What PR won’t fix

No amount of PR and no number of company blogs can make a bad company look good — or smart. Wal-Mart is the poster pig for that lipstick. Again and again, they prove themselves to be mean, greedy, and stupid. Again and again, they and their PR people are forced to apologize. And it’s clear: They never learn. The culture remains venal. Management remains blind to the fact that their moral myopia is bad for the brand and bad for business. Even the PR company, Edelman, fails to realize that this is bringing them down — who’d want to trust them after they keep throwing themselves on swords for Wal-Mart and who’d want to hire them given Wal-Mart’s horrid reputation — and they’d be better off resigning the account, no matter what it’s worth. Greed is usually such a simplistic explanation for bad behavior but in this case, it explains everything. This wouldn’t be so incredibly apparent if it didn’t keep happening over and over and over again.

The latest of the company’s moral lapses is the story of Debbie Shank, a former employee who was hit by a truck, is severely brain-damaged, and who won a lawsuit to help pay for her very expensive care. Wal-Mart wanted a piece of that suit.

Wal-Mart’s health care plan lets the retail giant recoup the cost of its expenses if an employee collects damages in a lawsuit. And Wal-Mart set out to do just that after Shank and her husband, Jim, won $1 million after suing the trucking company involved in the wreck. After legal fees, the couple received $417,000.

Wal-Mart sued the Shanks to recoup $470,000 it paid for her medical care. However, a court ruled that the company could only recoup about $275,000 — the amount that was left in a trust fund for her care.

Who cares what the clause says? The story went on TV and it inspires both heartbreak and rage (much of it in blogs). It’s obvious that Wal-Mart has no moral compass and not even a self-interested sense of priorities given its PR problems, especially over its health care for employees.

People make fun of Google’s righteous vow not to be evil. It’s practically a self-parody. And it’s a shame that any institution should think that it needs to make such a promise; shouldn’t it be presumed?

But imagine if Google took over Wal-Mart and made that one change, posting a sign in every store and every office: Don’t be evil. Imagine if that became the basis of firings and hirings: out with the bad air, in with the good air. Could the culture of this company possibly be reformed? Could they ever see that being evil to employees and customers is bad business? Could they ever train employees to think differently, to factor decency into their decisions? Or has it descended too far into hell?

The contrast between Wal-Mart and Google illuminates Google’s vow in a new light. It doesn’t look so silly to promise not to be evil when you watch the business of an evil company.

: LATER: I meant to add this: Wal-Mart spends many, many times as much on PR with Edelman as it was going after from the poor, brain-damaged accident victim and her family. Even from a self-interested, practical, sensible perspective, they should have seen that this would be damaging — so much so that Edelman would have been better paying the fee itself. This also indicates bad management judgment at Wal-Mart.

  • http://robertdfeinman.com/society robertdfeinman

    Walmart is in a position that is almost unique in modern firms, the Walton family owns about 40% of the stock and has complete control. Two Walton’s are on the board of directors.

    The family collects about $1.3 billion a year just from dividends on the stock and as they have no interest in selling their shares they are little concerned with the absolute price (much to the displeasure of Wall Street). As a consequence the area that has gotten all the attention over the past decade is raising the dividend payout. This has been going up at about 8% per year and increasing the Walton’s income by the same proportion.

    When looked at from this angle how the company is managed becomes clear: everything is done to maximize the family’s cash flow. If they didn’t have absolute control then their business practices would have been reformed long ago, not because Wall Street is more moral or compassionate, but because the policies are not good for growth.

    Walmart has been stumbling badly in the US for a number of years and has tried to compensate by expanding abroad. Most of these efforts have been failures or near failures and they have had to pull out of several ventures as a result. Growth right now comes mostly from Mexico and China.

    Even in China their policies are starting to run into problems. The company/government unions are starting to act a bit independently and consumers are not happy with the quality of the products (especial groceries) and the shopping experience.

    When one has an empire ruled by those who live in a bubble the results can veer wildly from what is optimal. This is as true for companies as for nations.

  • http://www.fiftybyfifty.com/lifeoffarhan/ Farhan Lalji

    Problem is the spectrum between good and evil isn’t clear or consistent, small changes might make Walmart move from evil not not so bad, but is that good enough? Until the market changes from valuing companies for their bottom lines and starts valuing things for their social bottom line companies will continue to cut corners and hoard pennies. We need companies to be accountable to the market and to their consumers about their social impacts. Would love to hear how though.

  • http://crawfordinsights.blogspot.com/ crawford

    Hogs eventually get slaughtered, lipstick or no. Just a matter of time and innovation of a replacement business model that tips the scale. Hopefully it will be one that arises from the pain center of all this with a conscious mission to do right, not the slash-and-burn of Bentonville.

    Don’t be evil works for Google. Don’t be a weasel might be a major step for Wal-Mart.

  • http://www.patthorntonfiles.com Pat Thonton

    Until people stop shopping at Wal-Mart, nothing will change. This incident will be lost on the majority of Wal-Marts customers, many of whom do not read blogs.

    Change has to start from consumers. I refuse to shop at Wal-mart for many reasons. If more people decided Wal-Mart wasn’t for then, then the company would actually change.

  • jeff

    Wal Mart is not a person. Such intellectual laziness invoking good and evil in this context. If everything were so black and white, morally, then perhaps we wouldn’t need politicians..or PR…just police.

  • http://blog.clearcastdigitalmedia.com/ Matthew Chamberlin

    Jeff-
    You left out the part where this poor woman also lost her 18-year old son in Iraq, something she needs to be constantly reminded of because she no longer has any short term memory.

    Stupid, evil and venal. Those are the first three words that come to mind when I think of Wal-Mart, a store I never have and never will patronize. Even BEFORE this story came to light.

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  • Daniel

    Anyone want to try to put a dollar value on the negative publicity this whole event caused Wal-Mart? $10 million? $50 million? Now that they have defused this by leaving the poor woman alone, what are the consequences?

  • http://robertdfeinman.com/society robertdfeinman

    Sorry Jeff, in this case Walmart is a “person”, that’s the point. It is run by the four families who are the descendants of Sam Walton.

    Most people don’t think that the world largest corporation could be run as a person fiefdom, but it is. Most of the other firms that are run on a similar basis are either not publicly traded or are much smaller, although still big. Others that you may not be aware of include Mars (the candy company) and Koch Industries (industrial equipment). They avoid scrutiny by remaining private.

    People don’t like to think that our democratic, capitalist system might harbor a plutocracy that has undue power and the families in this group do their best to hide this situation.

    I suggest a visit to Media Transparency or Source Watch to see the web of control that this small circle of the super wealthy is able to command.

    Perhaps this conflicts with your libertarian framework, but Horatio Alger was fiction.

  • http://steveclancy.com Steve Clancy

    I question the use of absolutes here – that Wal-mart is always evil and Google is always good. Clearly Wal-mart treats its employees much worse than Google and that’s wrong. But the truth is they’re different skill sets and there’s a much higher demand for Google-type employees so they need to treat their employees better. I’m not saying that’s right, but that’s just the way the job market works.

    I think there are times when Google doesn’t live up to its don’t be evil promise. I think the company hordes way too much data on its users for reasons that can’t be justified. I also see some of its efforts to put itself into every facet of the Internet slightly anti-competitive.

    I’m not saying Google is evil or Wal-mart is good. I’m just saying that speaking in absolutes like this makes for proactive posts like this one but blow things out of proportion.

  • Kerryjo

    Subrogation of medical claims is routine in healthcare insurance. However, they should be crucified for bad leaving them penniles — or worse it appears. However, I’d like to know why their legal team took more than half of the settlement? Have they no conscience either? Most states cap the attorney’s fee recovery on a personal injury claim at something like 40%, and they recoup their expenses (rightly so) but just because they can doesn’t mean they should! They should subtract the expenses and then consider what attorney fees are reasonable and compassionate. I personally am related to attorneys who represent claimants and they do this more often than you’d think. Shanks attorney’s should be ashamed (too bad they can’t be disbarred) for lack of compassion. But, we wouldn’t have many lawyers left, would we? (Sorry Dad, but you know I don’t mean the faimly law firm ;).

  • Matt V

    This is a failure by all of the lawyers involved.

    Wal-Mart’s lawyers should have seen what kind of PR mess this was going to become and told their client to let it go a long time ago.

    At the same time, the woman’s lawyers should be investigated to see why they took almost 60% of the original settlement. Also, they should have taken this to the media much sooner than they did, by letting it go to trial they probably spent the rest of her settlement.

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  • patricia

    where’s Steve Rubel in this conversation???

  • Mark Dionne

    I hate WalMart as much as anyone, but in this case, I think don’t think what WalMart is doing is so bad.

    My mother tripped fell in an office where there was a dangerous condition, and lost the sight in one eye. Her medical insurance paid the bills. A lawyer collected from the office (after several years), took one third, and then the medical insurance people had to be reimbursed. This is standard procedure. I know of other cases.

    So it looks like WalMart is just doing the standard thing here. It looks really bad for their public image. The bad publicity is probably costing them more than $400K, and maybe they should just pay up. BUT if they “pay up” in this case, then they are being unfair to everyone else who works for them who has been in a similar situation, and that is probably thousands of people who are going to be really pissed off if they don’t get a similar deal.

  • http://www.thenewmarketing.com Steve Ellis

    Far be it from me to defend the competition, but – unless you have evidence that Edelman was consulted on this ahead of the case and actually advised it made sense to proceed – then I’d strongly suspect that it got presented with this situation, and was then asked to administer the lipstick to the pig that was dropped in their lap by the legal dept.

    I don’t believe any PR advisor would recommend this route, even if they were sleepwalking on the account (on their way to the bank perhaps).

    I’m with Matt V – if anyone needs a kicking its Wal-Mart’s lawyers or their legal dept.

  • http://www.buzzmachine.com Jeff Jarvis

    Steve,
    I’m saying that they might as well have thrown whatever they spent on PR counsel out out the window for they blew it all with their venal stupidity.
    No, it’s Wal-Mart’s management that deserves the kick for not setting a culture of decency. The buck stops there. And stop it does, indeed.

  • Andrew

    From Wal-Mart, to the companies that sell to them, to the companies who service them, to the people who work there, to the people who shop there – all of them have a role to play in the culpability.

    You can include a large percentage of the American population in this group.

    Until people are willing to (or can, which is an even bigger hurdle) vote with their values, rather than their need/desire for money then companies like Walmart will be able to manipulate their providers and their employees without regard for their well-being.

  • JT Carpenter

    Peter Lynch said it best years ago when he said to only invest in companies that were so easy to manage that a monkey could do it because, eventually, one would. It would seem clear that the monkeys have taken over at Wal-Mart now.

    Sam Walton must be spinning in his grave so fast that he’s causing tornadoes.

  • http://theimpactstat.blogspot.com Aneez Kanji

    I agree with Pat Thonton. Companies are a reflection of it’s customers, and WalMart won’t change a thing until their customers demand it, and show it by not shopping there. The managers, PR, and lawyers are not the ones who have failed Debbie Shank – WalMart customers are.

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  • Will

    I might be missing something, but I’m not sure how this policy is “evil.” If I read the story right, then the policy was that if the company paid for your medical bills, then you won a lawsuit that awarded you damages for those bills, the company thought it deserved to get back what it initially put in for your treatment. Perhaps that’s profit-driven-amorality, but it doesn’t quite seem like evil – it seems more like Google electing to censor itself in China in order to gain greater access to that market. Except that, well, Google’s management did that on purpose with full knowledge of the situation – I doubt any WalMart execs or board members even heard about this until it went to the media. That’s unfortunate, but unavoidable. There’s no way management can individually consider the claims of 2 million employees. So they made a policy they thought would work best in the most situations (the company gets back what it gives out). When that turned out to be shoddy policy (as was the case here), the company acted in accordance with public opinion and reversed itself. It’s not perfect, it might not even be “good,” but I think we’re fooling ourselves if we think management is going to look at every company action to determine its “goodness.”

  • http://www.point-oh.com Peter I

    Even as an Edelman competitor, I think it’s unfair to link them to this one. I think you may be overestimating the PR budgets of companies like Wal-Mart and, if you’re just using it for context, you might want to go after some of their much larger marketing costs, like paid media or direct mail. Regardless of what you may think of how a company operates, cutting back on PR is hardly the most obvious way to cover these kinds of oversights. I’d encourage you to look into actual marketing costs instead of just guessing at them.

  • chico haas

    On blogs and in nice neighborhoods, Walmart’s existence is reviled. In reality, Walmart offers working and non-working people a variety of products and services at a price that is unavailable to them anywhere else. I’m not hot for Walmart by any means. Being in one motivates me to be work hard and make money in the same way that the “Scared Straight” documentary frightens young people into avoiding brushes with the law.

  • amphibian

    Chico, is Walmart truly offering services and products at prices unavailable elsewhere? I think Walmart’s advantage lies more in the aggregation of somewhat cheap (and somewhat crappy) products and services in one giant building.

    Reading an interview with Walmart’s CEO Scott in the Wall Street Journal about the company’s direction regarding greener energy infuriated me. Some of the other CEOs were obviously just throwing out buzzwords and trying to make nice, but Scott was pretty upfront about his fervent belief that the traditional Walmart mind-set requires no modifications or change to deal with the changes ahead.

    These people do not believe they’re ever wrong.

  • http://hyphenatedamericans.blogspot.com/ Hyphenated American

    Some time ago, Ayn Rand noted that leftists hate capitalists with same fervor as Nazis hate the Jews – and with pretty much same justice. This article proves that her point is 100% accurate. Let me reiterate the facts, with a tiny change – instead of saying “Wal-Mart”, I will call it “Jew-Mart”.

    1. Jew-Mart employee Shanks was hit by a truck and suffered horrible injuries (this happened at her own time).
    2. Jew-Mart paid for the medical expenses at the tune of $470,000.
    3. The doctors who were treating Shanks collected this money in full.
    4. Shanks hired a lawyer and sued the trucking company. The trucking company paid 1 million dollars.
    5. Shanks lawyers took $583,000 of Shanks money.
    6. Jew-Mart asked to be reimbursed the money it paid for the medical care from the sum that was won from the trucking company – the same money that was supposed to pay for Shanks medical care.
    7.Jew-Mart got only $275,000, with the unknown amount going to the lawyers.
    8.A lot of liberals wrote innumerable articles and faked outraged at Jew-Mart.

    Clearly, any rational individual would be surprised at the liberal outrage. What was evil in Jew-Mart’s actions? For example, no one thinks that Kerry is evil – even though he did not volunteer to pay for Shanks medical care. The liberals are not outraged at the doctors for collecting $470,000. Liberals don’t think that the lawyers who got $583,000 are evil. Only the Jew-Mart is evil. Why? Yes, it’s blind hatred of Jew-Wal-Mart, nothing else.

  • http://www.millergroup.net Christoph

    Until people stop shopping at Wal-Mart, they won’t change their methods!
    Change has to start from consumers but unfortunately most of them are not willing to do so…

  • http://assistantvillageidiot.blogspot.com Assistant Village Idiot

    So you criticise Walmart for a bad PR move, while giving them bad PR in an effort to make your claim true. Rather self-fulfilling, that. I suppose we could extend that to any amount of PR extortion: do what I say or I will make you look bad, then blame you for being too stupid to do the correct PR move.

    You suggest that there is moral fault because the woman’s situation is dire, but can’t seem to spell out exactly what Walmart did that is wrong. It looks bad to you because the woman is suffering and Walmart is rich. That doesn’t qualify as a moral principle. The comment wondering why her own lawyers escaped your condemnation is fair. Her lawyers didn’t pay her medical bills in advance – Walmart did. But hey, you’ve got your narrative based on feelings, and inconvenient facts are tossed aside.

    Don’t ever become a mediator or marriage counselor, okay?

  • chico haas

    Amphibian: “I think Walmart’s advantage lies more in the aggregation of somewhat cheap (and somewhat crappy) products and services in one giant building.”

    Absolutely true. I hope I didn’t unwittingly suggest otherwise. It’s a sobering experience to spend some time in a Walmart.

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  • http://www.pressthink.org Jay Rosen

    “I question the use of absolutes here – that Wal-mart is always evil and Google is always good.”

    I would question whether anyone said anything remotely like that.

    Raise your hands: who here thinks Google is always good?

  • http://www.buzzmachine.com Jeff Jarvis

    Right,
    The question is whether a company even stops to ask what good is.

  • jc

    Just like all the big corporations, in America today, everything is based on GREED.
    Profits are needed, that I understand, but the questions are (1) can there be a point where a company says, we are good and the people factor comes into play? (2) Don’t they understand, that if they put the people first, the profits will be there???

    GREEDY GREEDY GREEDY.

    Poor Sam is turning over in his grave.

  • http://eedious.blogspot.com friarminor

    All the money changing hands just made me dizzy.

    Lawyers. You just love working with them – rare few that is.

  • http://www.1st-pick.com Bonnie

    Thanks for your comments. I’m in pr; but am a “no hype” pr firm. Just the facts. I even own the domain, suingwalmart.com :)

  • http://steveclancy.com Steve Clancy
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