Wal-Mart's bribery-probe payouts fall

Wal-Mart Stores Inc. again paid additional fees to board of directors members serving on the company's audit committee for work related to an internal investigation of potential violations of the Foreign Corrupt Practices Act, the company reported.

Payouts related to the investigation are at their lowest point since they began in 2013. Wal-Mart has been conducting an internal investigation since 2011 after it was alleged that the company bribed Mexican officials. Later the investigation grew to include dealings in "but not limited to Brazil, China and India." Wal-Mart began paying extra fees related to the investigation in fiscal 2013 when the workload for the audit committee essentially doubled.

"This is not an indication of decreased involvement by the Audit Committee in the FCPA investigation and related matters, nor does it mean the investigation is coming to a close soon," Wal-Mart spokesman Randy Hargrove said in an email. "The additional fee reflects the board's subjective determination of a reasonable fee to be paid for the additional work."

According to Wal-Mart's most recent proxy statement, in fiscal 2015 the retailer paid board members James Cash Jr., Pamela Craig and Thomas Horton $37,500 above what they would otherwise earn for their service. Committee Chairman Timothy Flynn earned an extra $50,000. Outside directors on the Wal-Mart board are compensated annually with a $175,000 stock grant and $75,000 retainer fee.

For fiscal 2014, the audit committee members were granted an additional $75,000, and the committee chairman received $100,000 related to the investigation. Fees for fiscal 2013 were $60,000 for committee members and $85,000 for the chairman.

Declining expenses related to the internal audit are a sign that the investigation could be winding down, said Southern Illinois professor and Foreign Corrupt Practices Act expert Michael Koehler. Wal-Mart, which reported $483 billion in sales last fiscal year, has seen the amount spent on the investigation and global compliance initiatives drop from $1 million per day to about $500,000 per day, according to Koehler's research.

"Most of the expenses are in the internal investigation and the fact-gathering phase," Koehler said. "That tends to be the most expensive aspect of FCPA scrutiny, and logically that takes place early in the process and not towards the end of the process. I think this is clearly on the downward slope, but the Department of Justice and SEC face very little in terms of time pressures."

Investigation-related payouts for the audit committee are separate from the $173 million that the company spent on "FCPA Investigation and Related Matters" in fiscal 2015, a company spokesman said. Wal-Mart reports expenses of $612 million since fiscal 2013 related to the investigation and global compliance improvements.

Members of Wal-Mart's senior management team have been meeting regularly with the audit committee. Conversations have included the implementation of 72 compliance-related objectives outlined by the board last year.

CEO Doug McMillon noted in a recent update on Wal-Mart's Global Compliance Program that the company has met 70 of the objectives. Work on those unmet is carrying over into the current fiscal year. McMillon and other executives have a financial incentive to ensure the company achieves compliance-related goals, and the CEO noted there was enough progress made that bonuses were not reduced.

"In light of the progress in building our internal anti-corruption capabilities, in FY15 we transitioned to our internal staff a number of activities that external consultants had been handling," McMillon wrote in the report. "This increased the capabilities of our internal anti-corruption team, which is critical to the effectiveness and long-term sustainability of our anti-corruption program."

Wal-Mart also took steps to improve training for new employees in foreign markets and to expand compliance training for newly hired or promoted executive officers. The company has identified 40 compliance-related objectives to be carried out in its current fiscal year.

Wal-Mart's investments in employee and executive training and other compliance-related expenses have positioned the retailer as a leader, Koehler said.

"Whatever happened at Wal-Mart or did not happen at Wal-Mart seven or eight years ago, it's undeniable that Wal-Mart, through compliance enhancements, should be viewed as a leader," Koehler said. "It's doing all the right things, which I think speaks to sometimes the difficulty of ensuring in all times at all places FCPA compliance."

Business on 04/30/2015

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