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Wal-Mart CEO Weighs In on Bangladesh Fire

Mike Duke defended his company’s enforcement of fire-safety standards, while at the same time acknowledging that more work needs to be done.

Mike Duke

Mike Duke, president and chief executive officer of Wal-Mart Stores Inc., for the first time on Tuesday night addressed the fire at a garment factory in Bangladesh that killed 111 workers, defending his company’s enforcement of fire-safety standards, while at the same time acknowledging that more work needs to be done.

Duke spoke at the Council on Foreign Relations in New York in a broad discussion ranging from Wal-Mart’s sourcing and corporate social responsibility standards and challenges to the fiscal cliff talks in Washington, to the government’s investigation into bribery allegations at Wal-Mart’s Mexican subsidiary.

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Wal-Mart has said it terminated the relationship with a supplier that subcontracted work to Tazreen Fashions Ltd. in Bangladesh, where a fire killed 111 workers on Nov. 24 and triggered protests and an outcry from U.S. and international worker and labor rights groups. In recent days, there have been reports from workers’ rights groups that Wal-Mart produced substantial amounts of apparel at Tazreen.

Duke said Wal-Mart had a “very serious focus” in Bangladesh on fire safety in 2010, noting that the retail giant stopped doing business with 94 factories that failed to meet its compliance standards and also helped raise standards, in the area of fire safety in particular, in 23 other factories.

“In 2011, there was even more progress made,” Duke said. “We worked with other organizations and retailers to raise the bar and did a tremendous amount of training across the country,” adding that more than 3,000 factories went through fire safety and other compliance training.

He acknowledged that more needs to be done in Bangladesh and around the world.

“We’re still stepping back again and saying, ‘What else can we do?’” Duke said. “This is complicated. There are multiple steps in a supply chain. There could be a supplier that may be based here in the United States and may be buying from factories, and sometimes there are subcontract factories. We have a requirement to know those factories, though, and in this case that violation occurred and we’re not going to do business with that particular supplier anymore.”

Asked whether there was a conflict in Wal-Mart’s push for lower prices from its foreign suppliers and its expectation of factories to meet its fire safety and other standards, Duke said, “We will not buy from an unsafe factory. So this is not a price discussion.…If a factory is not going to operate with high standards, then we will not purchase from that factory, and there’s no discussion about price.”

Duke was also asked whether there are countries in which Wal-Mart refuses to source based on the absence of rule of law, corruption or lack of human rights protection.

“We do look at those factors in making a determination,” Duke said. “That is not to say that…where we do business today is perfect nor would I even say doing business in mature, developed markets is perfect.…I think defining standards of how countries operate is a sensitive topic, but we do have that consideration — the rule of law, compliance and governance and the risk of operating a business. It is a very practical analysis that we do and there have been decisions that we have made not to enter a market because of some of those factors.”

Duke was also asked about the investigation by the Securities and Exchange Commission and Justice Department into allegations that Wal-Mart’s Mexican subsidiary bribed foreign officials to help facilitate store expansion in Mexico. House lawmakers also launched their own investigation into the allegations. The investigations are still ongoing.

“We take those allegations very, very seriously and we have an investigation ongoing,” Duke said. “We’ll take the appropriate action based upon the conclusion of this investigation.…Doing the right thing, we’ve installed a number of additional steps in this particular area of [Foreign Corrupt Practices Act] compliance. And we look at markets around the world. We’ve taken a look at just how we operate and put in place compliance operations, and we’ve established a new office of compliance.…And I think this focus will make us a better company regardless of the outcome of the investigation in Mexico.”

Wal-Mart is the focus of another investigation in India. On Wednesday, the Indian government gave in to pressure from the opposition and agreed to an inquiry of Wal-Mart’s lobbying in India. The inquiry will be headed by a retired judge, said Kamal Nath, minister for parliamentary affairs.

Opposition parties took up the issue after Wal-Mart revealed in the U.S. Senate it had spent $25 million in lobbying since 2008.

“I think there are a couple of important points to make on this from the U.S. side,” Nancy Powell, American ambassador to India, said on NDTV on Tuesday. “What has happened is the accusations are that this money is bribery; what it is is lobbying. In the United States those are two very separate things.” She pointed out that lobbying in the U.S. was regulated and the effort had been to make it transparent.

“Wal-Mart had something like 80 items for which they approached U.S. policy makers on, in nine different categories, FDI [foreign direct investment] in India was one of them,” she said.