BACK in November 2006, Eduardo Castro-Wright, who was then
the US president of Walmart, dispatched the company's jet to pick up marketing
head Julie Roehm in Chicago.
She arrived late, in an ice storm, but made it in to the
Walmart headquarters, where Castro-Wright started grilling her on the agency
review process: how she had picked DraftFCB as the agency which would take over
Walmart’s $1bn-per-year account.
Roehm had interviewed some 30 agencies before settling on
Draft; the questions centred on whether she had allowed any of those agencies
to pay for dinner while she was talking to them, and whether she had accepted a
lift in the car of any of the agencies' CEOs.
Four days later, Roehm was fired for violations of Walmart's
extremely strict ethics policy. As Walmart expert Charles Fishman explains:
"Walmart had a kind of unbending, almost obsessive adherence to even the
trivialist elements of an ethical code.
"They're a brutal competitor and everybody acknowledged
that, but Walmart was also the company that wouldn't take a dinner from you,
that wouldn't let you provide a soda if you went to meet them to talk about
business, where they wouldn't join trade associations for many, many years
because they didn't want to pay dues and have a conflict of interest."
We now know, of course, that Castro-Wright was the man at
the very centre of the Walmex corruption scandal. Which raises the obvious
question: did the corruption at Walmex appear despite Walmart's ultra-strict
ethics code? Or did it, paradoxically, appear because the code was so strict?
The point here is that Walmart left, essentially, nothing to
its employees' discretion. It didn't trust them to do the right thing: it
codified everything in a set of rules, and then told them to follow those
rules.
And you can see how that might have resulted in a kind of
Calvinist scale-blindness, where accepting a soda when going to meet a vendor
is exactly as bad as greasing Mexican wheels to the tune of $24m.
On top of that, the most senior executives at Walmart had a
lot of discretion when it came to enforcing the rules. For someone like Roehm,
who never fit in to the corporate culture, it was easy to find an infraction
and fire her.
On the other hand, when it came to allegations touching on
Castro-Wright himself, it was similarly easy to hand the investigation off to
one of his loyal subordinates, who did what he was expected to do and buried
it.
Accepting a soda from a vendor, of course, is not illegal;
engaging in sham investigations, on the other hand, is. Or can be, at any rate.
At a grown-up organisation, the Mexican allegations would have been a much
darker shade of grey than anything that Roehm is alleged to have done, and
would therefore have been taken much more seriously.
But executives at Walmart, used to seeing the world in black
and white, were unable to distinguish between the merely unethical and the
downright illegal. As a result, there could be criminal charges for Walmart
executives.
Call it the ultimate unintended consequence of a strict
ethics policy.
- Reuters
* Felix Salmon is the finance blogger at Reuters.