Prominent Investor Pushing Wal-Mart On Executive Pay

The growing debate about worsening income inequality in the United States has put a spotlight on how fast-food chains and retailers treat their staff, both as a social issue and from the perspective of investment returns.

"Our message to any retailer would be that employees are your front line. You need to treat your human capital as you would treat your financial capital," said Anne Sheehan, director of corporate governance at the California State Teachers' Retirement System, which holds nearly $400 million worth of Wal-Mart shares.

Sheehan declined to comment specifically on Wal-Mart because the fund is suing current and former executives over allegations of bribery in Mexico that first surfaced in a New York Times article in 2012. Hargrove declined to comment on that matter, citing an ongoing investigation.

Seeking More

With the wage hike, Wal-Mart showed it "can stand up to the plate and be a better company," said Cynthia Murray, an employee, shareholder and member of the OUR Walmart labor activist group, who submitted her own proposal calling for the company to address gender-based pay inequity. "Why should we stop at that? We need more."

Hargrove said the company had included 27 proposals over the past 6 years and only seeks to exclude those they believe don't meet SEC guidelines or involve topics better left to management or the board. "Shareholders have varying views and they are important and we take them into consideration," he said.

Lawyers for Wal-Mart are arguing against inclusion of six proposals in 2015, including one calling for an independent board chairman that has been on the ballot the past two years, according to letters filed with the SEC.

The independent chairman proposal was supported by 15.4 percent of the vote in 2014, short of the 20 to 30 percent threshold governance experts say can generally prompt a board to seriously consider an issue or take action.

But excluding the Walton block of stock, the measure got 40 percent of the "independent" vote, up from 36 percent in 2013.

Submitted by the International Brotherhood of Teamsters General Fund, the proposal cites the allegations of bribery in Mexico as one of the factors underlining the need for improved oversight. The current board chairman is Rob Walton, scion of the billionaire family that founded the retailer.

The Teamsters fund is contesting Wal-Mart's argument that the proposal should be excluded because it is vague, correspondence with the SEC shows.

As examples of independent oversight, Hargrove noted that 70 percent of the board is independent, that it has an independent lead director and has long separated the roles of chairman and CEO.