Feb. 25, 2005
The 10 Worst Corporations of 2004
by Russell Mokhiber and
It is never easy choosing the 10 Worst Corporations of the Year there are always more deserving nominees than we can possibly recognize. One of the greatest challenges facing the judges is the directive not to select repeat recipients from last years 10 Worst designation. The no-repeat rule forbids otherwise deserving companies like Bayer, Boeing, Clear Channel and Halliburton from returning to the 10 Worst list in 2004.
Of the remaining pool of price gougers, polluters, union-busters, dictator-coddlers, fraudsters, poisoners, deceivers and general miscreants, we chose the following as the 10 Worst Corporations of 2004:
Abbott Laboratories: Drug-Pricing Chutzpah
Chutzpah. Webster's defines the Yiddish term now incorporated into English slang as: 1. unmitigated effrontery or impudence; gall. 2. audacity; nerve.
In the next edition, they may want to add: 3. See Abbott.
In December 2003, the company raised the U.S. price of its anti-AIDS drug Norvir (generic name ritanovir) by 400 percent. That is, unless the product is used in conjunction with other Abbott products in which case the price increase is zero.
Norvir has become an increasingly important treatment in recent years. Scientists have discovered that while Norvir is generally too toxic for safe use as a protease inhibitor (one category of anti-AIDS drugs), in lower doses it works well as a booster to increase the efficacy of other protease inhibitors. As a result, Norvir is frequently prescribed along with other protease inhibitors.
The Norvir price increase does not apply when the product is used as a booster with another Abbott protease inhibitor (in the combined product Kaletra). Thus the impact of the Norvir price increase is to make Kaletra far cheaper than rival combinations of Norvir and non-Abbott protease inhibitors.
Norvir is especially important for patients in need of a "salvage therapy" of new and powerful treatments because their virus has become resistant to other medicines.
Lynda Dee, co-chair of the AIDS Treatment Activists Coalition's Drug Development Committee, called the price increase for these patients, who may have no choice as to the medications they need to survive, "pharma-terrorism perpetrated against the patients who need new drugs the most."
Abbott said the price spike was justified by its need to raise money for research and development. "New medicines cost hundreds of millions of dollars to develop," Jeffrey Leiden, president and chief operating officer of Abbott's Pharmaceutical Products Group, told a National Institutes of Health meeting in May.
Making the Abbott price jump especially pernicious in the eyes of consumer advocates was that the drug was invented on a grant from the U.S. federal government.
Because of the U.S. government's financing role, Essential Inventions, Inc., a nonprofit corporation created to distribute affordable public health and other inventions, in January petitioned the government to exercise its "march-in" rights under the federal Bayh-Dole Act and issue an open license to generic firms to produce their own version of Norvir.
But NIH rejected the Essential Inventions proposal, arguing that companies that obtained licenses to government-funded inventions have a duty only to commercialize the inventions. NIH does not have authority to consider the price at which a product is sold and the impact of the price on access, the agency ruled even though the Bayh-Dole Act says government-funded inventions should be made "available to the public on reasonable terms."
AIG: Deferred Prosecutions On the Rise
When the world's largest insurer, American International Group Inc. (AIG), was charged by federal prosecutors with crimes in November, it quickly cut a deal with the Justice Department that ended a criminal probe into its finances with a deferred prosecution agreement.
In a deferred prosecution, the corporation accepts responsibility, agrees not to contest the charges, agrees to cooperate, usually pays a fine and implements changes in corporate structure and governance to prevent future wrongdoing.
If the company abides by the agreement for a period of time, then the prosecutors will drop the criminal charges.
"This comprehensive settlement brings finality to the claims raised by the SEC and the Department of Justice," said AIG Chair M. R. Greenberg. "The role of the independent consultant complements our own transaction review processes. We welcome this enhancement to our overall risk management and control mechanisms."
Under the deal with AIG, an AIG subsidiary was charged with a crime for the next 12 months, but then the charge will be dismissed with prejudice if AIG abides by the deferred prosecution agreement. As part of the agreement, AIG and two subsidiaries will pay an $80 million penalty, and $46 million into a disgorgement fund maintained by the SEC.
Merrill, AIG and PNC are three of 10 major corporations that have settled serious criminal charges with deferred prosecution, no prosecution or de facto no prosecution agreements over the last two years. Companies are getting off the criminal hook with these agreements, which were originally intended for minor street crimes. Now they are being used in very serious corporate crime cases.
If a crime has been committed and there is little doubt that crimes have been committed by the corporations in these cases then the companies should plead guilty and pay the penalty. If prosecutors want to impose change on the corporation, they can do this after securing a conviction through probationary orders. Right now, corporate lawyers are teaming up with prosecutors to go after individual executives while the company's record is wiped clean.
Coca-Cola: KillerCoke.org vs. CokeKills.org
On KillerCoke.org, you'll find a raft of information on Coke and its bottlers' operations in Colombia. There is extensive documentation of rampant violence committed against Coke's unionized workforce by paramilitary forces, and powerful claims of the company's complicity in the violence.
An April 2004 report from a fact-finding delegation headed by New York City Council member Hiram Monserrate contends:
"To date, there have been a total of 179 major human rights violations of Coca-Cola's workers, including nine murders. Family members of union activists have been abducted and tortured. Union members have been fired for attending union meetings. The company has pressured workers to resign their union membership and contractual rights, and fired workers who refused to do so."
Allegations such as these formed the basis of a lawsuit filed in 2001 by the International Labor Rights Fund and the United Steelworkers of America in U.S. courts against Coke on behalf of a Colombian trade union and union leader victims of violence at Coke bottling facilities in Colombia.
In 2003, a federal court dismissed the claims against Coke, arguing that its relationship with the owners of the Coke bottling plant in Colombia was too attenuated to hold the soft drink multinational responsible for human rights abuses at the plant. The plaintiffs have since re-filed their complaint. They argue the original decision was mistaken, but that Coke's subsequent purchase of the Colombia bottlers means the company is now clearly responsible for the bottlers' actions.
Here's what Coke has to say:
"The pervasive violence in Colombia, and the targeting of union members by its perpetrators, has, unfortunately, touched The Coca-Cola Company in a very personal way. Employees of our Company and bottling partners in Colombia have been threatened, kidnapped, and some have even been murdered ... In a lawsuit in Colombia, the court concluded that the bottler not only took proper steps to initiate investigation by the authorities, but went further to enhance its workers' safety by heightening security at the plant."
Leave aside for the moment the issue of Coke's legal liability. The idea that Coke can't control the behavior of its bottlers is simply implausible. It can control them if it so chooses just the way that clothing retailers can control the actions of their manufacturers, but even more so.
Dow Chemical: Forgive Us Our Trespasses
At midnight on Dec. 2, 1984, 27 tons of lethal gases leaked from Union Carbide's pesticide factory in Bhopal, India, immediately killing an estimated 8,000 people and poisoning thousands of others.
Today in Bhopal, at least 150,000 people, including children born to parents who survived the disaster, are suffering from exposure-related health effects such as cancer, neurological damage, chaotic menstrual cycles and mental illness. Over 20,000 people are forced to drink water with unsafe levels of mercury, carbon tetrachloride and other persistent organic pollutants and heavy metals.
Activists from around the world including human rights, legal, environmental health and other experts mobilized this year to demand that Dow Chemical, the current owner of Union Carbide, be held accountable.
Twenty years after this disaster, the company responsible for this catastrophe and its former executives are still fugitives from justice. Union Carbide and its former chairman, Warren Andersen, were charged with manslaughter for the deaths at Bhopal, but they refuse to appear before the Indian courts.
Here is part of Dow's statement on Bhopal:
While Dow has no responsibility for Bhopal, we have never forgotten the tragic event and have helped to drive global industry performance improvements. This is why Responsible Care was created and why these standards are essential for the protection of our employees and the communities where we live and work. Our pledge and our commitment is the full implementation of Responsible Care everywhere we do business around the world.
In commemoration of the 20th anniversary of the crime of Bhopal, we present here 20 things to remember about Dow Chemical the company now responsible for Bhopal and a fugitive from justice.
20. Agent Orange/Napalm: The toxic herbicide and jellied gasoline used in Vietnam created horrors for young and old alike.
19. Rocky Flats: The top secret Colorado site managed by Dow Chemical from 1952 to 1975 remains an environmental nightmare.
18. Body burden: In March 2001, the Centers for Disease Control reported that most people in the United States carry detectable levels of plastics, pesticides and heavy metals in their blood and urine.
17. 2,4-D: One of the key ingredients in Agent Orange, the toxic defoliant used in Vietnam, 2,4-D is still the most widely used herbicide in the world.
16. Mercury: In Canada, Dow had been producing chlorine using the mercury cell method since 1947. Much of the mercury was recycled, but significant quantities were discharged into the environment. In March 1970, the governments of Ontario and Michigan detected high levels of mercury in fish in major waterways. Dow was sued by state and local officials for mercury pollution.
15. PERC: Perchloroethylene is the hazardous substance used by dry cleaners everywhere. Dow tried to undermine safer alternatives.
14. 2,4,5 T: One of the toxic ingredients in Agent Orange.
13. Busting unions: In 1967, unions represented almost all of Dow's production workers. But since then, according to the Metal Trades Department of the AFL-CIO, Dow undertook an "unapologetic campaign to rid itself of unions."
12. Silicone: The key ingredient for silicone breast implants made women sick. Litigation continues over silicone breast implants, removed from the market more than a decade ago.
11. DBCP: The toxic active ingredient in the Dow pesticide Fumazone. Doctors who tested men who worked with DBCP thought they had vasectomies, because no sperm was present.
10. Dursban: Trade name for chlorpyrifos, a toxic pesticide, proved to have nerve agent effects. It was tested on prisoners in New York in 1971. It replaced DDT when DDT was banned in 1972. A huge seller, in June 2000, EPA limited its use and forced it off the market at the end of 2004.
9. Dow at Christmas: "Uses of Dow plastics by the toy industry are across the board," boasted Dow Chemical in an internal company memo one Christmas season. Among the chemicals used in these toys are polystyrene, polyethylene, ethylene copolymer resins, saran resins, PVC resins, or vinyls and ethyl cellulose.
8.The Tittabawassee: A river and river basin polluted by Dow in its hometown, Midland, MI.
7. Brazos River, Freeport, TX: A February 1971 headline in the Houston Post read: "Brazos River is Dead." In 1970 and 1971, Dow's operation there was sending more than 4.5 billion gallons of wastewater per day into the Brazos and on into the Gulf of Mexico.
6. Toxic Trespass: From Trespass Against Us: Dow Chemical and the Toxic Century by Jack Doyle: "Dow Chemical has been polluting property and poisoning people for nearly a century, locally and globally trespassing on workers, consumers, communities, and innocent bystanders on wildlife and wild places, on the global biota and the global genome."
5. Holmesburg Experiments: In January 1981, a Philadelphia Inquirer story revealed that Dow Chemical paid a University of Pennsylvania dermatologist to test dioxin on prisoners at Holmesburg Prison in Philadelphia in 1964.
4. Worker deaths: Dow has a long history of explosions and fires at its facilities. In May 1979, an explosion ripped through Dow's Pittsburgh facility, killing two workers and injuring more than 45 others.
3. Brain tumors: In 1980, investigators found 25 workers with brain tumors at the company's Freeport, TX facility 24 of which were fatal.
2. Saran Wrap: The thin slice of plastic invaluable to our lives, Saran Wrap was produced by Dow until consumers went looking for Dow products to boycott.
GlaxoSmithKline: Deadly Depressing
GlaxoSmithKline, Paxil and selective serotonin reuptake inhibitors (SSRIs): It was the story that foreshadowed and strikingly paralleled the controversy surrounding Merck, Vioxx and Cox-2 inhibitors.
With the antidepressant Paxil (generic name: paroxetine), the story was driven primarily from the United Kingdom by the BBC program Panorama and a public interest group called Social Audit. They called attention to the severe side effects from the drugs; notably that they are addictive and lead to increased suicidality in youth.
In 2003, the evidence of dangerous side effects had piled too high for British regulators to continue to ignore them. In June, the UK health experts advised that children should not be prescribed Paxil.
In March 2004, days after the Medicines and Healthcare Products Regulatory Agency (the UK's drug regulatory agency) advised that Paxil dosages should be kept to low levels, an expert participating in the Paxil review resigned, claiming the agency had possessed evidence for more than a decade suggesting that Paxil dosages should be kept low, but failed to act on it.
By this time, the story had started to heat up in the United States. Dr. Andrew Mosholder, of the FDA Office of Drug Safety, had conducted an analysis of clinical trials related to antidepressant use in children, and found a heightened risk of suicidality. But his superiors refused to let him present his findings to an advisory panel convened to look at the issue in the wake of the British action.
According to an investigation by Sen. Charles Grassley, R-IA, the FDA actually tried to get Mosholder to present data that deceptively underrepresented the risk of suicidality.
Although Paxil is not approved by the FDA for prescription to children, doctors routinely write "off-label" prescriptions for the product for children, a practice permitted under FDA rules. More than two million prescriptions for Paxil were written for children and adolescents in the United States in 2002.
In June, New York State Attorney General Eliot Spitzer filed suit against Glaxo, charging the giant drug maker with suppressing evidence of Paxil's harm to children, and misleading physicians. Spitzer's complaint cited a 1998 GSK memo, which states that the company must "manage the dissemination of these data in order to minimi[z]e any potential negative commercial impact."
Responding to Spitzer's suit, GSK claimed that, "As for the 1998 memo, it is inconsistent with the facts and does not reflect the company position."
The New York complaint asserted as well that "GSK has repeatedly misrepresented the safety and efficacy outcomes from its studies of paroxetine as a treatment for MDD [Major Depressive Disorder] in a pediatric population to its employees who promote paroxetine to physicians."
In August, the company settled with Spitzer for $2.5 million, plus a commitment to maintain the policy of posting clinical trial results, for all drugs marketed by the company.
The next month, the Star-Ledger of New Jersey reported on a Glaxo memo from the year before, instructing the company's sales force not to talk to doctors about company data showing dangers from prescribing Paxil to kids.
In October, the FDA ordered Glaxo and other SSRI makers to include a "black box" warning with their pills. The warning says SSRIs double the risk of suicide in children, though some medical researchers say the number should be higher. At least one GSK clinical trial showed 7.5 percent of youth taking Paxil suffering from suicidality (versus zero percent among those taking a placebo).
Hardee's: Heart Attack on a Bun
When Hardee's introduced the Thickburger this year, Jay Leno joked that it was being served in little cardboard boxes shaped like coffins.
With other major fast food outlets moving to green salads, Hardee's revels in big beef.
Clearly, Hardee's, a subsidiary of CKE Restaurants, Inc. of Carpinteria, CA, is not worried about the public health aspects of unleashing the monster into the marketplace.
Eating one Thickburger is like eating two Big Macs or five McDonald's hamburgers. Add 600 calories worth of Hardee's fries and you get more than the 2,000 calories that many people should eat in a whole day, according to Michael Jacobson of the Center for Science in the Public Interest.
The Federal Trade Commission (FTC) earlier this year charged KFC Corporation, owner of the Kentucky Fried Chicken national restaurant chain, with making false claims in a national television advertising campaign about the relative nutritional value and healthiness of its fried chicken.
The false claim? KFC said that eating fried chicken, specifically two Original Recipe fried chicken breasts, is better for a consumer's health than eating a Burger King Whopper.
The FTC says that while it is true that the two fried chicken breasts have slightly less total fat and saturated fat than a Whopper, they have more than three times the trans fat and cholesterol, more than twice the sodium, and more calories.
KFC settled the case.
But there will be no law enforcement action brought against Hardee's. Hardee's makes no pretensions that the Hardee's Thickburger is good for you, and has no qualms about the impact of the monster on the public's health. The fast-food pusher's new advertising campaign is straight up: "Be afraid. Be very afraid."
Merck: 55,000 Dead
It's not as if people in power didn't know about the impending disaster, what David Graham, a Food and Drug Administration (FDA) drug safety official, calls "maybe the single greatest drug-safety catastrophe in the history of this country.''
Testifying before a Senate committee in November, Dr. Graham put the number in United States who had suffered heart attacks or stroke as result of taking the arthritis drug Vioxx in the range of 88,000 to 139,000. As many as 40 percent of these people, or about 35,000-55,000, died as a result, Graham said.
The unacceptable cardiovascular risks of Vioxx were evident as early as 2000, a full four years before the drug was finally withdrawn from the market by its manufacturer, Merck, according to a study released by the Lancet, the British medical journal.
"This discovery points to astonishing failures in Merck's internal systems of post-marketing surveillance, as well as to lethal weaknesses in the U.S. Food and Drug Administration's regulatory oversight," Lancet editors wrote.
Authors of the Lancet study pooled data from 25,273 patients who participated in 18 clinical trials conducted before 2001. They found that patients given Vioxx had 2.3 times the risk of heart attacks as those given placebos or other pain medications.
Merck withdrew Vioxx on Sept. 30 of this year after a company-sponsored trial found a doubling of the risks for heart attack or stroke among those who took the medicine for 18 months or more. Merck says it disclosed all relevant evidence on Vioxx safety as soon as it acquired it, and pulled the drug as soon as it saw conclusive evidence of the drug's dangers.
But there is evidence that strongly suggests a different version of the story.
The Lancet findings came in the wake of new disclosures that suggest Merck was fully aware of Vioxx's potential risks by 2000.
The Wall Street Journal revealed emails that confirm Merck executives' knowledge of their drug's adverse cardiovascular profile the risk was "clearly there," according to one senior researcher.
At the Senate hearing, Dr. Graham said that the FDA "as currently configured is incapable of protecting America against another Vioxx" because of ties between agency reviewers and the pharmaceutical industry.
Graham said that at least five medications currently on the market pose such risks that their sale ought to be limited or stopped. Graham named the five as Meridia, Crestor, Accutane, Bextra and Serevent.
McWane: Death on the Job
The New York Times ran a three-part series by David Barstow and Lowell Bergman that exposed the egregious safety record of McWane Inc., a large, privately held Alabama-based sewer and water pipe manufacturer.
Nine McWane employees have lost their lives in workplace accidents since 1995. More than 4,600 injuries were recorded among the company's 5,000 employees.
According to the series, one man died when an industrial oven exploded after he was directed to use it to incinerate highly combustible paint. Another was crushed by a conveyor belt that lacked a required protective guard.
Three of McWane's nine deaths were the result of deliberate violations of safety standards. In five others, safety lapses were a contributing factor.
According to the Times, McWane pulled the wool over the eyes of investigators by stalling them at the factory gates and then hiding defective equipment. Accident sites were altered before investigators could inspect them, in violation of federal rules.
When government enforcement officials did find serious violations, "the punishment meted out by the federal government was so minimal that McWane could treat it as simply a cost of doing business."
"After a worker was crushed to death by a forklift that apparently had faulty brakes, an Occupational Safety and Health Administration investigation found defects in all 14 of the plant's forklifts, including the one involved in the death," the Times reported. The fine was just $10,500. Employers are further protected by the workers' compensation system, which can make it hard for victims to sue."
According to the Times, in one McWane oven explosion that killed an employee, Frank Wagner, McWane "hired a well-connected lobbyist to lean on Dennis Vacco, then New York State's attorney general, and ended up with a settlement in which it did not admit responsibility for the death."
The experts who looked at the case determined that the explosion that killed him was the result of reckless criminal actions by McWane, which was operating a cast-iron foundry in Elmira, NY, where Wagner worked.
"The evidence compels us to act," the prosecution team wrote in a confidential memorandum to Vacco in 1996. The team urged him to ask a grand jury to indict McWane and its managers on manslaughter and other charges. A grand jury inquiry, senior investigators believed, could have taken them up the corporate ladder, the Times reported.
But Vacco never sought an indictment against McWane for any crime.
Only after an unusual intervention by the United States attorney in Buffalo, who threatened federal charges, did McWane agree to plead guilty to a state felony and pay $500,000.
"But as the company and Mr. Wagner's widow are quick to note, that charge, a hazardous-waste violation, specifically did not hold McWane accountable for Mr. Wagner's death," the Times reported.
As the Times series showed, in plant after plant, year after year, "McWane workers have been maimed, burned, sickened and killed by the same safety and health failures."
McWane says it is changing, and it's certainly paying more attention to PR after the Times series.
"Over the last several years, our Company has embarked on significant changes that are focused on setting the industry standard in employee safety, health and environmental programs," asserts a May 2004 report from the company on health and safety.
That doesn't exactly jibe with what company managers call "the McWane way" what federal and state regulators characterized to the Times as a "lawless" and "rogue" operation that ruthlessly sought profits with disregard for worker safety and well-being.
Now, consider this:
McWane is responsible for nine worker deaths and countless injuries.
Scott Peterson was responsible for the death of his wife and unborn child.
Which one did the mass television media focus on?
Who got the death penalty?
Riggs Bank: The Pinochet Connection
Being a military dictator is not as easy as it looks.
You need suppliers of weapons. You need an army to work with you. And, if you are a crook as most military dictators are you need a bank to hold on to your money.
That's where Riggs Bank in Washington, DC comes in.
An explosive report from the U.S. Senate Permanent Subcommittee on Investigations of the Committee on Governmental Affairs, issued in July, revealed that Riggs illegally operated bank accounts for former Chilean dictator Augusto Pinochet, and routinely ignored evidence of corrupt practices in managing more than 60 accounts for the government of Equatorial Guinea.
An ongoing internal investigation by Riggs has revealed that the bank's dealing with Pinochet dates back to 1985, while the Chilean despot remained in power, according to a November Washington Post report.
Riggs has not so far been cited for civil or criminal violations in connection with the Pinochet money-laundering scheme. In May, the bank paid $25 million in fines in connection with money-laundering violations related to the Equatorial Guinea and Saudi Arabian governments.
The bank is the subject of ongoing criminal investigations by the U.S. Department of Justice and the U.S. Attorney's Office for the District of Columbia, according to recent filings with the Securities and Exchange Commission.
The Permanent Subcommittee on Investigations report found that from 1994 until 2002, Riggs opened at least six accounts and issued several certificates of deposit (CDs) for Pinochet while he was under house arrest in the United Kingdom and his assets were the subject of court proceedings. The aggregate deposits in the Pinochet accounts at Riggs ranged from $4 million to $8 million at a time.
What is now becoming apparent is that Riggs was collaborating with Pinochet even a decade earlier, with a scale of activity not yet clear.
Riggs was not a passive or unknowing actor in this drama. According to the Permanent Subcommittee on Investigations report, high bank officials solicited Pinochet's business, the bank helped Pinochet set up offshore shell corporations and open accounts in the names of those corporations to disguise his control of the accounts, altered the names of his personal accounts to disguise their ownership, and otherwise worked to help him hide his money flow.
Although these activities seem to violate U.S. banking rules, the Office of the Comptroller of the Currency (OCC) did not take enforcement action against the bank after it learned of these matters in 2002. That presumably was not unrelated to the fact that the OCC examiner at Riggs soon thereafter went to work for Riggs.
Pinochet is not the only dictator for whom Riggs undertook money laundering.
Equatorial Guinea is a small, oil-rich West African country dominated by a dictator. President Teodoro Obiang Nguema Mbasago. Obiang, his family and cronies, live a life of luxury while the rest of the country remains desperately poor.
The Permanent Subcommittee on Investigations report found that from 1995 until 2004, Riggs Bank administered more than 60 accounts and CDs for the government of Equatorial Guinea, Equatorial Guinea government officials or their family members. Money laundering to cover up corruption appeared to be routine.
Combined, these accounts represented the largest relationship at Riggs Bank, with aggregate deposits ranging from $400 to $700 million at a time. Riggs does not deny these activities took place, and its internal investigation is continuing. A number of Riggs employees involved in the scandals have been fired or demoted.
Wal-Mart: The Workfare Company
You only have to look at the cover of Wal-Mart's 2004 Annual Report to know the company is facing trouble unlike any it has had to handle before.
"It's my Wal-Mart," asserts the slogan on the cover of the annual report.
At the bottom are these claims: "Good Jobs * Good Works * Good Citizen * Good Investment."
Missing is any reference to "Always Low Prices."
Stepped up and novel community and legal challenges confronting the company are making the mammoth retailer expend energy on repositioning its image. Hence the annual report, the major image-oriented television ads, the sponsorships on National Public Radio listened to by few of its shoppers and the huge surge in campaign contributions. Wal-Mart and its managers gave more than $2 million to federal candidates in the last U.S. electoral cycle, more than any oil company and almost triple the level the company donated in the 2000 elections.
The company faces a class action lawsuit on behalf of 1.6 million women workers, alleging rampant employment discrimination at Wal-Mart.
The Service Employees International Union (SEIU) has announced plans to spend $25 million a year with the ultimate goal of unionizing Wal-Mart, the largest private U.S. employer.
And the company, which has already lost more than 200 site fights, faces an even more-intensified resistance to its efforts to locate new stores as it increasingly seeks to enter markets in more urban areas. In April, voters in the largely African-American and Latino working class town of Inglewood, CA rejected a referendum that would have allowed Wal-Mart to open a Supercenter without being subject to normal municipal reviews.
But while on a bit of a public relations defensive, the company remains the colossus of U.S. and increasingly global retailing. It registers more than a quarter trillion dollars in sales. Its revenues account for 2 percent of U.S. Gross Domestic Product.
The company takes in more than one in five dollars spent nationally on food sales, and market researcher Retail Forward predicts Wal-Mart will control more than a third of food store industry sales, as well as a quarter of the drug store industry, by 2007. Wal-Mart is the largest jewelry seller in the United States, "despite the fact that the prime target market for jewelry high-income women from 25 to 54 years are the least likely of all consumers to shop for jewelry in discount channels," as Unity Marketing notes. Wal-Mart is the largest outlet for sales of CDs, videos and DVDs. And on and on.
The company's business model has relied on new innovations in inventory management, focusing on ignored markets (low-income shoppers in rural areas though this is now changing), and squeezing suppliers to lower their margins. But it has also relied centrally on under-compensating employees and externalizing costs on to society.
A February 2004 report issued by Representative George Miller, D-CA, encapsulated the ways that Wal-Mart squeezes and cheats its employees, among them: blocking union organizing efforts, paying employees an average $8.23 an hour (as compared to more than $10 for an average supermarket worker), allegedly extracting off-the-clock work, and providing inadequate and unaffordable healthcare packages for employees.
Miller's report's innovation was in documenting how Wal-Mart's low wages and inadequate benefits not only hurt workers directly but also impose costs on taxpayers. The report estimated that one 200-person Wal-Mart store may result in a cost to federal taxpayers of $420,750 per year about $2,103 per employee. These public costs include:
$36,000 a year for free and reduced lunches for just 50 qualifying Wal-Mart families.
$42,000 a year for Section 8 housing assistance, assuming 3 percent of the store employees qualify for such assistance, at $6,700 per family.
$125,000 a year for federal tax credits and deductions for low-income families, assuming 50 employees are heads of household with a child and 50 are married with two children.
$100,000 a year for the additional Title I [educational] expenses, assuming 50 Wal-Mart families qualify with an average of two children.
$108,000 a year for the additional federal healthcare costs of moving into state children's health insurance programs (S-CHIP), assuming 30 employees with an average of two children qualify.
"There's no question that Wal-Mart imposes a huge, often hidden, cost on its workers, our communities and U.S. taxpayers," Miller said. "And Wal-Mart is in the driver's seat in the global race to the bottom, suppressing wage levels, workplace protections and labor laws."
Wal-Mart's abuses are giving rise to countervailing efforts, but it is an open question whether the company has amassed such power that it will be able to defeat such initiatives.
In California, in November, the company was able to stave off by a 51-to 49 percent margin a proposition that would have required every large and medium employer in the state to provide decent healthcare coverage for their workers, with the employer contribution set at a minimum of 80 percent of costs.
Wal-Mart dumped a half million dollars into the anti-Proposition 72 campaign just a week before the vote.
"As one of California's leading employers, we care about the health of our 60,000 employees here," said Wal-Mart spokesperson Cynthia Lin, in celebrating the defeat of Proposition 72. "That's why we provide our employees with affordable, quality health care coverage."
"Prop. 72 was never about Wal-Mart," she claimed. "It was about allowing businesses to operate without unreasonable government mandates, it was about the survival of small businesses and it was about consumer choice in healthcare benefits."
The biggest immediate challenge facing Wal-Mart is the class action lawsuit filed by its women workers. The women allege that Wal-Mart pays female workers less than men, promotes men faster than women and men above more competent women, and fosters a hostile work environment. A federal judge ruled in June that the case could proceed as a class action.
"We strongly disagree with his decision and will seek an appeal," says company spokesperson Mona Williams. "While we cannot comment on the specifics of the litigation, we can say we continue to evaluate our employment practices. For example, earlier this month Wal-Mart announced a new job classification and pay structure for hourly associates. This new pay plan was developed with the assistance of third party consultants and is designed to ensure internal equity and external competitiveness."
Liza Featherstone, who has chronicled the claims of the women employees in her book Selling Women Short, says women workers report "a pattern of arbitrary, very subjective decision-making by management." They report business meetings being held at Hooter's or strip clubs.
The contradiction of a self-righteously moral company which won't sell racy magazines or CDs with parental advisory labels permitting such behavior is a reflection of women employees' powerlessness. "Unlike its female workforce," Featherstone writes, "the women who shop at Wal-Mart can't be ignored, and many of them have conservative values."
But while Wal-Mart is willing to bend to consumer demand on marginal issues like covering over the headlines on Cosmopolitan magazine, it is not so flexible on respect for worker rights. Nor is there any sign of a consumer rebellion on anything like the scale necessary to make the company revisit its employment policies.
Russell Mokhiber and Robert Weissman are co-authors of On the Rampage: Corporate Predators and the Destruction of Democracy (Monroe, Maine: Common Courage Press). Robert Weissman is general counsel for Essential Inventions, a nonprofit mentioned in the Abbott profile.
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