Wal-Mart the Saint?
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Wal-Mart the Saint?
In 2009, Wal-Mart Stores Inc (NYSE: WMT) was the largest corporate charitable giver, donating $288.1 million, which put it in first place. In 2010, it donated $319.4 million towards charitable giving, again topping the list. In 2011, Wal-Mart donated $342.4 million towards charitable giving, which again topped the list. Wal-Mart has a great track record of donating away part of its massive earnings towards charities. Which is ironic, because most of the public seems to hate Wal-Mart for one reason or another. There are those who say Wal-Mart is ruining small businesses and forcing mom and pop to close up shop. There are others who say Wal-Mart is too aggressive towards its employees and should be paying them more. It seems even with Wal-Mart's low prices and massive donations, the public still views it in a negative light.
Wal-Mart donates to all kinds of things, such as its Global Women's Economic Empowerment Initiative, which helps women get out of poverty, make more money, and to become better educated. According to its website,
"over a billion people live in poverty worldwide – 70% are women. Nearly 800 million people can’t read or write, and the majority are women. Women do up to 80% of the work on farms, but many don’t get the training they need to make the most of their labor. Through Wal-Mart’s Global Women’s Economic Empowerment Initiative, we’ve set goals and are taking practical steps to help change the lives of countless women around the world."
(from UN Women, Gates Foundation, and Dow Jones VentureSource).
Now, this is from the same company that came under fire when a huge lawsuit was filed against them by women workers, claiming they discriminated against them by paying them less. Two of the women leading the lawsuit were Christine Kwapnoski and Betty Duke, who said that even though the Supreme Court won't take the case because there aren't enough common elements tying the 1.6 million women's cases together, said they will continue on with their own lawsuits.
Personally I find it hard to believe Wal-Mart is sexist because several of the Walton family members (who control 48% of Wal-Mart) are women, such as Christy and Alice Walton, who are the largest shareholders by far. Also there is Ann Walton Kroenke and Nancy Walton Laurie, whose stake in Wal-Mart is worth billions. Plus, the wife of Sam Walton, (who founded Wal-Mart and was an amazing businessman) Helen Robson Kemper (who died in 2007), who was also a huge shareholder of Wal-Mart, would never have discriminated against her own sex. When 2 out of 3 of the largest Wal-Mart shareholders are women, why would they be sexist towards women? It doesn't make an sense to be, and it seems the public is getting riled up over nothing more than pandering.
The other donors on the top of the list might surprise you. Exxon Mobile Corp (NYSE: XOM) was third on the list (by The Chronicle of Philanthropy), who donated $232.7 million in cash and $2.1 million in products in 2011. Exxon donated $27 million to the National Math and Science Initiative, which promotes AP Training and UTeach programs. Exxon usually gets mixed feelings from the public, but more on the negative side. When oil prices rise, who is it consumers blame? Big Oil. Which is kind of ironic, because in order to get oil prices to go down, you need to increase supply, which is very hard if the government doesn't lease out some of its land. And those same people think the government is the solution to the problem.
The second largest donor for 2011 was Goldman Sachs Group Inc (NYSE: GS), who donated $337.1 million in 2011. Goldman, as you already know, is not viewed in a good light. People rioted in front of its headquarters because they were so angry at the bailout money it received. Yet, it was about $5 million short of being the largest corporate donor in 2011.
The fourth largest was Wells Fargo & Co, who donated $213.5 million, and the fifth was Chevron Corp (NYSE: CVX), who donated $209.3 million. All the large Wall Street banks are up on the list, with Bank of America Corp donating $208.4 million, JPMorgan & Chase Co (NYSE: JPM) donating $203 million, and Citigroup Inc donating $121.9 million. Yet all of these banks are hated and seen as evil money grubbers who throw people out of their homes and try to cheat them with high interest on their credit cards. It seems to me that there is a trend here, the more a company is hated, the more they donate.
What this means to you as investors
It seems that these donations aren't swaying public opinion enough. Exxon did run some commercials in my area about their large donations to education, but they weren't very touchy feely, which is what you want if you want to get better PR. What I think these companies need to do to get better PR is to donate a large sum to a charity that helps many people survive (such as feeding the poor and the homeless or something) so they can get the news to cover it if it is big enough ($25-$50 million?) and have the touchy-feely stories of the homeless and poor people they are helping out shown all over the globe, with the CEO of the company right there shaking hands with them and smiling, so he or she seems like a more approachable guy/girl.
If you can get the news to cover it, then everyone will see it at some time or another, and you can start to sway public opinion in your favor. Most don't even know Wal-Mart is a huge charitable giver. If these large-cap companies can use their large donations to their advantage, then shareholders could benefit immensely. For Wal-Mart, who has several activist groups and a large part of the demographic against them, they could use better PR to show how several women are in control of Wal-Mart, and talk more about their Global Women’s Economic Empowerment Initiative.
If Wal-Mart was to lose a Supreme Court case to the possible 1.6 million plaintiffs, that would be disastrous and would have consequences in numerous areas. One, Wal-Mart could be forced to pay a settlement to each of these women, which would be costly. Two, the government could try to force Wal-Mart to raise its wages, which would also be costly, as they employee 2.1 million people. A $1 per hour raise for Wal-Mart employees would cost them at least $4.368 billion more a year (2080 hours x 2.1 million x $1 an hour). Ouch. And, their same store sales would plummet as consumers steer clear of this "sexist entity". But if they can properly capitalize on their Global Women’s Economic Empowerment Initiative and other donations, then this can be stopped. It's hard for a group of activists to get public support behind them if Wal-Mart is donating millions to help empower women across the globe, which would help their case in any court.
Wall Street and Big Oil
Consumers look at companies like Chevron, Exxon, Goldman Sachs and JPMorgan like they are some sort of large, unfeeling villains. This has led billions of dollars in deposits to not go to the big banks and to go to credit unions instead. Last October, they lost 650,000 customers and $4.5 billion in deposits in just one month. But, if they can slowly turn public opinion towards their favor, they can stop customers from leaving in droves. Also, in their investment banking unit, clients would be more inclined to do business with a respectable bank than one seen as evil, selfish, and deceitful. Someone looking to place a large amount of money with an investment bank doesn't want to give it to someone who they think are going to go off and place bets against them in a different account. If Goldman Sachs and JPMorgan can start using their large donations better, than they can benefit on several fronts. The political front is another huge factor that Big Banks and Big Oil have to deal with. The federal government has grown rapidly in size, with the National Book of Regulations growing from ~64,000 pages to ~78,000 pages under George Bush Jr.’s presidency alone. This doesn't bode well for Big Oil and Big Banks. More regulations means less activity and more costs just to deal with all those regulations. One reason for all these regulations is many Americans feel that they are essential in order to control these "large unfeeling" entities. But, if you get the public on your side, or at least get them to not hate you, then there is less of a reason for new regulations. All these burdensome regulations are created by politicians, but they are created in order to appease those who voted for them. If voters feel that these companies, primarily Big Oil and Wall Street, have turned over a new leaf, then they (in theory) would focus on other issues and wouldn't want these companies to be over-regulated. One example is that the Federal Government owns large amounts of land that has meaningful oil reserves. Right now, the liberals don't want to lease out these lands (for some stupid reason) because of all the anti-oil sentiment. But, when gas prices spike, this issue always comes around, and if the public doesn't hate Big Oil, then there is a much better chance that these lands will get sold off. If these lands are sold off, then Big Oil could get its production levels up and drill on very profitable land. Then everyone would benefit, Big Oil would get to drill on very profitable land, the government would get a lot of tax revenue, and the public would get better schools, roads, and more jobs. But, this can't happen until Big Oil can use its large donations to their maximum potential and sway public opinion, at least a little.
One More Thing
This is for all big box retailers and grocery stores. Every time I walk into a grocery store or retailers, at the counter there is always a small box for charitable giving. This can be enormously helpful for companies that take advantage of this, because hundreds of millions of people walk into these stores every day. While not every consumer places the small amount of change they get back from the cashier into those little plastic boxes, some do, and companies can take that money and give it to charities as their own, so they can keep certain people off their back and can get better PR. Also, they can use the donations to reduce their tax burden. The consumer feels happier because they donated to a good cause, so they would be more likely to go back as they had a better shopping experience.
I wrote this because I feel that Wal-Mart (and other large companies) always gets the short end of the stick as far as public opinion goes. It donates enormous sums to charity, pays a very high tax rate of 31.3% (which basically is more charitable spending because over half of the US federal spending is on our welfare state), and it creates millions of jobs for its suppliers, its distributors, the construction crews needed to build new Wal-Mart's, the employee's at Wal-Mart, and the new management needed to run those new Wal-Mart's. Plus, on Bloomberg (I can't find the article so don't quote me on this) I saw an article once that said Wal-Mart sells things for 10% cheaper than anywhere else. While, even if that number is wrong, Wal-Mart is still cheaper than everywhere else, and when low income families shop at Wal-Mart, their standard of living is raised simply because Wal-Mart has amazing distribution and doesn't have the extra "middleman costs" put into their products. I am bullish on corporate giving going forward, as corporate giving grew by 7.2% from 2010 to 2011. Here is the website to see the corporate donors:http://philanthropy.com/article/How-America-s-Biggest/132785/.
callumturcan has no positions in the stocks mentioned above. The Motley Fool owns shares of Bank of America, Citigroup Inc , JPMorgan Chase & Co., Wells Fargo & Company, and ExxonMobil and has the following options: short OCT 2012 $33.00 puts on Wells Fargo & Company and short OCT 2012 $36.00 calls on Wells Fargo & Company. Motley Fool newsletter services recommend Chevron, Goldman Sachs Group, and Wells Fargo & Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.