United
States Securities and Exchange Commission
Washington, D.C. 20549
NOTICE
OF EXEMPT SOLICITATION
Pursuant to Rule 14a-103
Name of the
Registrant: Walmart Inc.
Name of persons
relying on exemption: National Legal and Policy Center
Address of persons
relying on exemption: 107 Park Washington Court, Falls Church, VA
22046
Written materials
are submitted pursuant to Rule 14a-6(g) (1) promulgated under the
Securities Exchange Act of 1934. Submission is not required of this
filer under the terms of the Rule but is made
voluntarily in the interest of public disclosure
and consideration of these important issues.
PROXY
MEMORANDUM
TO:
Shareholders of Walmart Inc.
RE: The case
for voting YES on Shareholder Proposal No. 11 on the 2023
Proxy Ballot (“Communist China Risk Audit”).
This is not a
solicitation of authority to vote your proxy. Please DO NOT send us
your proxy card; National Legal and Policy Center is not able to
vote your proxies, nor does this communication contemplate such an
event. NLPC urges shareholders to vote for Proposal No.
11 following the instructions provided on management's
proxy mailing.
The following
information should not be construed as investment advice.
Photo credits
follow at the end of the report.
National Legal and
Policy Center (“NLPC”) urges shareholders to vote
YES on Proposal No. 11 on the 2023 proxy ballot of Walmart
Inc. (“Walmart” or the “Company”). The Resolved clause states:
Shareholders request that, beginning in 2023, Walmart Inc. report
annually to shareholders on the nature and extent to which
corporate operations depend on, and are vulnerable to, Communist
China, which is a serial human rights violator, a geopolitical
threat, and an
1
adversary to the United States. The report should exclude
confidential business information but provide shareholders with a
sense of the Company's reliance on activities conducted within, and
under control of, the Communist Chinese government.
This report is
necessary because:
1)Doing
business with China presents a unique, substantial, and pressing
risk that warrants dedicated reporting.
2)The
potential damage from Walmart’s reliance on China affects every
aspect of its business. These China-specific risks should be
assessed and reported more comprehensively.
3)Existing
disclosures are fragmented, incomplete, and vague. As a result,
these disclosures are inadequate to assess business risks related
to China.
Doing business
with China presents a unique, substantial, and pressing risk that
warrants dedicated reporting.
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China poses a unique
challenge gives its size, strength, and track record of
constricting the freedom of its people and abusing their human
rights.
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Against this
backdrop, it’s unrealistic and irresponsible for Walmart to contend
that doing business with China is comparable to other business
risks disclosed in existing reports and filings – especially
given the company’s dependence on China for revenue and supply.
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To summarize the many
challenges posed by China:
-China
is the second-largest country in the world by nominal
GDP,1 and the largest
country in the world by GDP in purchasing power parity
(PPP).2
-The
nation of China is ruled by the Chinese Communist Party (CCP),
whose stated intention is to “become a global leader in terms of
composite national strength and international
influence.”3
1 “GDP: All
countries and economies,” The World Bank, accessed April 30, 2023.
See
https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?most_recent_value_desc=true&view=map.
2 “Country
comparisons – real GDP,” Central Intelligence Agency: The
World Factbook, accessed April 30, 2023. See
https://www.cia.gov/the-world-factbook/field/real-gdp-purchasing-power-parity/country-comparison.
3 Jinping, Xi.
“Full text of Xi Jinping’s report at 19th CPC National
Congress,” China Daily, November 4, 2017. See
http://www.chinadaily.com.cn/china/19thcpcnationalcongress/2017-11/04/content_34115212.htm.
2
What makes China’s
size and emerging strength particularly troubling is that it is
ruled by an authoritarian regime that abuses its own people and
antagonizes its adversaries – including the United States.
This includes:
Human trafficking
and oppression of ethnic minorities: The U.S. State
Department’s 2022 Trafficking in Persons Report declared China a
state sponsor of human trafficking, noting:
There was a government policy or pattern of widespread forced
labor, including through the continued mass arbitrary detention of
Uyghurs, ethnic Kazakhs, ethnic Kyrgyz, and members of other Turkic
and/or Muslim minority groups in the Xinjiang Uyghur Autonomous
Region (Xinjiang) under the guise of ‘vocational training’ and
‘deradicalization.’ Authorities continued to implement these
policies in other provinces; targeted other religious minorities
under their auspices; and sought the coerced repatriation and
internment of religious and ethnic minorities living abroad through
the use of surveillance, harassment, threats against them and their
family members, and extradition requests.4 5
Since many companies
in China are ultimately under the control of the CCP, they are
– voluntarily or involuntarily – complicit in this human
trafficking and oppression.
Cyber warfare:
The U.S. Cybersecurity and Infrastructure Security Agency states
that the CCP “engages in malicious cyber activities to pursue its
national interests. Malicious cyber activities attributed to the
Chinese government targeted, and continue to target, a variety of
industries and organizations in the United States.”6
Escalating
military threats: According to the U.S. Department of Defense,
China now has the largest number of naval vessels of any military
in the world; 975,000 active-duty military personnel, long-range
precision strike systems, and hypersonic weapons. The 2022 China
Military Power Report states that China’s “evolving capabilities
and concepts continue to strengthen the PLA’s [People’s Liberation
Army] ability to ‘fight and win wars’ against a ‘strong enemy’ (a
euphemism likely for the United States), counter an intervention by
a third party in a conflict along the PRC’s periphery, and project
power globally.”7
China has recently
demonstrated its intention to project power by repeatedly
conducting military operations around Taiwan8 and sending large
numbers of fighter jets into Taiwan’s Air Defense
4 “Trafficking in
persons report: July 2022,” United States Department of State, July
2022. See
https://www.state.gov/wp-content/uploads/2022/04/337308-2022-TIP-REPORT-inaccessible.pdf.
5 “Against their
will: the situation in Xinjiang,” U.S. Department of Labor,
accessed April 30, 2023. See
https://www.dol.gov/agencies/ilab/against-their-will-the-situation-in-xinjiang.
6 “China cyber
threat overview and advisories,” Cybersecurity & Infrastructure
Security Agency, accessed April 30, 2023. See
https://www.cisa.gov/uscert/china.
7 “Military and
security developments involving the People’s Republic of China:
2022,” U.S. Department of Defense, October 26, 2022. See
https://media.defense.gov/2022/Nov/29/2003122279/-1/-1/1/2022-MILITARY-AND-SECURITY-DEVELOPMENTS-INVOLVING-THE-PEOPLES-REPUBLIC-OF-CHINA.PDF.
8 Varandani, Suman.
“Taiwan intercepts 9 PLA military aircraft, 4 naval ships as
tensions mount with China,” International Business Times, January
1, 2023. See
https://www.ibtimes.com/taiwan-intercepts-9-pla-military-aircraft-4-naval-ships-tensions-mount-china-3660368.
3
Zone.9 In regards to
Taiwan, China’s ruler Xi Jinping has previously said, “The
historical task of the complete reunification of the motherland
must be fulfilled, and will definitely be fulfilled.”10 China is
embarking on efforts to fully modernize its military by 2027, which
according to the U.S. Department of Defense, “could give the PLA
capabilities to be a more credible military tool for the Chinese
Communist Party to wield as it pursues Taiwan
unification.”11
In addition to the
above issues, China presents other challenges, such as:
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The CCP’s crackdown
on freedoms in Hong Kong.12
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The CCP’s “social
credit” system, which monitors and punishes citizens – without
due process – for certain behaviors, leading to potential
blacklisting from travel, buying property, or taking out
loans.13
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The CCP’s monitoring
and control of the Internet in China, which prevents citizens from
having open access to uncensored information.14
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Inhumane lockdowns of
entire cities due to the CCP’s regressive Zero
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COVID
policy.15
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The CCP’s abusive
trade practices16 meant to
dominate key U.S. industries.17
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9 Cheung, Jozuka,
& Yeung. “China carries out military exercises near Taiwan and
Japan, sending 47 aircraft across Taiwan Strait in ‘strike drill,’”
CNN, December 26, 2022. See
https://www.cnn.com/2022/12/25/asia/taiwan-china-aircraft-incursions-intl-hnk/index.html.
10 “China’s Xi
vows ‘reunification’ with Taiwan, but holds off threatening force,”
CNBC, October 8, 2021. See
https://www.cnbc.com/2021/10/09/china-president-xi-jinping-on-reunification-with-taiwan.html.
11 “Military and
security developments involving the People’s Republic of China:
2022,” U.S. Department of Defense, October 26, 2022. See
https://media.defense.gov/2022/Nov/29/2003122279/-1/-1/1/2022-MILITARY-AND-SECURITY-DEVELOPMENTS-INVOLVING-THE-PEOPLES-REPUBLIC-OF-CHINA.PDF.
12 Maizland,
Lindsay. “Hong Kong’s freedoms: what China promised and how it’s
cracking down,” Council on Foreign Relations, May 19, 2022. See
https://www.cfr.org/backgrounder/hong-kong-freedoms-democracy-protests-china-crackdown.
13 Krolik, Aaron
and Mozur, Paul. “A surveillance net blankets China’s cities,
giving police vast powers,” New York Times, December 17,
2019. See
https://www.nytimes.com/2019/12/17/technology/china-surveillance.html.
14 Zhou, Quijia.
“Building the (fire) wall: internet censorship in the United States
and China,” Harvard International Review, December 28, 2020.
See https://hir.harvard.edu/building-the-fire-wall/.
15 Deng, Shawn and
Gan, Nectar. “Chinese cities rush to lockdown in show of loyalty to
Xi’s ‘zero-Covid’ strategy,” CNN, September 5, 2022. See
https://www.cnn.com/2022/09/05/china/china-covid-lockdown-74-cities-intl-hnk/index.html.
16 Blackburn, et.
“Letter to secretaries Blinken and Yellen regarding China trips,”
The United States Senate, January 31, 2023. See
https://www.rubio.senate.gov/public/_cache/files/a312bb80-3195-4837-ab5d-b0db1c63a670/AFBFFB4AC8C6D94F89D83A1F55095554.01.31.22-smr-letter-to-secretaries-blinken-and-yellen-re-china-trips.pdf.
17 “Commerce finds
dumping and countervailable subsidization of imports of steel racks
from China,” International Trade Administration, July 18, 2019. See
https://enforcement.trade.gov/download/factsheets/factsheet-prc-steel-racks-ad-cvd-final-071819.pdf.
4
-The
CCP’s wrongful detainment of U.S. citizens.18
-The
CCP’s direct contribution to the fentanyl crisis that is destroying
U.S. communities.19
It’s obvious that
doing business with such an oppressive and hostile regime has
significant risks that must be accounted for and mitigated. Any
number of diplomatic, economic, or military events could trigger
Walmart to be cut off from both revenue and supply from China.
Shareholders deserve
a report focused specifically on the nature and extent to which
corporate operations depend on and are vulnerable to China.
Existing reports and
filings are not transparent or specific enough to address these
concerns.
The potential
damage from Walmart’s reliance on China affects every aspect of its
business. These China-specific risks should be assessed and
reported more comprehensively.
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While Walmart
generically discusses business risks in its mandatory regulatory
filings, the risks specific to China should be addressed in more
detail. The magnitude of its risk in China is not comparable to the
general business risks disclosed by Walmart, many of which are
indistinguishable from the disclosures made by other public
companies. China-specific risks are present across many parts of
Walmart’s business, including:
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Revenue
risk
-China
is Walmart’s fourth-largest market, behind the United States,
Central America, and Canada.20
-Walmart
has 365 stores in China, representing 6.9 percent of its
international locations and 22.1 percent of its international
square footage.21
18 Kine, Phelim.
“Families push Biden for release of jailed Americans in China,”
Politico, June 19, 2022. See
https://www.politico.com/news/2022/06/19/families-biden-administration-americans-china-00040706.
19 Belmonte,
Adriana. “How China flooded the U.S. with lethal fentanyl, fueling
the opioid crisis,” Yahoo Finance, February 15, 2022. See
https://finance.yahoo.com/news/chinas-role-in-the-us-fentanyl-epidemic-152338423.html.
20 “Walmart, Inc.
10-K,” United States Securities and Exchange Commission, April 25,
2023. See
https://corporate.Walmarts.com/corpmcd/investors/financial-information.html#accordion-c3f9e31fc6-item-c90fade14a.
21 Ibid.
5
-The
Chinese market was a key factor in Walmart’s 2.1 percent growth in
net sales in the Company’s international segment.22
-Russia’s
invasion of Ukraine in early 2022 provides recent evidence of how
damaging a regional conflict can be. The loss of human life and the
need for humanitarian assistance are, of course, the foremost
concerns. However, these events also provide recent evidence of how
quickly a regional conflict can shut off revenue in an affected
region.
-Walmart
heavily relies on its Chinese distribution and fulfillment
facilities to fulfill e-commerce in the region. Walmart’s
e-commerce group, which has partnered with China’s JD.com, grew 70
percent during 2022 and represents 48 percent of Walmart’s net
sales in China.23
-Walmart’s
reliance on China and the rest of Asia Pacific represents a
material percentage of total revenue and locations. Walmart’s
vulnerability to disruption from China’s stated goal of
“reunification” with Taiwan requires immediate and transparent
analysis.
-The
effects of regional conflict stemming from China’s hostility toward
Taiwan would likely have ripple effects on the global economy,
further damaging Walmart’s business.
-According
to a Federal Reserve report on the effects of war in Ukraine, “the
increased geopolitical risks induced by the Russian invasion of
Ukraine will weigh adversely on global economic conditions
throughout 2022. Such effects are estimated in our model to reduce
GDP and boost inflation significantly, exacerbating the policy
trade-offs facing central banks around the world.”24
-It’s
likely that an invasion of Taiwan would cause even more damage to
the global economy, especially given the world’s reliance on
semiconductors from Taiwan.25
Operational
risk
Walmart has invested
a considerable amount in its Chinese infrastructure. Thus,
potential disruptions due to political, economic, regulatory, or
health issues could negatively impact Walmart’s investments in the
region:
-Walmart
relies on China for growth opportunities, with total revenue
growing in China by 13.3 percent relative to growth of 7.3 percent
for the rest of the Company.26
-Walmart
has made significant investments in its Chinese supply chain, with
the Company announcing in 2019 that it intends to invest $1.2
billion in logistics and distribution centers over the next 10-20
years.27
22 Zhuoqiong,
Wang. “Walmart China’s Q4 points to retail health,” China Daily,
February 28, 2023. See
https://www.chinadaily.com.cn/a/202302/28/WS63fd4ab0a31057c47ebb129a.html.
23 Ibid.
24 Caldara, et.
al. “The effect of the war in Ukraine on global activity and
inflation,” Board of Governors of the Federal Reserve System, May
27, 2022. See
https://www.federalreserve.gov/econres/notes/feds-notes/the-effect-of-the-war-in-ukraine-on-global-activity-and-inflation-20220527.html.
25 Nee Lee, Yen.
“2 charts show how much the world depends on Taiwan for
semiconductors,” CNBC, March 15, 2021. See
https://www.cnbc.com/2021/03/16/2-charts-show-how-much-the-world-depends-on-taiwan-for-semiconductors.html.
26 Zhuoqiong,
Wang. “Walmart China’s Q4 points to retail health,” China Daily,
February 28, 2023. See
https://www.chinadaily.com.cn/a/202302/28/WS63fd4ab0a31057c47ebb129a.html.
27 Berthiaume,
Dan. “Walmart dramatically increases supply chain commitment in
China,” China Store Age, July 7, 2019. See
https://chainstoreage.com/operations/walmart-dramatically-increases-supply-chain-commitment-in-china.
6
-The
Chinese government has a history of seizing the assets of
corporations and forcing them to restructure their debt
obligations, as was the case with Anbang Insurance
Group,28 HNA
Group,29 CEFC China
Energy,30 and
others.
-Nearly
all of Walmart’s retail and wholesale facilities in China are
leased, with many distribution and fulfillment locations operating
under lease agreements. This introduces the risk that Walmart will
be unable to re-sign leases due to the Chinese government’s control
over all land in China.31
-The
Chinese government has a history of intimidating companies and
manipulating them, as seen with Apple32,
Marriott33, Ant
Group34,
Alibaba35, and others. As
a company with significant operations in China, Walmart could also
face comparable intimidation from the Chinese government. In fact,
the Company already has.
During the end of 2021, Walmart stopped stocking all products
produced from the Xinjiang region of China upon reports that forced
labor and human rights violations were occurring in the area. The
Chinese government said this was a sign of “stupidity” and
“short-sightedness” on Walmart’s part and that the Company will
“surely have its own bad consequences.”36 China’s threats
against corporations are frequently backed up by action. This
should give investors cause for concern.
-A
geopolitical situation comparable to the Russian and Ukrainian war
could put pressure on Walmart to cease operations in the
region.37
28 Miller, Matthew
and Engen, Tham. “China seizes control of Anbang Insurance as
chairman prosecuted,” Reuters, February 22, 2018. See
https://www.reuters.com/article/us-china-anbang-regulation/china-seizes-control-of-anbang-insurance-as-chairman-prosecuted-idUSKCN1G7076.
29 “China plans to
take over HNA Group and sell its airline assets as coronavirus hits
business,” CNBC, February 19, 2020. See
https://www.cnbc.com/2020/02/19/china-to-take-over-hna-group-and-sell-its-airline-assets-report-says.html.
30 Chang, Alfred
and Lau, Dominic. “CEFC China Energy seized by Shanghai Government,
SCMP reports,” Bloomberg, March 2, 2018. See
https://www.bloomberg.com/news/articles/2018-03-02/cefc-china-energy-seized-by-shanghai-government-scmp-reports#xj4y7vzkg.
31 “Walmart, Inc.
10-K,” United States Securities and Exchange Commission, April 25,
2023. See
https://corporate.Walmarts.com/corpmcd/investors/financial-information.html#accordion-c3f9e31fc6-item-c90fade14a.
32 “Apple is
censoring its App Store for China,” Tech Transparency Project,
December 23, 2020. See
https://www.techtransparencyproject.org/articles/apple-censoring-its-app-store-china.
33 “Marriott’s
broken China,” Wall Street Journal, November 19, 2021. See
https://www.wsj.com/articles/marriotts-broken-china-hotel-prague-uighurs-11637364746.
34 Wei, Lingling.
“China blocked Jack Ma’s Ant IPO after investigation revealed
likely beneficiaries,” Wall Street Journal, February 16,
2021. See
https://www.wsj.com/articles/china-blocked-jack-mas-ant-ipo-after-an-investigation-revealed-who-stood-to-gain-11613491292.
35 “China’s
communist government employing intimidating tactics against big
businesses, Alibaba founder Jack Ma staying in Japan: report,”
OpIndia, December 1, 2022. See
https://www.opindia.com/2022/12/alibaba-founder-jack-ma-shifts-to-japan-due-to-intimidating-tactics-of-ccp/.
36 Case, Brendan.
“China accuses Walmart of ‘stupidity’ over missing Xinjiang items,”
Aljazeera, December 31, 2021. See
https://www.aljazeera.com/economy/2021/12/31/bbchinaaccuses-walmart-of-stupidity-over-missing-xinjiang-items.
37 Moon, Brad.
“140 companies that have pulled out of Russia,” Kiplinger’s,
March 7, 2022. See
https://www.kiplinger.com/investing/stocks/604317/companies-pulled-out-of-russia.
7
Reputational
and legal risk
Walmart has an
estimated brand value of nearly $113.8B, making it one of its most
valuable and important assets.38 There is a
clear correlation between brand value and firm valuation.
Reputational risks can damage a brand’s value, and thus the
valuation of a firm.
Reputational risks
from doing business with China are relevant to shareholders,
especially since the CCP’s actions frequently conflict with
Walmart’s stated values and policies.
Privacy
-Walmart
has stated that it “believe(s) privacy is more than an issue of
compliance and endeavor to manage personal information in
accordance with our core value of respect for the
individual.”39
-This
statement conflicts with the reality that Walmart derives a
significant portion of its revenue from a country that runs a
massive surveillance program on over one billion
citizens.40
-The
CCP tracks its citizens using facial recognition41 and
monitoring of social media posts.42 They
punish citizens using a “social credit” system that can cast out
citizens from access to jobs, housing, and travel with no due
process.43 They
monitor movements and suppress dissent using QR codes.44
-While
Walmart can’t be blamed for the CCP’s surveillance of consumer
devices, it can be held accountable for whether its technology is
empowering customers or the CCP.
Human rights and
free expression
Walmart’s website
states, “We respect human rights and seek to use our scale,
capabilities and influence to help people and communities improve
their lives, with a focus on our salient human rights
issues.”45
38 “Walmart’s
brand value worldwide from 2016 to 2023,” Statista, accessed March
11, 2023. See
https://www.statista.com/statistics/980007/brand-value-of-walmart-worldwide/.
39 “Privacy &
Security,” Walmart, Inc., Accessed March 11, 2023. See
https://corporate.walmart.com/privacy-security.
40 Ka, You.
“Inside China’s surveillance state, built on high tech and a
billion spies,” World Crunch, November 1, 2022. See
https://worldcrunch.com/culture-society/china-surveillance-cameras.
41 Ma, Alexandra.
“China is building a vast surveillance network – here are 10
ways it could be feeding its creepy ‘social credit system,’”
Insider, April 29, 2018. See
https://www.businessinsider.com/how-china-is-watching-its-citizens-in-a-modern-surveillance-state-2018-4?op=1.
42 Krolik, Aaron
and Mozur, Paul. “A surveillance net blankets China’s cities,
giving police vast powers,” New York Times, December 17,
2019. See
https://www.nytimes.com/2019/12/17/technology/china-surveillance.html.
43 Kobie, Nicole.
“The complicated truth about China’s social credit system,”
Wired, July 6, 2018. See
https://www.wired.co.uk/article/china-social-credit-system-explained.
44 Gan, Nectar.
“China’s bank run victims planned to protest. Then their Covid
health codes turned red,” CNN, June 15, 2022. See
https://www.cnn.com/2022/06/15/china/china-zhengzhou-bank-fraud-health-code-protest-intl-hnk/index.html.
45 “ESG: Human
Rights,” Walmart, April 20, 2023. See
https://corporate.walmart.com/esgreport/governance/human-rights.
8
This statement
conflicts with past credible allegations against Walmart:
-Walmart
has been sued several times over gender and racial discrimination.
Walmart was the defendant of the largest employment class-action
lawsuit in history in the Dukes v. Walmart case, in which a
group representing 1.5 million current and former female employees
filed suit against the Company in 2001, alleging that Walmart
discriminated against them in terms of their salary, bonus, and
training.46 Walmart was
sued in 2019 by a group of nearly 100 workers claiming sexual
discrimination prevented them from gaining equal pay and equal
opportunities.47 Walmart was
sued in 2020 by the U.S. Equal Employment Opportunity Commission
(“EEOC”) due to Walmart’s physical ability testing for grocery
distribution center order fillers, which the EEOC said
discriminated against female applicants. This resulted in a $20
million fine for Walmart and a requirement that Walmart “cease all
physical ability testing currently being used for the purposes of
hiring grocery distribution center order fillers.”48 Walmart was
sued again by the EEOC in 2022 when it provided an unsanitary
lactation space for an employee based on her race and failed to
promote her due to “stereotypes about mothers with small
children;”49 a similar
sexual discrimination lawsuit based on pregnancy-related
discrimination which represented 4,000 women resulted in a $14
million settlement in 2020.50
-Walmart
was included in an investigative article claiming that many
corporations have exploited migrant children by employing them in
factories, distribution centers, and stores throughout the United
States.51 The article
states that “migrant children, who have been coming into the United
States without their parents in record numbers, are ending up in
some of the most punishing jobs in the country… This shadow work
force extends across industries in every state, flouting child
labor laws that have been in place for nearly a
century.”52
A company’s brand is
a function of customer trust. When a company operates in direct
violation of its stated values and policies, that trust can be
broken and brand value damaged, in turn lowering the company’s
market capitalization. Shareholders must have the ability to
determine
46 “Walmart
lawsuit (re: gender discrimination in USA),” Business & Human
Rights Resource Centre, January 1, 2001. See
https://www.business-humanrights.org/en/latest-news/walmart-lawsuit-re-gender-discrimination-in-usa/.
47 Sainato,
Michael. “Walmart facing gender discrimination lawsuits from female
employees,” The Guardian, February 18, 2019. See
https://www.theguardian.com/us-news/2019/feb/18/walmart-gender-discrimination-supreme-court.
48 “Walmart, Inc.
to pay $20 million to settle EEOC nationwide hiring discrimination
case,” U.S. Equal Employment Opportunity Commission, September 10,
2020. See
https://www.eeoc.gov/newsroom/walmart-inc-pay-20-million-settle-eeoc-nationwide-hiring-discrimination-case.
49 “EEOC sues
Walmart for gender and race discrimination,” U.S. Equal Employment
Opportunity Commission, February 11, 2022. See
https://www.eeoc.gov/newsroom/eeoc-sues-walmart-gender-and-race-discrimination.
50 Schmidt,
Samantha. “Judge approves $14 million settlement in Walmart
pregnancy discrimination case,” Washington Post, April 29,
2020. See
https://www.washingtonpost.com/dc-md-va/2020/04/29/walmart-pregnant-workers-discrimination-settlement/.
51 Dreier, Hannah.
“Alone and exploited, migrant children work brutal jobs across the
U.S.,” New York Times, February 25, 2023. See
https://www.nytimes.com/2023/02/25/us/unaccompanied-migrant-child-workers-exploitation.html?smid=nytcore-ios-share&referringSource=articleShare.
52 Ibid.
9
how Walmart is
specifically addressing the reputational and legal risks related to
doing business with China.
Existing
disclosures are fragmented, incomplete, and vague. As a result,
these disclosures are inadequate to assess business risks related
to China.
As
discussed in the “Human Rights” section of its webpage, Walmart is
“guided by” the United Nations Guiding Principles on Business and
Human Rights.53 That document
states,
“Because the risk of gross human rights abuses is heightened in
conflict-affected areas, States should help ensure that business
enterprises operating in those contexts are not involved with such
abuses. In order to identify, prevent, mitigate, and account for
how they address their adverse human rights impacts, business
enterprises should carry out human rights due diligence.
Assessing actual and potential human rights impacts, integrating
and acting upon findings, tracking responses, and communicating how
impacts are addressed… In order to account for how they address
their human rights impacts, business enterprises should be prepared
to communicate this externally, particularly when concerns are
raised by or on behalf of affected stakeholders.”54
We
agree with the aforementioned statements and would argue that
Walmart does not currently adhere to them.
-Walmart
does not provide a comprehensive breakout of its operations in
China, with information provided only detailing the number of
stores open and several generic risk disclosures for the
country.55 Walmart fails
to detail critical information, such as its Chinese supply chain,
revenue, and infrastructure.
-SEC-mandated
disclosures of material risk do not address Walmart’s initiatives
to mitigate those risks. According to SEC’s Division of
Enforcement, “It is critical that public companies accurately
disclose material business risks and timely disclose and account
for loss contingencies that can materially affect their bottom
line." 56
China is a clear
driver of Walmart’s business performance, making the Company’s
reliance on the country a key risk, as there are a number of
factors that could harm the company. The United Nations calls on
companies to “provide information that is sufficient to evaluate
the adequacy of an enterprise’s response to the particular human
rights impact involved.” If the Company is being “guided” by this
principle and is already providing “regular and transparent
public
53 “ESG: Human
Rights,” Walmart, April 20, 2023. See
https://corporate.walmart.com/esgreport/governance/human-rights.
54 “Guiding
principles on business and human rights,” United Nations, June 16,
2011. See
https://www.ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusinesshr_en.pdf.
55 “Walmart, Inc.
10-K,” United States Securities and Exchange Commission, April 25,
2023. See
https://corporate.Walmarts.com/corpmcd/investors/financial-information.html#accordion-c3f9e31fc6-item-c90fade14a.
56 “Mylan to pay
$30 million for disclosure and accounting failure relating to
EpiPen,” U.S. Securities and Exchange Commission, April 19, 2019.
See https://www.sec.gov/news/press-release/2019-194.
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reporting on key
risks facing the company,” then a report on the topics discussed
should be easy to deliver and provide investors with meaningful
insights.57
Conclusion
Doing
business in and with China poses unique risks for Walmart,
especially in light of the company’s reliance on China for revenue
and future growth. While Walmart insists that existing disclosures
and voluntary reports account for these risks, that is not the
case. These disclosures and reports are vague and do not address
risks specific to doing business with China. The information is
scattered among various reports, and meaningful information about
Walmart’s assessment and response to China-related risks is
missing, leaving shareholders in the dark as to the extent and
nature of this risk.
As the
United Nations Guiding Principles on Business and Human Rights
says, companies should be “showing involved communication,
providing a measure of transparency and accountability to
individuals or groups who may be impacted and to other relevant
stakeholders, including investors.”58 We believe this
is a reasonable standard to which to hold Walmart.
Having carefully considered these risks, we urge you to vote
FOR Shareholder Proposal No. 11 on Walmart Inc.’s 2023
Proxy, requesting a report on the nature and extent to which
corporate operations are dependent on, and vulnerable to, Communist
China.
Photo
credits:
Page 2
– Xi Jinping, UN Geneva/Creative Commons
Page 4 – COVID
testing in China/QuantFoto, Creative Commons
Page 5 – Walmart
Supercenter in Shenzhen City, China, dcmaster/Creative Commons
THE FOREGOING
INFORMATION MAY BE DISSEMINATED TO SHAREHOLDERS VIA TELEPHONE, U.S.
MAIL, E-MAIL, CERTAIN WEBSITES AND CERTAIN SOCIAL MEDIA VENUES, AND
SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE OR AS A SOLICITATION
OF AUTHORITY TO VOTE YOUR PROXY.
THE COST OF
DISSEMINATING THE FOREGOING INFORMATION TO SHAREHOLDERS IS BEING
BORNE ENTIRELY BY THE FILERS.
THE INFORMATION
CONTAINED HEREIN HAS BEEN PREPARED FROM SOURCES BELIEVED RELIABLE
BUT IS NOT GUARANTEED BY US AS TO ITS TIMELINESS OR ACCURACY, AND
IS NOT A COMPLETE SUMMARY OR STATEMENT OF ALL
57 “Walmart, Inc.
2023 Proxy Statement,” Walmart, Inc., April 20, 2023. See
https://s201.q4cdn.com/262069030/files/doc_financials/2023/ar/2023-proxy-statement.pdf.
58 “Guiding
principles on business and human rights,” United Nations, June 16,
2011. See
https://www.ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusinesshr_en.pdf.
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AVAILABLE DATA. THIS
PIECE IS FOR INFORMATIONAL PURPOSES AND SHOULD NOT BE CONSTRUED AS
A RESEARCH REPORT.
PROXY CARDS WILL
NOT BE ACCEPTED BY US. PLEASE DO NOT SEND YOUR PROXY TO US. TO VOTE
YOUR PROXY, PLEASE FOLLOW THE INSTRUCTIONS ON YOUR PROXY
CARD.
For questions
regarding Walmart Inc. – Proposal 11 – “Communist China
Risk Audit,” sponsored by National Legal and Policy Center, please
contact Paul Chesser, director of NLPC’s Corporate Integrity
Project, via email at pchesser@nlpc.org.
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