Sean Rocha

Why we still need newspapers

Two years ago, I said of the New York Times in-depth investigation of bribery by Walmart in Mexico that it was proof of why we need newspapers: the time and resources involved in breaking that story were beyond the capabilities of most online news sources and the risk involved in challenging one of the world’s largest corporations takes a fortitude not always in evidence within the newspaper industry but rarer still beyond it.

Now we can assess the fallout.  To recap what was revealed in that investigation you can look at my original post (it will open in a new window) but Walmart paid substantial bribes to circumvent building and zoning regulations in order to rapidly expand its big box stores throughout Mexico.  Since Walmart’s purchasing power and economies of scale mean it can crush smaller and more local retailers wherever it goes, the ripple effects of its expansion go far wider than just whether they got extra land for the parking lot.  But for Mexico you can read practically any developing country in which Walmart — or Carrefour, or any of the other big box retailers — operate, where it is quite likely similar corruption is at work.

The Times updates the story this way:

Thomas A. Mars, formerly the chief administrative officer for Walmart in the United States, stepped down. José Luis Rodríguezmacedo Rivera, once the general counsel at Walmart’s Mexican division, quietly left the company. And H. Lee Scott Jr., who was Walmart’s chief executive, will retire from the board this month.

These men belong to a list of executives from the uppermost reaches of Walmart’s management who held critical positions when corruption scandals engulfed the company’s international division. Come July, almost every person on that list will no longer be with the company — but no departure has been cited by Walmart as a way to clean house after those scandals.

[…]

While the circumstances surrounding each executive’s departure are unclear, a pattern has emerged. At least eight of Walmart’s most senior executives in Mexico, India and Bentonville, Ark., have left the company since the latter part of 2011, when Walmart learned of The Times’s investigation. In the same two years, the company has revamped its global compliance program. In a move that swims against the current of Walmart’s corporate culture, the company has increased its compliance staff by more than 30 percent, to 2,000 people, in that short time.

I interpret that offhand reference to India differently.  Perhaps the most significant consequence of the Times’ investigation of Walmart in Mexico can be found in what happened to Walmart in India: 18 months after the Times published its report, Walmart pulled back from its plans, announced with great fanfare before the Times made its investigation public, to expand rapidly in India.  Now, there were undoubtedly other factors at work: disagreements with its local partner, the slowing Indian economy, etc. — though a down economy is when Walmart thrives, to say nothing of a market with a billion price-sensitive consumers.  But it is awfully hard to imagine how Walmart could navigate the thicket of rules and regulations and required permits to expand in India without paying huge bribes — the scale of corruption in the last government having grown so notorious that Indian voters went for the divisive Narendra Modi in a landslide — so I, at least, am going to take its pullback in India as a sign it felt constrained from doing business as usual by the exposure of the bribery racket in Mexico.

Well done, New York Times.

This entry was posted on Monday, June 9th, 2014 at 8:06 am. It is filed under Close Reader and tagged with business, India, media, Mexico, The New York Times. You can follow any responses to this entry through the RSS 2.0 feed.