Wal-Mart lawsuit may alter retail industry

LITTLE ROCK -- Retail experts say a nationwide class-action sex- discrimination lawsuit against Wal-Mart Stores Inc. could lead to changes within the world's largest retailer and among competitors.

"If the allegations are true, it will very fast lead to radical improvement of the situation. It is absolutely in (Wal-Mart's) best interest to resolve this as fast as possible," said Kurt Barnard, president of Retail Forecasting LLC in Upper Montclair, N.J.

Another analyst noted that those changes may already have begun before the decision Tuesday by a federal judge in San Francisco to grant class-action status to a suit filed three years ago.

The suit originally filed on behalf of six women will now represent as many as 1.6 million current and former employees -- the largest private civil rights case in U.S. history. The suit claims Wal-Mart set up a system that often pays female workers less than their male counterparts for comparable jobs and bypasses women for promotions.

Wal-Mart contends its stores operate with so much autonomy that they are like independent businesses with different management styles that affect the way women are paid and promoted. The company has said the ruling had nothing to do with the merits of the case and promised to appeal.

Merrill Lynch analyst Daniel Barry noted that Wal-Mart has already announced plans to tie executive bonuses to new corporate diversity goals that include the promotion of minorities and women in the same proportion that apply for management positions.

"The new bonus plan states that if executives fail to achieve these objectives, compensation will be cut by 7.5 percent in the first year and 15 percent in the second year," his report said.

Mona Williams, a spokeswoman for the Bentonville-based retailer, said the bonus plan shows "we are serious; we are putting our money where our mouth is."

Williams said nearly 40 percent of the company's managers are women and Wal-Mart has been "steadily increasing" that figure. She also cited the Women in Leadership Program, which includes monthly seminars to groom female employees for management.

"We aren't just trying to hit a number, we are trying to make sure that, when (women become managers), they can succeed," she said.

Robert Blattberg, director of the Center for Retail Management at Northwestern University's Kellogg School of Management, said the lawsuit will force all retailers to look at whether they are complying with equity laws.

"Most companies spend a lot of time trying to avoid these types of problems," he said. "If these cases start becoming prevalent, it will significantly increase the cost to retailers to track and determine if they are in compliance."

Wal-Mart's size and its staunch opposition to unions make it any easy target for such lawsuits, he said. "They are admittedly anti- union, and the unions like these types of lawsuits because they would like to see Wal-Mart bend," he said.

Barry described the class-action lawsuits as "another negative psychological blow to Wal-Mart" that could affect the stock price while the case's outcome remains unclear.

Within Wal-Mart, which aggressively promotes its internal corporate culture, the lawsuit could lead to changes in the way equality efforts are evaluated at individual stores, said Claudia Mobley, director of the Center for Retailing at the University of Arkansas' Walton College of Business -- named for Wal-Mart founder Sam Walton.

"Wal-Mart is so large and individual stores are responsible for staffing," she said. "The company cannot always control every individual manager and make sure they are doing the right thing."

But retail experts said negative publicity from the lawsuit is unlikely to hurt the company's bottom line.

"In the long run, it doesn't hurt Wal-Mart because Wal-Mart is Wal- Mart; they are resistant," Barnard said.

"People don't go to Wal-Mart because they love Wal-Mart," Blattberg agreed, "they go to Wal-Mart because they like their prices."

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