Saturday, June 05, 2004 - Wal-Mart altering its bonus and pay plans - Wal-Mart altering its bonus and pay plans

Wal-Mart altering its bonus and pay plans
Some of chain's workers to get raises this month; Labor practices under fire

Bloomberg News

June 5, 2004

FAYETTEVILLE, Ark. - Wal-Mart Stores Inc. Chief Executive Officer H. Lee Scott, facing increasing pressure to improve labor practices, said yesterday that some employees will receive pay raises this month and company officers' bonuses will be tied to diversity goals.
"Wal-Mart's taking great steps to move forward in this area," Scott told about 18,000 shareholders and employees at the retailer's annual meeting.

Wal-Mart's attention to costs - the company charges workers 35 cents for coffee at its Bentonville, Ark., headquarters - has helped make the chain the world's largest retailer and a favorite among budget-conscious shoppers. Higher wages and benefits may jeopardize the low-cost advantage Wal-Mart has used to help push some discounters such as Ames Department Stores Inc. and Bradlees Inc. into bankruptcy.

"You put all these pieces together in the mosaic and wonder, where does it all lead?" said David Ritt, an analyst at ASB Capital Management in Washington, which has 1.81 million Wal-Mart shares among $6.73 billion in assets.

Shares of Wal-Mart rose a penny yesterday to $56.59 on the New York Stock Exchange. The stock has risen 6.7 percent this year, compared with a gain of less than 1 percent by the Standard & Poor's 500 index.

More than 30 lawsuits allege that the world's largest retailer forces employees to work on their own time without pay. Labor unions, which have led the opposition to store openings in such cities as Chicago and Inglewood, Calif., allege that Wal-Mart pays workers less than local prevailing wages. Federal authorities are investigating charges that some stores hired janitorial services that used undocumented immigrants.

Wal-Mart disputes the allegations of unfair labor practices. The company's policy is to pay employees for every minute worked and not to tolerate any form of discrimination, spokesman Gus Whitcomb said. Incidents where employees' claims have been validated represent exceptions and aren't as widespread as critics suggest, Whitcomb said.

"When your absolute standard is to deliver the lowest price to the consumer, you sacrifice other things such as labor practices," said Adam Kanzer, director of shareholder advocacy at Domini Social Investments LLC, which sold its Wal-Mart shares in 2001 because of concerns about the company's efforts to monitor and improve working conditions at overseas suppliers.

No workers will be paid less under the new compensation system, Scott, 55, told his audience at the University of Arkansas' Bud Walton arena, which is named after the late co-founder of the company.

Officers' bonuses may be cut by as much as 7.5 percent this year and 15 percent next year if some diversity goals are not reached, Scott said. The company, the largest private U.S. employer with 1.3 million workers, said no position will have a pay cap.

There will be seven job classes, and wages will reflect the market, said Charlyn Jarrells Porter, the senior vice president who heads the company's diversity office. Wal-Mart said the new system will raise compensation costs by an undisclosed amount.

Under the compensation system, workers may receive increases ranging from 8 cents to $3 an hour in June, according to unidentified employees and labor leaders, Business Week said in a preview of its June 14 issue.

Raises would be given based on a flat rate, not a percentage of salary, which may hurt long-term employees, Business Week reported.

The average Wal-Mart worker is paid $9.64 an hour, in addition to contributions to 401(k) and profit-sharing plans, Whitcomb said. About 75 percent of the company's employees work full time, or at least 36 hours a week, he said.

The diversity goals include the promotions of qualified minority and female candidates, Wal-Mart said. The company is testing scheduling software that takes into account individual states' work-hour requirements, as well as cash registers that will automatically shut down if cashiers do not acknowledge that it is time for their meal break.

The company has a new compliance team in place to make sure all Wal-Mart projects meet local requirements, Scott said.

Wal-Mart has more than 5,400 stores, with more than 3,570 in the United States and 1,900 abroad.


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