Leadership

Wal-Mart vs. 1.5 Million Women: Can the Company's Reputation Be Saved?

By Ira Kalb

Updated on: May 30, 2011 / 11:59 PM EDT / MoneyWatch

Wal-Mart is once again faced with an attack on their corporate image - this time resulting from a sex discrimination law-suit originally filed by 7 women employees 10 years ago. Despite objections from Wal-Mart's attorneys, the Supreme Court has decided to hear the case, which now represents a class of roughly 1.5 million women that are past and present employees of the retail giant and its affiliate Sam's Club. The women are seeking back wages and punitive damages against Wal-Mart. They also want a change in its pay practices.

Even though most had logged more years with the company than their male counterparts, women earned less than men in every region of the country and nearly every job category. In the original lawsuit filed in 2001, the allegations made by the women include the following:

Women comprise roughly 70% of hourly employees, but less than one-third of store management.
Women managers earned $14,500 less than their male counterparts.
Women hourly workers earned $1,100 less than men.
Only one of its top 20 officers is a woman.

The women are suing as a bloc because they cannot afford to sue the company individually. Wal-Mart has been fighting them in the lower courts to prevent them from suing collectively. If the Supreme Court allows class action to proceed, it would be the largest job-discrimination case in US history estimated to be worth billions of dollars.

But what may be worth even more is Wal-Mart's image.

This is the latest blemish on the corporate image of Wal-Mart, the largest retailer in the world, which has a long record of complaints from various groups inside and outside the company. A few of the issues that have tarnished their image are listed below.

Vendors complain about squeezed gross margins. Says food-industry consultant Jeremy Diamond "Vendors who deal with Wal-Mart get beat up so much, at the end of the day, their profit isn't as much."

Employees objected to low wages, inadequate benefits, and poor treatment, including being locked inside Wal-Mart facilities overnight. In at least one case, an employee seriously injured on the job was unable to get prompt medical attention since nobody had a key to let medical personnel in the facility.

Government agencies have taken action. In 2008, a temporary worker was trampled to death when Black Friday crowds rushed the store as doors opened. OSHA fined Wal-Mart $7,000 because Wal-Mart failed to take action on warnings about the handling of such crowds in the previous 3 years.

Local communities have fought to keep Wal-Mart out of their neighborhoods because of the economic threat to local businesses and the adverse impact on the environment.

How to Respond to Assaults on the Corporate Image:

Here's what Wal-Mart did: In 2005, Wal-Mart set up a "rapid response" public relations team in Arkansas in what they call the War Room. They also hired former presidential advisers Michael Deaver (Ronald Reagan) and Leslie Dach (Bill Clinton), who tried to discredit an unflattering documentary, Wal-Mart: The High Cost of Low Price, directed by Robert Greenwald. While a good idea in principle, it still hasn't stopped the attacks on the company's reputation.

Wal-Mart's Challenge: To Tell the Other Side of the Story

Wal-Mart is, and has long been, about lower prices and a place where customers can buy much of what they need in one trip. They continue to be the largest retailer in the United States, and according to Interbrand, Wal-Mart is the top US retail brand three years in a row.

Whether they win or lose the lawsuit (many predict a win due to the corporation-friendly male majority on the Court), Wal-Mart needs to address the negative repercussions of being involved in the largest class-action lawsuit on record and the appearance they are discriminating against women.

Probably their best strategy is to come to a settlement with the women and address the disparity in pay. Anything else might give them a win in court, but a more costly loss with the public.

What do you think they should do?

Related:

Ira Kalb is president of Kalb & Associates, an international consulting and training firm, and professor of marketing at the Marshall School of Business at University of Southern California (USC). Follow him on Twitter.
image courtesy of flickr user, D'Arcy Norman