the company was telling them how to vote was wrong.

Wal-Mart has not exactly had a cozy relationship with Democrats over the years. In 2000, when Scott was named CEO, 85% of Wal-Mart's political donations went to Republicans and 14% to Democrats, according to the Center for Responsive Politics, a nonpartisan group that tracks political contributions. Although that gap has narrowed this year (53% to Republicans, 47% to Democrats), Wal-Mart's funding of political action committees still skews overwhelmingly Republican by a margin of more than 2-to-1. The company disputes those numbers, saying 55% of its PAC donations go to Republican organizations with 45% going to Democratic ones.

By ushering in a new CEO, Wal-Mart has an opportunity to clean the political slate. At the moment, there is little to suggest that Duke, 58, a former department store executive who joined Wal-Mart in 1995, will be vastly different from Scott in his political dealings.

He has personally donated money to the presidential election campaigns of Mike Huckabee, George Bush and John McCain as well as to other Republican candidates, such as Alaskan Congressman Don Young, according to Political Moneyline, a web site that tracks political contributions.

But sometimes a symbolic gesture is all it takes to shift the debate. "If you are going to make an argument to Washington that as a company Wal-Mart has changed, it doesn't hurt to have a new face at the table," says David Nasser, executive director of Wal-Mart Watch, a union-financed group often critical of the retailer.

How Wal-Mart deals with the new power structure is a question that has plagued some of its associates. In the days following the Nov. 4 election, Scott received numerous queries from employees on the subject. His response, contained in an internally circulated e-mail, says that Wal-Mart is looking "forward to working with the new President and Congress, regardless of party."

In some ways, Duke's appointment suggests that Wal-Mart's focus going forward will increasingly rest with foreign markets such as China and Brazil - far from the Washington corridors of power. (Wal-Mart's investors responded to Duke's appointment by sending the stock up $2.26, or 4.5%, to $52.92 on Friday.)

Duke has led Wal-Mart's international division since 2005, a unit that now comprises more than a quarter of the company's $400 billion in sales. That percentage is only expected to rise in the future as Wal-Mart's domestic growth levels off.

During his tenure as international chief, Duke had some hits, but also some big misses. In 2006, Wal-Mart withdrew from Germany and Korea, two big setbacks for the company. And despite taking control of its Japanese business in 2007, Wal-Mart continues to struggle there. Successes include Brazil, which has experienced phenomenal growth and serves as a model for Latin America, and India, where Wal-Mart scored a coup by forming a partnership with Bharti Enterprises to expand in that country despite local opposition from mom-and-pop retailers.

As Wal-Mart fights critics of its labor policies at home - who have accused the retailer of sub-standard health benefits, low pay and sexual discrimination, among other complaints - there are signs that the company is already facing similar issues overseas. In September, Mexico's Supreme Court chastised Wal-Mart for paying employees partially in vouchers that could only be used at company stores. The court compared Wal-Mart to the Mexican dictator Porfirio Diaz, who ruled in from the late 1880s to 1911. Compared with those remarks, Wal-Mart may find Washington a friendly place. To top of page

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