FAYETTEVILLE, ARK. (AP) — While Wal-Mart's U.S. business is roaring back, the world's largest retailer will face scrutiny from shareholders at its annual meeting Friday in the wake of allegations that top executives neglected their responsibility in a bribery scandal in Mexico.
Shareholder groups, including the nation's two largest public pension funds, and key proxy adviser firms have called for the removal of several board members, including CEO Mike Duke and former CEO Lee Scott. Investors have filed lawsuits against top executives.
The descendants of founder Sam Walton own about 50 percent of Wal-Mart's shares, so activist shareholders have little chance of voting out the board members. But any lack of support for the leaders is a blow to the retailer, which has worked hard to rebuild its reputation. Such criticism could dampen the festivities of the celebrity-laden event, which will celebrate the company's 50th anniversary.
The New York Times reported in April that Wal-Mart allegedly failed to notify law enforcement after finding evidence that officials authorized millions of dollars in bribes in Mexico to get speedier building permits and other favors.
Mexico is Wal-Mart's largest international operation. Duke was the head of the international division and Scott was CEO when Wal-Mart was conducting the probe in 2005.
Federal authorities in the U.S. and Mexico are said to be investigating Wal-Mart for potential violations of the 1977 law that forbids U.S. companies from bribing foreign officials.
Wal-Mart has said it is overhauling its compliance program and has launched an internal investigation. It disclosed last month that it is widening the investigation to other countries.
Executives are not expected to discuss details of the case during presentations to thousands of people expected at the annual meeting at the basketball arena at the University of Arkansas in Fayetteville.
In a pep rally with international workers Wednesday, executives including Duke and international CEO Doug McMillon, urged employees to embrace integrity and follow the rules of business established by its founder.
During a media conference Thursday, McMillon said Wal-Mart plans to use the accusations to strengthen its protocols not only relating to foreign bribery but also other issues like food safety.
"A moment like this causes us to be on our toes," McMillon said. "We're trying to use this as an opportunity to be an even stronger company."
Still, Wal-Mart's strong financial performance offers reasons for investors to cheer. The company's shares fell more than 7 percent to $57 per share right after the allegations of bribery were reported. But since reporting a better-than-expected first-quarter profit that showed an improving U.S. namesake business, shares have more than recovered. The stock is now trading at around $65.
Wal-Mart's U.S. namesake unit, which accounts for 60 percent of net sales, turned in its best performance in three years in revenue at stores open at least a year. That metric rose 2.6 percent in the division for the first quarter. That marked the third consecutive quarterly gain for the division after nine straight quarters of declines.
The figure is considered a key measurement of retail performance because it excludes stores that open or close during the year.
Total revenue for the U.S. Wal-Mart division rose 5.9 percent. Customer traffic rose for the second quarter in the row. And its clothing business posted its first sales gain in six years after going back to basics like underwear and jeans.
The business had been struggling because its core low-income customers had been hard hit by joblessness and other challenges in the weak economy. The unit also had erred in veering away from its "everyday low prices" strategy and getting rid of popular merchandise. But Wal-Mart last year began adding back 10,000 products and refocused on keeping prices low.
On Thursday, the Maryland State Retirement Pension System said it will also be voting against the entire board of Wal-Mart Stores Inc.
The system announced that it will vote its 1.2 million shares, which are worth $76.8 million, against the board.
R. Dean Kenderdine, the system's executive director, says the action is required, because when less than two-thirds of a board is independent, the system votes against all the candidates.
The system says an analysis by Institutional Shareholders Services shows six of the 16 board members are either officers of the corporation or affiliated with it in another capacity.