At Walmart, we are committed to doing business the right way. We’re constantly striving to earn and keep the trust of our customers and the communities where we work and live.
One way we meet that commitment is through the company’s ethics and compliance program. Our program helps our company identify key risks in our business, develop standards and processes to address those risks, and then bring those standards and processes to life in our business.
Over the last few years we’ve made significant investments to enhance these capabilities. We have highlighted some of that work in prior annual reports on our ethics and compliance program and also in Walmart’s annual Global Responsibility Reports. Because our business and the world are constantly changing, over this last year we continued to develop and refine our company’s governance processes. I’m pleased to share some details from those efforts in this third annual report on our ethics and compliance program.
In this coming year and the years ahead, the company will continue to focus on building a world-class ethics and compliance program to prevent, detect, and remediate issues that arise in a growing business. To do that, we must embed our ethics and compliance processes in our business and challenge ourselves to continually improve. This report highlights some of the latest progress on this journey.
President and CEO, Wal-Mart Stores, Inc.
April 20, 2016
Refining and Evaluating our Program Enhancements
Walmart’s culture emphasizes integrity and respect for others. This cultural foundation is critical to Walmart’s success because it provides our associates with shared expectations and a common understanding of what is important.
Our ethics and compliance program builds on that cultural foundation. With the many complex issues our business confronts, we need both a strong culture and effective governance to achieve our goals. Accordingly, several years ago we began implementing significant structural changes to enhance our ethics and compliance efforts. These changes have now brought into one program many of the functions and processes that help our company follow the laws and regulations that govern our business. Having a unified global program has brought a consistent, coordinated approach to our compliance work and has allowed us to apply learnings from one part of our business across all of our operations.
As part of our oversight of the company’s compliance program, for the last several years the company’s senior management has worked with the Audit Committee of Walmart’s Board of Directors to identify high-priority projects to move the program forward. The company continued this approach in the fiscal year ended January 31, 2016 (“FY16”). Early in FY16 the company and the Audit Committee identified 40 such high-priority objectives (the “Objectives”). Those objectives were selected based on information we gathered about our operations throughout the year. In addition to the normal feedback we receive in our business, we conduct annual risk assessments in each of our retail markets and also use innovative systems to collect data on our compliance efforts. Several of those systems are discussed below. This focus on data and analytics helps us to understand our risks and prioritize our efforts.
As in past years, the Board’s Compensation, Nominating and Governance Committee (the “CNGC”) conditioned a portion of the compensation for the company’s most senior executives on demonstrating adequate progress in achieving the Objectives. Under the oversight of the Audit Committee and CNGC, the company assigned responsibility for each of the Objectives to one or more members of our senior executive team.
Our senior management regularly reported to the Audit Committee and CNGC on the status of the Objectives throughout the year. At the end of FY16, the Audit Committee conducted a review and concluded that the company achieved adequate progress on all 40 of the year’s Objectives. In light of these results, the CNGC elected not to exercise its discretion to reduce our executives’ compensation.
This report discusses some of the Objectives that the company achieved over the last year. The report also provides data and examples from the company’s broader ethics and compliance program to provide context for our efforts and show how the company’s governance processes have continued to improve. We believe that this process of continuous improvement is critical to our company’s success.