Even as Wal-Mart Stores Inc showed unusual openness to outsiders' complaints by taking steps including raising wages, it has been trying to slam the door on a shareholder proposal that could weaken the founding Walton family's power over its board.
The investors are pushing hard for changes in how the world's No. 1 retailer governs itself, seeking to install an independent chairman. Many also support a measure that would require wider disclosure of when it has "clawed back" compensation from executives linked to ethical missteps.
Crucial to the debate will be the stance of BlackRock Inc, Wal-Mart's No. 3 shareholder, which last year appeared to take the company to task for its response to a Mexican bribery scandal which has angered a number of shareholders. Wal-Mart, which says it cares about outside shareholders views, has met with BlackRock twice since last year.
The persistent investor gripes come as the retailer puts its best foot forward at this week's shareholders' meeting outside of Bentonville, Arkansas where it is based. Wal-Mart has brought in thousands of workers from around the world for a three-day, celebrity-studded affair that culminates in Friday's annual meeting.
"Wal-Mart shareowners have been pushing for a more independent and accountable board ever since the bribery-related allegations several years ago exposed serious board oversight failures," New York City Comptroller Scott Stringer, who oversees city pension funds with $160 billion in assets, said in a statement.
"The company will not succeed in restoring investor confidence in its business practices and compliance until it heeds the calls to overhaul its board," Stringer said.
The Comptroller's office was behind one of several derivative lawsuits filed by investors against Wal-Mart in 2012 related to the bribery allegations. That suit is ongoing.
Wal-Mart spokesman Randy Hargrove said the company takes governance seriously and has reached out to many of its largest shareholders to discuss its strategy and policies, and shared the insights of those meetings with the board.
"We'll continue to evaluate and act upon the recommendations that the board feels are in the best interest of all of our shareholders," he said.
This year the company will trumpet a move announced in February to invest $1 billion in wages and training as a sign of its willingness to listen to critics, who have long blasted the company for not paying a "living wage".
But Wal-Mart has sought to quash criticism from another quarter in the form of shareholders pushing to install an independent chairman. Family scion Rob Walton has served as chairman for 23 years.
Shareholders have made similar proposals in the last two years but Wal-Mart this year for the first time petitioned the Securities and Exchange Commission to exclude the proposal. The request was denied.
Wal-Mart believes its board structure is sound, Hargrove said. Its lead director is independent, as are 11 of 16 members, and it separates the roles of chairman and chief executive.
The rebel shareholders argue a chairman without ties to management or the founding family could help better address the bribery allegations and avoid similar occurrences elsewhere. The company has spent $612 million over the past three years on legal and related costs to cope with an investigation into the matter, which remains unresolved.
Because the Walton family owns 50.9 percent of the retailer's shares, outside shareholder proposals face daunting odds. But a significantly higher rate of support among non-Walton votes could prod independent board members to adopt reforms, some governance experts said.
BlackRock, which is the world's largest asset manager and is seen as a key swing vote, has slowly offered more detail about its voting practices.
Friday's meeting will be the first since a June 2014 governance report in which BlackRock said it had raised concerns "with a global retailer after allegations of bribery surfaced at the company" and that its requests for follow-up meetings had gone unanswered.
Wal-Mart's Hargrove said the company has met with BlackRock twice in the past year, which could help address its concerns.
BlackRock would not confirm that the report pertained to Wal-Mart or comment on its voting at Wal-Mart this year. But the descriptions in its report matched how its funds voted at the retailer, including support for the independent chairman proposal last year.
"It's one thing when you have pension funds and activist investors raising concerns about a company like Wal-Mart, but when you have BlackRock raising that concern that brings the debate right into the mainstream," said William Atwood, executive director of the Illinois State Board of Investment.
CLAWBACK
The top two proxy advisory firms, Institutional Shareholder Services and Glass Lewis, have recommended votes for the independent chairman proposal this year, as they did in the prior two years.
While the independent chairman proposal got just 15.4 percent of the overall vote last year, support among non-Walton shares, assuming all Walton shares were voted, was 40 percent, up from 35.6 percent in 2013.
Last June Wal-Mart named director Gregory Penner as vice chairman, a move viewed by many as setting him up to one day succeed his father-in-law Rob Walton, who is 70 years old, atop the board.
"The bottom line is this is a family firm and change is going to be very slow coming," said Ric Marshall, executive director at MSCI ESG Research.
The "clawback" proposal, which was also launched after the bribery allegations surfaced in 2012, got 38 percent of non-Walton votes, last year. Wal-Mart is recommending a vote against it, arguing that it already discloses enough on the issue.
"It's an area where the company has not been responsive to a very reasonable proposal," said Laura Jordan, assistant treasurer at the state of Connecticut. "It has the sense of digging in its heels."
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