New York City funds increase pressure on Wal-Mart over Mexican bribery allegations

Letter to fellow shareholders as proxy firms weigh in

The five New York City pension funds, with combined assets of $122bn (€95.7bn), have ramped up their pressure on Wal-Mart over the Mexican bribery allegations ahead of the retail giant’s annual meeting on June 1.

The funds hold a combined 5.6m shares in the Arkansas-based company, worth around $352.8m. Wal-Mart is facing allegations that it hushed up reports of widespread corruption in its Mexican operations following a story in the New York Times in April.

The funds’ trustee, New York City Comptroller John Liu, has followed up an earlier letter to fellow shareholders with a new missive drawing investors’ attention to recommendations from proxy firms Institutional Shareholder Services (ISS) and Glass Lewis.

“I’m pleased to inform you that leading independent proxy advisors, ISS and Glass Lewis, have each recommended that Wal-Mart shareowners vote against Wal-Mart directors whose election the NYC Pension Funds oppose,” he wrote.

On May 2, he had written to shareholders urging them to vote against directors Michael Duke, Lee Scott, Arne Sorenson, Robson Walton and Christopher Williams.

Liu said at the time of the reported cover-up, Wal-Mart’s audit committee was “stonewalling” repeated demands from the NYC Funds and other investors for an independent compliance review.

“We welcome the decisions by Glass Lewis and ISS to recommend against those directors who we also believe are most responsible for this costly and avoidable governance mess,” Liu writes.Although the directors’ re-election is virtually certain, Liu said shareholders “can deliver a strong message about the need to restore credibility” at the company to protect long-term value.

The proxy firms have both advised against the re-election of CEO Michael Duke and his predecessor as CEO Lee Scott. ISS also recommends voting against founding family member Walton, who is chairman. Glass Lewis said Duke and Scott should have acted “more proactively” to investigate the claims. ISS referred to the pair’s “staggering lack of judgment”.

“Costly and avoidable governance mess”

Meanwhile, Liu has also written to shareholders in controversial natural gas and oil producer Chesapeake Energy calling on them to vote out board members Burns Hargis and Richard Davidson at its annual meeting on June 8 – saying strong directors are needed to oversee “willful” chief executive Aubrey McClendon.

The California Public Employees Retirement System (CalPERS) has also engaged with fellow Chesapeake investors – seeking support for its proposal on super majority voting at the company.

Elsewhere, the UAW Retiree Medical Benefits Trust and the Nathan Cummings Foundation have also sought investor support ahead of the Wal-Mart AGM. They call on support for their proposal for a board member with health care expertise.