Wal-Mart GOP executives at war with Democratic Customers

Wal-Mart's Republican executives at war with its Democratic customers
Posted Aug 1st 2008 - AOL
by Peter Cohan

The Wall Street Journal reports that Wal-Mart Stores (NYSE: WMT) is warning its store managers against an Obama victory in November. Why? because Wal-Mart executives worry that Obama will boost the power of unions and that unionized Wal-Mart stores will lead to higher worker pay -- and higher prices for Wal-Mart customers.

I can understand why Wal-Mart executives would want to keep President Bush's policies in place for another four years. After all, those low taxes on the top 1% help enrich Wal-Mart brass. I am not suggesting that all Wal-Mart customers are Republicans, not at all, but I do believe that most people who shop at Wal-Mart cannot afford to buy their shoes at Neiman Marcus. And these middle- and lower-income Wal-Mart shoppers are the natural beneficiaries of Democratic policies such as Obama's plan for a middle-class tax cut.

Wal-Mart is clearly trying to be on both sides of this election. The Journal reports that it's reduced its share of contributions to Republican candidates from 98% in 1996 to 52% in 2008 -- giving 48% of its $2.2 million in political contributions to Democrats this year. It also has directors who have been big Clinton supporters, including Hillary Clinton herself who served on its board from 1986 to 1992 and Aida Alvarez, who worked in Bill Clinton's cabinet from 1997 to 2001 and has been a Wal-Mart director since 2006.

Meanwhile, it's not clear why Wal-Mart thinks an Obama win automatically means unionized Wal-Mart workers. It clearly fears the Employee Free Choice Act (EFCA), which "companies say would enable unions to quickly add millions of new members," according to the Journal. If EFCA did pass under an Obama administration, would all Wal-Mart stores suddenly become unionized? And if some of them did, would that really be so bad for Wal-Mart's business? Its workers would then have higher incomes, meaning they could buy more at its stores.

I think Wal-Mart needs to sort out its political strategy. Its stock did much better under Clinton -- up 257% during his presidency -- than under Bush -- up 15% so far. And most of Wal-Mart's stock price gain has come in the last year as credit crunched consumers flocked to Wal-Mart's lower prices; since last August the stock has risen 27.6%. Thus it's the failure of Bush's weak dollar, high debt policies that have most benefited Wal-Mart's bottom line.

Wal-Mart's stock price prospered under Clinton and suffered under Bush. Its pattern of political contributions and board membership suggest an openness to Democrats. With its latest anti-Obama warnings, Wal-Mart's executives seem to be at war with its customers. And that's not good for its business or its shareholders.
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Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Wal-Mart securities.