Magazine article Risk Management

Smiling on Candid Camera

Magazine article Risk Management

Smiling on Candid Camera

Article excerpt

When Wal-Mart recently ended a contract with its long-time video production firm on poor terms, embarrassing footage of the retailer's executives began appearing on the internet and may soon be sold to Wal-Mart detractors. For a company increasingly concerned with its image, how will this tarnish its reputation?

"They're shameless," Jim Kramer, host of CNBC's Mad Money, once said about Wal-Mart. "And if there's one thing you've got to own, it's the stock of a company that is totally without shame."

Kramer's rant focused on whether or not the world's largest retailer had lost its killer instinct, and decided that, in fact, the company certainly had not. His proof came from the company's efforts to thwart a state bill in Maryland that would require companies of a certain size--a bracket that would likely only contain Wal-Mart--to spend 8% of their payroll on employee health care. As the largest private provider of health care benefits in the country, Wal-Mart used its massive resources to aggressively fight the bill.

In the process, the company once again drew scorn from its many detractors, especially those who maintain that the company destroys small businesses and small-town culture. Over the years, Wal-Mart has gone to great lengths to counteract this negative reputation. It has waged many public relations campaigns, donated vast sums to charity, provided timely disaster response (Wal-Mart was the savior of more than one Gulf Coast town after Hurricane Katrina) and partnered with Kellogg's to give away one million reusable shopping bags to promote Earth Month in April.

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Despite these positive activities, critics still focus on negative headlines, and the anti-Wal-Mart machine has rolled on. For every 10 positive things the company has done to quell the backlash, it seems to only take one bad thing to rekindle a fresh onslaught from its detractors.

The latest hit to the retail behemoth's image came when Flagler Productions, a video production company that created corporate videos for Wal-Mart for nearly 30 years, recently made its archive footage available to lawyers, unions and media organizations. The massive video leak was the end result of a botched sales negotiation between Wal-Mart and Flagler.

In 2006, Wal-Mart dropped Flagler as its video production company despite a verbal agreement to keep using the small firm as its primary vendor. According to Flagler's owners, Wal-Mart's move cost Flagler 90% of its business and led to widespread layoffs. But Flagler, brought on in the 1970s under a handshake deal, still had the film archive in its possession and reportedly offered to sell the footage back to Wal-Mart for around $150 million. Wal-Mart countered with an offer of $500,000. Flagler declined, negotiations ended and the videos began appearing on the internet.

An embarrassing video of Wal-Mat executives parading in drag for a company skit soon became viral, and Flagler stated that it now has multiple prospective buyers for footage, including political groups and national media, lined up for more footage. An especially awkward clip shows company executives joking about exploding fuel cans at a time when the company was being sued by a 12-year-old boy who suffered extensive burns after a gas canister bought from Wal-Mart exploded. Given the success of the anti-Wal-Mart film The High Cost of Low Prices (and its website, www.walmartmovie. …

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