Two years ago NLPC sponsored several proposals at major U.S. corporations that sought greater disclosure over their risks of doing business in, or setting a significant percentage of their supply chain in, communist China. One of those companies was Walmart.
The problem was that of all the companies that — as is required by law — reported their “risks” to the Securities and Exchange Commission in their annual reports, little was disclosed with regard to China exposure, other than “we do business there” and that vague circumstances like “geopolitics” could affect financial performance. Our “China audit” proposals, including for Walmart, sought more specificity.
Now this week we hear this, as reported by CNN Business:
Walmart thought it could use its immense power as America’s biggest retailer to make Chinese suppliers eat the cost of President Donald Trump’s tariffs. But Walmart got a response it’s not accustomed to hearing: No.
Trump has slapped 20% tariffs — or taxes on imported goods — on all products coming from China. That’s put the squeeze on retailers like Walmart, which imports a lot of merchandise from China and sells those goods at the lowest price possible to American consumers. Walmart, in turn, has tried to pressure its Chinese suppliers to lower prices. But the Chinese government is having none of it…
“What this is signaling is that the Chinese government is saying, ‘We’re not going to pay for this tariff. US consumers are going to pay for it,” said Thomas Hoenig, a fellow at the Mercatus Center at George Mason University and former president of the Federal Reserve Bank of Kansas City…
Walmart has long used its scale and bargaining power to drive down prices for consumers.
But Walmart’s strategy to keep prices down by compelling Chinese suppliers to make concessions is vulnerable against any resistance from the Chinese government. The company sources an estimated 20% of its goods from China, analysts estimate…
Walmart also has a strong retail presence in China, including its Sam’s Club warehouse chain of stores. Last year, Walmart’s sales in China rose by 16% to $17 billion.
The company’s business in China could be damaged if the Chinese government continues to exert pressure, experts say.
When NLPC’s Paul Chesser presented the proposal at Walmart’s annual meeting in 2023, he pointed out the retailer’s woefully inadequate disclosures:
1. Walmart claims that shareholders are sufficiently informed about material risks in periodic reports to the SEC.
This is just laughable, as there is zero detail about the extensive risks of doing business in China.
2. Walmart claims it addresses the risks we are asking about through its “enterprise risk management program.”
This sounds like a perfectly bureaucratic process of questionable value, and it certainly is opaque for shareholders.
Chesser also pointed out how Walmart was so fearful of angering China and its dictator leader Xi Jinping (pictured above), that it tap-danced around the country in addressing how it protects human rights in its supply chain, with the extent of its positive initiatives in the country being represented by ESG issues such as climate change, biodiversity, protecting forests, and foodborne illness.
Walmart, its leaders, and board of directors clearly thought they were too cheap to fail and that they held the leverage over their communist business partners. Their big vote-holding shareholders like BlackRock, Vanguard and others agreed. They should have listened to NLPC instead and demanded stronger disclosures.
