In its second annual “Global Compliance Program Report,” Walmart details the compliance enhancements it has made in recent months. Among them: improved training for its 2,000-employee global compliance program, investing $40 million in new technology, centralizing the oversight of license and permit applications, and conducting compliance-related spot checks at more than 5,500 retail locations
The report, covering the company’s fiscal year that ended on Jan. 31, is required by its audit committee in response to a wave of bribery, corruption, and permit-related allegations regarding stores in Mexico, China, Brazil, and India. In fiscal year 2015 the company spent $173 million on legal and compliance costs related to the Foreign Corrupt Practices Act; that is on top of $282 million in 2014 expenses and $157 million spent in 2013.
The annual reports measure progress on a prioritized list of compliance-related enhancements, developed by senior management in coordination with the audit committee. The latest assessment boasts that Walmart completed 70 of its 72 compliance objectives. That track record shows “adequate progress” and executive compensation will not be reduced. In 2014, the Board’s Compensation, Nominating and Governance Committee conditioned a portion of the compensation for senior executives on compliance improvements.
The report doesn’t list those 72 objectives, choosing instead to more generally address compliance initiatives in key areas: anti-corruption; anti-money laundering; health and wellness compliance; environmental compliance; health and safety compliance; labor and employment compliance; and licensing and permits. In 2014, Walmart named and hired “subject matter leaders” to oversee compliance efforts in each of these areas. The next step, in fiscal year 2015, was to round out market-level compliance teams by recruiting additional staff and improving training programs.
Anti-corruption is flagged in the 2015 report as an area of particular emphasis. Current efforts include recruiting anti-corruption directors in the eCommerce businesses at Walmart.com.br (Brazil) and Yihaodian.com (China). Working with Walmart’s global anti-corruption team, these new directors will conduct due diligence, develop and provide anti-corruption training, and oversee the implementation of anti-corruption policies and procedures.
Last year, Walmart appointed teams of compliance monitors (referred to as “continuous improvement teams”) in each of its international retail markets. These monitors regularly visit stores, assess the effectiveness of compliance controls at the store level, train managers and associates, and assist with correcting issues. In fiscal year 2015, more than 5,500 assessments were conducted at retail locations and more than 90 percent of identified issues were resolved. This initiative will be expanded to a multi-year plan to create teams of compliance monitors focused on anti-corruption policies and financial controls.
Walmart says “substantial attention” is placed on compliance and ethics training. In fiscal year 2015, it provided anti-corruption training to third-party partners in 10 international markets. Improvements included the development of compliance training materials for new associates in each of its markets and expanding training for newly promoted or hired global officers.
The company also reported the expansion of its responsible sourcing programs by obtaining more detailed disclosures from the suppliers who make private-brand products and using those disclosures to create a risk-based approach to auditing factories. The past year also brought enhanced fire-safety standards and partnerships with external groups focused on worker well-being and safety.
With so many retail locations and associates throughout the world, efficiently collecting their data and using it to anticipate and identify compliance risks is a challenge, the report says. For fiscal year 2015, Walmart spent more than $40 million developing and deploying new systems to assist with this task. Among the data-driven initiatives is tracking the work of continuous improvement teams around the world. When teams visit a location, a closed-loop system allows them to document observations and follow up on prior findings.
Technological investments are also improving due diligence research on third parties that may interact with governmental entities on Walmart’s behalf, the report says. Information is collected from third parties, then run through various databases to identify adverse news stories, litigation, government sanctions, and politically exposed persons related to them and their key personnel. New technology has also centralized the oversight of Walmart’s license and permit applications and renewals. The expanded management system organizes the licensing and permitting requirements in each geographic market, simplifies the application process, provides a single repository for related documentation, and analyzes this data to predict and prepare for licensing needs.