Summary: Still Broke: Walmart’s Remarkable Transformation and the Limits of Socially Conscious Capitalism by Rick Wartzman

Key Takeaways

• Walmart is the biggest company in America, but it is also one of the most controversial. How has it changed its ways in the past 15 years to become more socially and environmentally responsible? And is it enough to make a difference?
• If you want to learn more about Walmart’s transformation and the challenges and opportunities of conscious capitalism, read on. You will discover how Walmart has tried to create value for all its stakeholders, not just its shareholders, and what impact it has had on its workers, customers, suppliers, competitors, and regulators.
• You will also find out why Walmart’s efforts, while remarkable and commendable, are not enough to solve the systemic problems of low wages, income inequality, and environmental degradation that affect the US economy and society.
• You will also get insights and lessons from Walmart’s experience that can help you think and act more consciously as a business leader, policymaker, or consumer.

Recommendation

For decades, discount retailer Walmart struggled with its image as a malevolent corporate behemoth that underpaid workers and harmed local communities. However, the company has made great strides in the 21st century. It’s become a leader in climate-friendly operations and now pays its employees, on average, more than double the federal minimum wage. Why, then, do so many Walmart workers still struggle to make ends meet? In this well-researched history, Rick Wartzman argues that Walmart’s travails reflect how American capitalism fails modern workers and accepts income inequality as the norm.

Take-Aways

• Walmart is the United States’ largest employer.
• Sam Walton opened the first Walmart in Rogers, Arkansas, in 1962.
• CEO Lee Scott initiated a gradual evolution of Walmart’s business practices.
• Unions and employees sought to expose Walmart’s employment practices.
• In 2015, CEO Doug McMillon took the first steps toward boosting pay rates.
• Walmart’s wage issues reflect wider problems in American capitalism.

Summary

Walmart is the United States’ largest employer.

In 2020, Walmart employed 1.5 million workers in the United States and another 700,000 in other nations. Still, it struggled with a long-lived reputation as a corporate bully.

“Low prices are great, but Walmart’s dominance creates problems — for suppliers, workers, communities and even American culture.” (BusinessWeek, 2003)

In 2008, Federal Reserve Bank officials cataloged the charges: Walmart was killing jobs, decimating downtown commercial districts, discriminating against women, hiring undocumented workers, abusing employees and waging zealous campaigns against labor unions. Some of these factors have changed.

Sam Walton opened the first Walmart in Rogers, Arkansas, in 1962.

Walmart founder Sam Walton’s business philosophy rested on two pillars:

1. Reduce operating costs to offer the lowest prices.
2. Make your workers feel respected and valued.

Walton sought to distinguish his store by offering lower prices than his competitors and maintaining them all year. He opened stores in small towns, not metropolitan areas, serving a market most big retailers ignored. By the end of the 1960s, Walmart had 18 locations in three states. During the 1970s, Walmart opened some 50 stores per year.

Walmart paid low wages as part of its cost-cutting ethos, but many employees still regarded the company warmly. Sam Walton frequently visited his stores, where he made employees feel appreciated by soliciting their feedback. He believed that cultivating personal relationships with his employees would prevent union organizing.

“Walton had always done all he could to tamp down his workers’ regular pay, going so far as to configure the company in its early days in a manner that would circumvent the federal minimum wage.”

Walton promoted employee goodwill with a profit-sharing plan for employees with two years of tenure. The plan invested primarily in Walmart stock, allowing workers to buy shares at a steep discount. For long-term employees, this perk could become a substantial retirement nest egg.

In the 1980s, Walmart created a state-of-the-art computerized logistics and distribution system that tracked its merchandise using bar codes and satellite surveillance. This system enabled the company to adjust orders to its suppliers on the fly and maintain lean inventories. By 1990, the chain boasted 1,400 Walmart locations and 120 big-box Sam’s Wholesale Clubs.

In 1988, Sam Walton turned leadership over to a new CEO, David Glass, who pushed for growth with an emphasis on Walmart Supercenters. These enormous stores added groceries to Walmart’s traditional merchandise mix. By the end of Glass’s 12 years in charge, Walmart was operating more than 700 Supercenters, 1,800 standard stores and almost 500 Sam’s Clubs.

CEO Lee Scott initiated a gradual evolution of Walmart’s business practices.

Lee Scott assumed the CEO’s chair in 2000 and continued Walmart’s push for growth. By the end of 2003, Walmart had doubled its number of Supercenters and become the United States’ largest grocer and purveyor of toys, furniture, jewelry and other merchandise. It had the highest revenue of any US business.

Negative publicity ensued when human rights advocates exposed abuses in foreign factories that made some of Walmart’s goods. And, in 2020, the nine American states that offer such information reported that more than 14,000 Walmart employees were using food stamps to supplement their earnings.

Consultants told Walmart that between 2% and 8% of its customers had stopped shopping at its locations due to adverse publicity. Long-time employees joined the critics, saying the company had abandoned its drive to make workers feel appreciated. In dozens of stores, they said, managers pushed employees to keep working after they clocked out for scheduled rest breaks or lunch. Such violations resulted from Walmart executives pressuring store managers to reduce payroll expenses. Employees believed Walmart had abandoned one of Sam Walton’s two pillars to focus exclusively on lower costs.

“Walmart, now the largest corporation of them all, had come to symbolize…a race‑to‑the-bottom brand of capitalism that was leaving legions of people struggling to get by.”

The company’s response to Hurricane Katrina became a turning point. As the storm made landfall, executives gathered on a conference call to discuss possible responses, such as shipping bottled water to devastated areas. As the severity of the destruction grew clearer, Scott pushed the team to think bigger. At that moment, according to the then-head of Sam’s Club, Doug McMillon, the company decided to ignore profits and focus on helping.

The company donated some 2,000 truckloads of clothes and supplies to hard-hit areas. Local workers searched their stores for supplies to donate, and delivery drivers braved perilous conditions. Scott used the resulting goodwill to push for more socially conscious initiatives, with an emphasis on environmental concerns. He met with environmental advisors who advocated sustainability as a strategic asset.

Andy Ruben, Walmart’s strategy chief, led the effort to introduce sustainability goals in every aspect of the business, from energy use to packaging. In a post-Hurricane Katrina speech, Lee Scott set several goals: Walmart would produce zero waste and would sell products, such as compact fluorescent light bulbs, with low environmental impact. Its energy supply would become 100% renewable. The company would heed local communities’ interests, demand that global suppliers treat workers fairly and offer its frontline staff more affordable health insurance.

“Walmart very much sees itself as part of this new wave of capitalism, talking up its adherence to ‘shared value,’ which calls upon companies to generate economic value in a way that simultaneously generates value for society by addressing its most urgent needs.”

Scott stopped short of promising a living wage, but he implored the federal government to consider raising its minimum wage. Walmart thus assumed a leadership role in an emerging concept of capitalism that rejects seeing shareholder value as a company’s only responsibility. Walmart had come to believe that a business should consider how to engage with society and meet social needs.

Unions and employees sought to expose Walmart’s employment practices.

Unions almost never succeeded in their efforts to organize Walmart workers. The lone exception occurred in 2000, when butchers at a Jacksonville, TX Supercenter voted for representation by the United Food and Commercial Workers (UFCW) union. Subsequently, Walmart eliminated butchers in its stores.

In 2005, the Service Employees International Union (SEIU) kicked off its new Walmart Watch campaign. It didn’t aim directly at unionizing Walmart, but rather at raising employees’ awareness of income inequality, wage stagnation and their lack of quality health care coverage.

The same year, UFCW announced its Wake Up Walmart campaign. In 2006, a Wake Up Walmart bus tour traveled through 19 states to 35 cities where thousands gathered to hear about Walmart’s labor practices.

“If there is one thing that runs as deep in Walmart’s DNA as its devotion to keeping costs down and prices low, it would have to be its antipathy toward organized labor.”

Public relations expert Leslie Dach joined Walmart to handle the fallout. Dach previously assisted the Working Families for Walmart campaign as part of the company’s anti-union efforts. Dach told Scott that improving Walmart’s reputation required improving its practices.

He believed such a large, powerful company could be a force for good in the United States. During Dach’s tenure, Walmart reduced the price of certain generic drugs to $4 for a 30-day supply. It donated large amounts of food to food banks and progressed sufficiently in its environmental initiatives to induce critics from environmental organizations to collaborate with Walmart in pursuit of its environmental goals.

In 2007, Walmart announced a collaboration with a long-time antagonist, SEIU leader Andy Stern, to fight for affordable health care. Their talks focused on:

1. Health care reform – By summer 2009, Walmart and SEIU had decided to back President Barack Obama’s proposal to require employers to provide medical coverage or help workers pay for it.
2. “Worker voice” – To enable employees to report abusive managers, the union and Walmart discussed creating a telephone hotline that SEIU would monitor. The idea fizzled.
3. Wages – Walmart remained obstinate regarding pay. It backslid, announcing in 2010 that it was replacing Sam Walton’s profit-sharing plan with a 401(k).

In 2009, as Mike Duke succeeded Lee Scott as CEO, workers and unions intensified their efforts. The UFCW helped create the worker-led Organization United for Respect at Walmart (OUR Walmart), later known as United for Respect. OUR Walmart focused on a Walmart in Laurel, Maryland, where Cindy Murray worked in the store’s fitting room. She pushed to organize her store in 2006. She spoke at union rallies, participated in a Wake Up Walmart TV ad and urged the Maryland legislature to pressure Walmart for better health coverage.

“The company…had opened its mind to many new ideas. It had yet, however, to open its wallet to its own employees.”

OUR Walmart allied with the Warehouse Workers United union and began a Facebook recruitment drive in 2011. Members met in Bentonville, Arkansas, home of Walmart’s headquarters, to draw up a “Declaration of Respect.” They called on Walmart to set a minimum wage of $13 per hour, boost the percentage of its employees who worked full-time, offer consistent schedules and provide affordable health coverage. Workers staged brief walkouts at several stores.

In 2015, CEO Doug McMillon took the first steps toward boosting pay rates.

When new CEO Doug McMillon came aboard in 2014, he had big growth plans but recognized that he had to address frontline workers’ disaffection. Low morale had led to staffing shortfalls, worsening other problems, such as bloated inventory.

At a February 2015 board meeting, McMillon proposed a new standard: Walmart shouldn’t pay any worker less than $8.25 per hour. Board member Jim Cash recommended a higher ceiling. Cash, a Harvard Business School professor emeritus, asserted that Walmart couldn’t cultivate engagement while paying only $8.25 per hour.

“As disconcerting as it was to see the stock plunge, it made the Walmart team more resolved than ever to make good on their plans and prove [Wall] Street wrong.”

The board agreed to boost its minimum hourly rate to $9 by April 2015 and to $10 by 2016. It pledged to provide training to open the door to higher-paid positions and to give frontline workers more input into their schedules. Wall Street analysts viewed these actions with displeasure; Walmart’s share price fell 10% in one day.

Walmart’s wage issues reflect wider problems in American capitalism.

Since the 2015 pay raise, Walmart has continually increased its investment in its frontline workers. Still, at least half of its US hourly workers earn less than $33,000 annually. Walmart claims its pay rates align with the local market average without recognizing that the market average has been weak for decades.

During the post-World War II era – the so-called Golden Age of American Capitalism – much of the US population shared in corporations’ thriving fortunes. Between 1948 and 1979, growth in wages for most workers paralleled the rise in productivity.

But from 1979 to 2020, while productivity expanded by more than 60%, wages and benefits rose less than 18%, according to the Economic Policy Institute. A RAND Corporation study showed that if productivity and compensation had stayed at its earlier ratio, the 2018 median pay would be $100,000 instead of $50,000. Instead, RAND data show that most of the economic rewards of increased productivity went to the top 1% of the population.

Low wages and earnings inequality have become the US norm, and benefits such as job security, employer-paid health insurance and retirement benefits have languished. This problem requires US governmental action. For instance, political leaders should rewrite labor laws to expand collective bargaining, provide new opportunities for employees to be heard, ensure full employment and make most salaried employees eligible for overtime pay – as only 15% are now.

Companies must pay people enough to live on. The nonprofit Living Wage for US says a living wage is the amount necessary for a “decent standard of living” for a home with two kids and two adults, one working full-time and the other at work 75% of the time. Such a wage must cover housing, food, transportation, health insurance, out-of-pocket medical costs, taxes, retirement savings, child care, assorted necessities and unexpected events. For 90% of Americans, maintaining that standard would require a $20 per hour wage. A smaller but still significant percentage of Americans live in areas that would require $25 per hour.

“Twenty dollars is bound to come across as too radical to many, but…as with climate change, we have put ourselves in a hole so deep we will never get out of it if we think small.”

Worker advocates urge the government to raise the federal minimum wage from $7.25 per hour to $20 per hour. At that rate, a full-time worker would earn a little less than $42,000 a year, a living wage that could imbue each person’s work and life with dignity.

About the Author

Rick Wartzman is co-president of Bendable Labs, a technology, consulting and research firm that specializes in the areas of lifelong learning, workforce development and job quality.

Genres

Business, History, Sociology, Economics, Politics, Ethics, Environment, Journalism, Biography, Case Study

Review

The book tells the story of how Walmart, the largest employer and retailer in the US, has changed its business practices and policies over the past 15 years to become more socially and environmentally responsible. The author, Rick Wartzman, a journalist and former director of the Drucker Institute, traces the origins of Walmart’s transformation to 2005, when the company faced a series of challenges and criticisms, such as lawsuits, labor protests, environmental violations, and declining sales.

He shows how Walmart’s leaders, especially its current CEO Doug McMillon, have adopted a more conscious capitalism approach, which aims to create value for all stakeholders, not just shareholders. Some of the steps that Walmart has taken include raising its minimum wage to $12 an hour, improving its employee benefits and training, investing in renewable energy and reducing its carbon footprint, supporting local suppliers and communities, and advocating for social issues such as immigration reform and racial justice.

Wartzman also examines the impacts and limitations of Walmart’s efforts, both internally and externally. He explores how Walmart’s workers, customers, suppliers, competitors, and regulators have responded to its changes, and how the company has balanced its social goals with its financial performance and market position.

He also questions whether Walmart’s actions are sufficient and genuine, or whether they are driven by self-interest and public relations. He argues that Walmart’s transformation, while remarkable and commendable, is not enough to address the systemic problems of low wages, income inequality, and environmental degradation that plague the US economy and society. He calls for more public policies and collective actions to ensure that all workers can earn a living wage, have access to health care and education, and enjoy a decent quality of life.

The book is a well-researched and engaging account of Walmart’s evolution and the challenges and opportunities of practicing conscious capitalism in today’s world. Wartzman draws on extensive interviews, documents, and data to provide a detailed and balanced perspective on Walmart’s history, culture, strategy, and impact.

He does not shy away from criticizing Walmart’s shortcomings and controversies, but he also acknowledges its achievements and innovations. He offers insights and lessons from Walmart’s experience that can be useful for other businesses, policymakers, and consumers who are interested in creating a more sustainable and inclusive economy and society.

The book is not only informative, but also entertaining and provocative. Wartzman writes in a clear and lively style, using anecdotes, quotes, and examples to illustrate his points and keep the reader’s attention. He also raises important and timely questions about the role and responsibility of corporations, the meaning and measurement of success, and the future of work and capitalism in the 21st century.

The book is a valuable and stimulating contribution to the ongoing debate and dialogue on how to make business a force for good.