Following Mexico scandal, lawsuits take a bite at Wal-Mart’s board
Lawsuits keep lining up against Wal-Mart executives
Shareholders are taking a tough stance against Wal-Mart’s board of directors in an attempt to increase accountability of the company, which was forced in April to disclose its involvement in a multimillion dollar bribery scandal in Mexico.
New York City Pension Funds on Monday joined others across the U.S. in their efforts to change how the company is run by filling a shareholder suit against top executives.
The suit accuses Wal-Mart executives of “breach[ing] their fiduciary duty to the company and its shareholders by failing to properly handle credible claims of the bribery allegations and attempting to cover up details of the scandal,” according to a statement by New York City Comptroller John Liu.
The cases are grounded on “derivative actions,” meaning that if the plaintiffs receive a ruling in their favor, any fees and penalties recovered for losses in Wal-Mart’s share price resulting from corruption scandals, for example, will be taken from executives’ pockets and given back to Wal-Mart as compensation.
The lawsuit includes 27 current and former Wal-Mart executives including Eduardo Castro-Wright, leader of Walmex at the time bribery instances occurred. Since April, the company has yielded to pressures from different groups and shareholders to restructure its board of directors as a more independent and accountable entity.
Before the Mexico bribery scandal was unveiled by the New York Times in late April, executives had not notified authorities about problems at Wal-Mart’s Mexico subsidiary Walmex, rousing contempt from U.S. shareholders.
Contrary to the reaction in America, Mexican authorities were slow and unconcerned in addressing the issue. Corruption charges against Wal-Mart in Mexico amount to $24 million in bribes paid to local officials, aimed at easing the company’s path through Mexico’s bureaucracy. Wal-Mart’s rapid expansion in Mexico has since ground to a halt.
Wal-Mart’s stock tells the story.
(photo: flickr.com/ayngelina)
