Lines Drawn in Wal-Mart’s Mexico Scandal

The question for Wal-Mart is how long its public statement about bribery allegations in Mexico will stand as pressure mounts on the company from several fronts.  A report surfaced today that the U.S. Justice Department has opened a criminal investigation into the matter – news that likely was responsible for a further 2% slide in Wal-Mart shares.  Since Monday, the scandal has clipped the company’s market cap by about 7%, some $12 billion.

Wal-Mart responded promptly to the bribery allegations in a statement and video message immediately after the article was posted on the New York Times website on Saturday.  Its response indicates it has adopted the following communication strategy:

  1. Remind everyone that the alleged activities happened a long time ago, so they’re not that important.
  2. Emphasize that the board began an internal investigation, disclosed it publicly and will act on its findings as necessary.
  3. Defend broad principles, but avoid a defense of specific facts.

As crisis-management goes, this is a solid first-day response, both in terms of content and tactics, like the use of video in English and Spanish.  Importantly, Wal-Mart’s statement allows it to buy time while it assesses the damage from the article.  The question is: how long will these statements hold up before some further action is needed or they’re compromised by new information?

Congressional hearings and law enforcement investigations will ratchet up the pressure and could force a shift in Wal-Mart’s public posture.  But investigations and hearings follow well-charted paths and generally give their targets ample time to prepare.  What could really pressure Wal-Mart is the online availability of the source material cited in the Times article.  It included links to a half-dozen excerpts from these documents, but the trove is huge:

“The Times obtained hundreds of internal company documents tracing the evolution of Wal-Mart’s 2005 Mexico investigation. The documents show Wal-Mart’s leadership immediately recognized the seriousness of the allegations. Working in secrecy, a small group of executives, including several current members of Wal-Mart’s senior management, kept close tabs on the inquiry.”

Online access to the emails, video interviews, internal reports and correspondence could intensify the pressure on Wal-Mart.  Instead of contending with prosecutors limited by tight budgets and political considerations, Wal-Mart could face a vast army of industrious bloggers, analysts, and reporters.  They’re capable of keeping the story alive for a long time.  It’s a scenario that recalls the release by WikiLeaks of US diplomatic cables in 2011, which generated news articles for months afterwards.

The New York Times has not said whether it will make the documents available.

Wal-Mart is hoping of course that the story fades with time, and there’s a good chance of that.  Bribery scandals don’t have obvious victims or high-impact visuals to maintain the public’s interest.  (Few people would remember the Archer Daniels Midland price-fixing scandal of the early 1990s were it not for Matt Damon’s starring role in The Informant!)

Wal-Mart has a challenging road ahead, but it might have weathered the worst of the storm – unless new details on the scandal emerge.



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