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Saturday, March 26, 2011

Wal-Mart’s Centralized Corporate Control Spreads Gender Discrimination Throughout the U.S.

The Supreme Court will hear oral arguments in Wal-Mart v. Dukes, a sex discrimination class action against the retail giant, on March 29. AFJ’s Justice Watch blog will highlight specific aspects of the case in daily installments between now and the date of oral arguments. Today we discuss how Wal-Mart’s centralized corporate control spreads gender discrimination from headquarters to every region of the United States.

Wal-Mart argues that the plaintiffs’ theory of liability should fail because of Wal-Mart’s sheer size. The company maintains that the large number of its stores, managers, and employees means that pay and promotion decisions “turn[ed] on decisions made by individual store managers” and cannot support the commonality among class members that is required for class certification.

Plaintiffs counter with a powerful narrative that shows how sex discrimination at Wal-Mart was the inevitable byproduct of a strong and centralized corporate system that originated in the company’s Home Office in Bentonville, Arkansas, and permeated each of the company’s stores in the United States.

The key issue here is not the size of Wal-Mart. After all, if the core of an apple is rotten, it does not matter how large the apple is – it is still rotten. The issue is whether Wal-Mart’s employment system perpetuated a male-dominated hierarchy that suppressed women’s promotion and pay throughout Wal-Mart’s thousands of stores. The answer to this question is clearly yes.

Don Soderquist, the company’s former vice chairman and chief operating officer, wrote in his book The Wal-Mart Way that Wal-Mart is “intentional about dispersing our culture throughout the company and determined that our values and beliefs be on the mind of every associate.” Soderquist describes the numerous meetings that occur for employees at every level of the company’s hierarchy and writes that “we have taken advantage of every single one of these opportunities to preach Wal-Mart culture.”

Wal-Mart’s engrained practices are also maintained by promoting from within and requiring people in line to become assistant managers – the lowest salaried management position – to go through a 4-5 month training program at the Walton Institute, where the message is that women are not aggressive enough and would lower standards if promoted to management. Once employees become Store Managers, they are also required to relocate regularly, which spreads Wal-Mart culture but disadvantages women who typically have less flexibility than their male counterparts to relocate suddenly. Sam Walton, the company’s founder, recognized as early as 1992 that this requirement is unnecessary for business purposes and deprives the company of talented female managers, but the policy remains.

Centralized control at Wal-Mart is pervasive. All personnel policies, including compensation and promotion guidelines, are set by the Home Office. Each store has the same job categories, job descriptions, and management hierarchy. Regional management meets at least weekly at the Home Office to discuss developments in individual stores. The company has a sophisticated computer network that allows the Home Office to monitor daily activities at every store. Managers are tied to the Home Office through a computer link called the Manager’s Workbench. The Home Office controls each store’s temperature and mandates what music will be played inside. Wal-Mart also has a strict anti-union policy that it enforces uniformly throughout its stores.

Within the context of this highly uniform corporate structure devoted to pushing the “Wal-Mart Way,” Store Managers, District Managers, and Regional Vice Presidents – more than 85 percent of whom are men, and most of whom have been trained at the Walton Institute – get to make largely unfettered pay and promotion decisions. Under Wal-Mart’s employment system, there is:
  • No criteria for making promotion selections;
  • No oversight or systematic review of compensation or promotion decisions;
  • No posting of most promotion opportunities; and
  • No written information about the management trainee program, and no ability for hourly employees to apply for it.
In addition, Wal-Mart managers can:
  • Offer raises based on undefined “exceptional performances;”
  • Depart from starting pay rates for whomever they choose; and
  • Through a “tap on the shoulder,” decide who becomes a management trainee.
The result is a system in which male managers promote people like themselves who accept and perpetuate Wal-Mart’s male-dominated corporate structure.

Tellingly, Wal-Mart knew at least six years before this lawsuit was filed that its employment practices would likely be seen by courts as discriminatory and subject to class-wide relief, after it hired a prominent law firm to evaluate whether its policies promoted sex discrimination. Akin Gump found widespread gender disparities. “By one measure, the law firm found, men were five and a half times as likely as women to be promoted into salaried, management positions.” The law firm advised Wal-Mart to take remedial steps in 1995, but Wal-Mart ignored the advice and continued its practices.

As a legal matter, the Supreme Court has recognized that Title VII should apply when “an employer’s undisciplined system of subjective decision-making has precisely the same effects as a system pervaded by impermissible intentional discrimination.” A strong corporate structure “creates the context – the policies, the decision-making systems, the work environment and culture – in which individual decisions are made.” These holdings support liability here.

Click here to read more about this landmark case and download AFJ's comprehensive analysis.


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