Wal-Mart’s Bribery Probe Could Drag On Growth Amid Intense Scrutiny

April 26th, 2012 by Trefis Team
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Wal-Mart (NYSE:WMT) is facing one of the toughest times since the recession as it is juggling with an ongoing bribery probe. According to reports, Wal-Mart Mexico was allegedly involved in bribery to cover up an internal probe in an attempt to build its business in the region. The company’s share price witnessed a decline of approximately 8% soon after the release of this allegation. Wal-Mart competes with other big retailers like Target (NYSE:TGT), Costco (NASDAQ:COST) and Best Buy (NYSE:BBY).

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Mexico Notorious to Thrive on Bribes

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According to a survey of Mexican households by Transparency Mexico, bribes paid by individuals, excluding corporations, amounted to approximately $2.4 billion in 2010. [1] In another study by Transparency International, Mexico ranks 100 on its list that ranks 183 countries by the perception of their level of corruption. [2]

Bribery Scandal and Possible Repercussion

Wal-Mart has more than 2,000 stores throughout Mexico and is a very important market for the company. There could be strict actions against senior executives including CEO Duke and former CEO Lee Scott who are alleged to have aided in covering up these findings. [3] Wal-Mart has also started an internal investigation into this, and it is also subject to criminal probe by the United States Department of Justice (DOJ).

We believe these allegations, if found true, could have far deeper implications including a hefty legal bill for the retail giant and a major management shuffle. It could also tarnish the image of Wal-Mart and potentially hinder its ongoing international expansion efforts as moves in foreign countries will face greater scrutiny.

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Notes:
  1. See: Little outrage in Mexico for Wal-Mart bribe report, Yahoo News [↩]
  2. See: Wal-Mart bribery allegations put focus on Mexican middlemen used to grease bureaucratic wheels, CBS News [↩]
  3. US lawmakers launch WalMart bribery probe, Business Standard [↩]