This is a case study of how a large successful company, Wal-Mart, uses its .... Ohio, schedules a similar event, `The Duck Challenge. Daya, for early October ...
Journal of Retailing and Consumer Services 8 (2001) 347}349
Viewpoint
Value-added annual shareholders meetings: re#ections on people's capitalism at Wal-Mart Raj Aggarwal Firestone Chair, Kent State University, Kent, OH 44242, USA
Abstract Most shareholder annual meetings are relatively dull. This is a case study of how a large successful company, Wal-Mart, uses its annual shareholder meeting to motivate and spread best practices among other stakeholders including vendors and employees. In doing so, it makes it a value-added event and also livens up what may be a relatively dull annual shareholder meeting. 2001 Elsevier Science Ltd. All rights reserved. Keywords: Retailing; Mass-marketing; Discount stores
1. Why expand shareholder annual meetings? Annual shareholder meetings of publicly held companies are usually very dull a!airs. They generally focus on a brief review of corporate "nancial performance and a speech by the CEO indicating the company's future direction. In most cases, the review of corporate performance glosses over or provides a positive spin on any di$culties or poor performance, and the CEO's speech tends to be bland and self-serving and any discussion of the future is hemmed in by legalistic fears of making speci"c projections. Oh yes, and the election of the new board of directors is also announced, with most of the votes having already been cast by mail and counted prior to the annual meeting. Most shareholders tend to sell their stock if not satis"ed with a company's management or its prospects and corporate elections generally tend to have unsurprising results with most votes cast as recommended by management. The most worrisome part of an annual meeting for the presiding CEO is usually the question and answer period which is mercifully kept very brief. In any case, embarrassing or di$cult questions, if any, generally get a brief response accompanied by the suggestion that the questioning shareholder get together with a senior manager for additional details after the formal meeting. Thus, most corporate annual meetings are dull rituals held mostly because they are required by law. Must these company annual meetings be so dull? Can we learn anything from the experience in other countries? Unfortunately, corporate annual meetings are also
similarly dull in other industrial countries. For example, in Japan, corporate management is even more concerned about keeping up appearances. Annual meetings of most public companies in Japan are held on the same day each year, on or around June 27. This is done to minimize the ability of organized groups of gangsters, that specialize in this activity, from disrupting company annual meetings with questions that may embarrass senior managers of the company. It seems that if we are to make company annual meetings more interesting, we in the United States may have to be pioneers. One possibility for livening up these company annual meetings is to expand the focus of these meetings to include stakeholders other than just stockholders. The stakeholder viewpoint recognizes that besides owner stockholders, employees, customers, suppliers, and communities also have a stake in the future of the company. However, in our capitalistic system, it is somewhat controversial to contend that a company should be responsible not only to stockholders but also to other stakeholders. Indeed, a focus on serving owners alone seems to be the singular strength of our capitalistic system, and is the reason why the rest of the world is privatizing companies and desperately trying to move towards our system of economic organization. Nevertheless, it is clear that corporate recognition of the importance of non-owner stakeholders is not inconsistent with a focus, even a singular focus, on serving owner stockholders. After all, corporate growth, pro"tability, and economic value all depend on the willing cooperation of other stakeholders. In fact, corporate
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growth, pro"tability, and economic value can be maximized only to the extent that other stakeholders can be motivated to serve the goals of the company. As an example, a number of studies have shown that there are many advantages of using `open book managementa (OBM) where "nancial and other often sensitive information about corporate performance is shared with employees. These studies contend that OBM is an important contribution to employee motivation towards achieving corporate goals. As another example, an increasing number of companies are recognizing the value of spreading `best practicesa to all parts of the company. This process essentially consists of identifying highly successful individuals or work groups in an organization, and then spreading the procedures responsible for their high levels of performance to other individuals and work groups within the same company * it is the internal equivalent to external `bench-markinga practices. Similarly, it is also useful to recognize and spread more widely any special contributions to company pro"tability made by other stakeholders such as vendors and customers. Consequently, it is clear that creating economic value and serving stockholders can be very consistent with the enlightened need to recognize the contributions of other stakeholders. Why not use the corporate annual meeting to recognize such contributions? If done e!ectively, it can convert dull ritualistic annual meetings to a value-added activity. I recently attended one such annual meeting * the Wal-Mart annual meeting.
2. Case study: the Wal-Mart annual meeting Wal-Mart is a large and successful organization. With sales exceeding a 100 billion dollars and pro"ts close to 4 billion dollars, Wal-Mart is larger than many of its next biggest competitors combined in sales and even more so in pro"ts. Further, it continues to grow both domestically and internationally. It is revolutionizing retailing in many new areas such as food, and internationally its goal is to supplement economic development e!orts by increasing the purchasing power of its customers. There are a number of reasons for this success. One reason Wal-Mart is so successful against its competition is that its overhead (SG&A, sales, general, and administrative) expenses are one of the lowest in retailing, enabling it to signi"cantly underprice its competition. As the tours of the extremely plain and functional headquarters o$ces associated with the annual meeting indicated, Wal-Mart executives set a good example, and `walk the talka about keeping costs low. However, while low SG&A does mean frugality at the corporate headquarters, it does not mean low expenditures in important areas of the business. For example, Wal-Mart has one of the largest data warehouses that is
used to customize product mix and placement in each store to re#ect the demographics of its market area and the buying patterns and needs of its customers. Wal-Mart also supports its stores with one of the most sophisticated logistics and distribution systems. Nevertheless, in spite of the Wal-Mart excellence in merchandising, technology, and logistics, a major reason for Wal-Mart's success is its people and how they are motivated. Wal-Mart management practices `servantleadershipa where they see their jobs as helping these associates serve customers most e!ectively. It is one of the largest employers in the United States * employing over three quarters of a million people, many of them front-line `associatesa responsible for customer service in its stores. While the success of Wal-Mart stores depends heavily on these associates, they are the "rst rung in the organization and generally do not have a great deal of experience and do not command high levels of compensation. Senior management recognizes the need for continuing associate training, and according to Tom Coughlin, the Chief Operating O$cer of Wal-Mart stores, one of his most important jobs is to be an e!ective `teacher of teachersa. Wal-Mart also has one of the most extensive stock ownership plans and a large proportion of Wal-Mart employees are now shareholders. The very unusual Wal-Mart annual meeting is a value-added activity that re#ects these characteristics of its business and is designed to help Wal-Mart achieve its goals. The Wal-Mart shareholder's annual meeting is usually scheduled to be held on the "rst Friday in June in the Bud Walton Arena of the University of Arkansas in Fayetteville. As a small shareholder, I normally would not have journeyed to this remote part of Arkansas for a corporate annual meeting, but I was curious about these meetings that were billed as a `family reuniona. My friend, Jack Kahl, CEO of Manco Inc., had been talking to me (and to anybody else who would listen) about the extraordinary personal qualities and business philosophies of Sam Walton with the zeal of a new convert for the last decade or so. As a member of Manco's board, I joined Jack and his senior managers for a trip to Wal-Mart for the meeting in Fayetteville. The proceedings were scheduled to start at 8 a.m. on the day of the Wal-Mart annual meeting. But we woke up at 5.30 a.m. to arrive at the Bud Walton arena about 6.30 a.m. to join a drumbeat of loud music and a steady stream of people who, we discovered, had already taken up many of the good seats in the 15,000 seat arena (and many of the choice parking spots nearby). As we arrived, a band was playing loud music from the movie `Rockya. This was my "rst corporate annual meeting in a basketball arena "lled by shareholders, many of whom were Wal-Mart `associatesa and vendors. A band of Wal-Mart associates led by Stevie Wonder had just "nished playing the song `Taking Care of Businessa when the meetings began with the arrival of
R. Aggarwal / Journal of Retailing and Consumer Services 8 (2001) 347}349
Wal-Mart Vice Chairman and COO, Don Soderquist. He proceeded to the round stage in the center of the arena accompanied by a fanfare of blaring horns and loud cheers. For the next two hours, he recognized various domestic and international stores and distribution centers, as well as the people responsible, from department managers and associates to truck drivers, for extraordinary performance in terms of sales, pro"ts, and service to the Wal-Mart family and to their communities. Many medals, rings, and plaques were handed out and every facility or department so recognized was represented by Wal-Mart people who had been elected as representatives for this event by their fellow workers. These various recognition activities were accompanied by fanfares of blaring horns and loud cheers, and punctuated by appropriate music, skits by celebrities and, of course, Wal-Mart cheers. All of these proceedings were simulcast on the numerous television screens in the arena as well as on four large `jumbotronsa above the stage. This was a very interesting family reunion with a religious revival meeting #avor and certainly a most unusual shareholder's meeting.
3. Implications and conclusions The use of the annual shareholder meeting to cheer on all its stakeholders was consistent with the Wal-Mart
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culture of open-book management including widespread information sharing, decentralization, and a servant-leadership style of management. In many ways, it seems to be a midwestern version, with a southern accent, of another set of innovative American management practices known as the `Silicon Valleya corporate culture. Clearly, it would be good if this Wal-Mart culture would replace other more common but not so useful corporate cultures, especially corporate cultures of rapid head-count expansion followed by loyalty shattering and angst-ridden restructuring and layo!s? Regardless of the answers to such larger questions, the Wal-Mart annual shareholder meeting is a report to all of Wal-Mart's stakeholders, and it clari"ed that Wal-Mart `caresa for all its stakeholders. Wal-Mart is clearly using its annual meeting to motivate all of its stakeholders and making the otherwise dull and ritualistic annual meeting a value-added event. Wal-Mart is not alone in doing this. For example, Manco, a medium-sized company in Avon Ohio, schedules a similar event, `The Duck Challenge Daya, for early October each year to recognize the contributions made by employees, customers, vendors, and owners. Clearly, it would be bene"cial for more companies to examine and adapt the Wal-Mart and Manco practices to enliven otherwise dull annual shareholders meetings.
