Wal-Mart's CEO Needs a Bathroom

Daniel Gross writes:

CEO Self-Pity Watch: There's nothing so unseemly as a highly compensated CEO feeling sorry for himself. The following gem was buried in Ann Zimmerman's excellent Wall Street Journal profile of Wal-Mart CEO Lee Scott on July 26.

And despite a concerted effort to soften his rougher edges, Mr. Scott can still be impatient with criticism. During the meeting in Los Angeles with business and civic leaders, he was asked about Wal-Mart's reputation for squeezing suppliers.

"I don't feel sorry for our suppliers," he shot back. "I flew here today on a Lear 31 [jet] that had to make fuel stops. Our suppliers fly directly into Bentonville on their G5 [jets]. They're not stopping on the way. And they have got a bathroom."...

Perhaps Mr. Scott should join a union? Bathroom breaks--and the availability of clean bathrooms--are things that unions care about when employers do not.

Comments

[alan]

That is just too funny. Had to settle for a Lear 31 instead of a G5 (like Steve Jobs got) or something. Poor guy.

[anne]

I wonder how the audience responds when there is such an anecdote. Obviously associates will say not a word. After all, how do you caution your CEO yet thrive?

[David Ricardo]

He could of taken a bus into LA and still fool nobody. Could it be that commuting on a Learjet-31 instead of a G-5 is a better negotiation strategy when dealing with unions, suppliers, customers or the community ?

[Thomas J. Newton]

Reminiscent of Godard and Gorin's Tout Va Bien with Jane Fonda and Yves Montand with a very funny scene where militants who have barracaded themselves in a factory they have seized (in France, in 1972) give the factory manager the same three minute bathroom break he gives them. Excellent Criterion Collection version came out last winter, which includes the rarely seen Letter to Jane, a companion piece where Godard and Gorin rip apart the iconography of their American star.

[anne]

Thank you for the suggestion, Thomas. There is a similar scene in a pleasant Japanese film, but I can not quite remember the title. Darn....

[sd]

I don't get the snark. For a company headquartered in Chicago or Dallas, a corporate jet is usually a frivolous expense - after all, you can fly coach to almost anywhere in the country almost any time of day. But for a company headquartered in Bentonville, Arkansas, a corporate jet is actually a reasonable business expenditure. I actually have a co-worker who used to work at Wal-Mart and who flew on the corporate jet a couple times. She said it was a piece of shit - old, spartan, cramped - much less pleasant than flying coach.

Mr. Scott isn't complaining. He's suggesting that if he, the CEO of a $250B company that is wildly profitable, can fly in an old, utilitarian plane, then the executives of Wal-Mart's much smaller, much less profitable supplier companies are full of shit when they complain that Wal-Mart's relentless pursuit of lower input costs is forcing them to put people out of work while they themselves tool around in luxury jets. He's suggesting that its improper for exectuives to buy themselves luxuries on the company expense account. What, pray tell, is wrong with that?

[jjb2]

sd wrote: "[....] What, pray tell, is wrong with that?"

Nothing is wrong with that if you are the CEO of a big corporation. Nothing is wrong with that if your universe includes only the plutocracy. But I for one don't know anyone who would refer to corporate jets by thier model number in public and expect to be understood. The real offense is that his sympathy, or lack thereof, only extends to the corporate jet set ...which is just a much longer version of Brad's "Perhaps Mr. Scott should join a union?"

NB: My (dual) G5 flies, but in a different way...

[Rob]

Hey Barry you think Mr. Scott gets paid his marginal product? Oh but his salary doesn't matter. And I'm sure there are no planes coming to Bentonville. I mean that's right next to Hooterville right?

[Jason]

1) Wal-Mart does pay below the marginal product for their workers. *evidence*: It is not possible for line (hourly associate) employees to live on Wal-Mart wages without gov't subsidy (tax credits, food stamps, WIC, and medicaid), yet WM is very profitable in an *extremely* competitive sector. They (have to) make their money somewhere: part comes from squeezing suppliers, part form sourcing goods from China, but most comes from below subsistence wages/benefits. This cannot be argued: they use low wage strategy as the cornerstone of their business model.

2) I would rather pay *more* for items, and simply consume less, in order to pay WM employees/suppliers/truckers more. Obviously, you don't feel that way. That's OK. Keep buying cheap Chinese crap from WM, and eventually, you won't have to woory about it. You'll be working *within* the low wage model as well, and be forced to consume far less. Other industries are just starting to copy WMs strategies...

[mds]

"Hey Barry you think Mr. Scott gets paid his marginal product?"

By definition. To think otherwise is socialist, in the mold of virulent Marxists like Professor DeLong. :-P

To be fair to Barry P., though, the nearest airport with commercial passenger service is way over in, uh, Bentonville. And since it's northwestern Arkansas, nothing really flies in there except American Eagle, Continental Express, Delta, Northwest Airlink, US Airways Express, and United. In such a limited market with only ~40 flights a day, private executive jets actually MAKE money for the company. Oh, and the terminal is named after Alice L. Walton, which is probably not germane, but I found it funny anyway.

Perhaps next time Mr. Scott can point out that these other companies can't really be feeling the pinch, since too many of their workers aren't forced to get their health insurance through Medicaid. Whoops, sorry, that's "socialist" talk.

[Chuchundra]

First of all, I'm no fan of Wal-Mart. I don't like the way they treat their workers and their union-busting activities . I don't like the way they've sucked the marrow out of small towns.

But

Scott wasn't talking about complaints from Wal-Mart workers. He was talking about complaints from companies that supply Wal-Mart with their merchandise about Wal-Mart's hard-assed price negotiations. His point here is valid. If the Wal-Mart suppliers are in such bad shape from trying to meet low price demands, why are they flying around in extravagant G5s when the CEO of Wal-Mart itself travels in a less expensive Lear.

And yes, when addressing a group of business men, I don't think it's unreasonable to think that the audience would have some familiarity with different types of business aircraft.

[PaulC]

"If the Wal-Mart suppliers are in such bad shape from trying to meet low price demands, why are they flying around in extravagant G5s when the CEO of Wal-Mart itself travels in a less expensive Lear."

This doesn't prove that the suppliers aren't in bad shape in terms of being able to continue US operations, only that their top executives aren't the ones who feel the pain. The G5s stay whether or not WalMart applies the squeeze. Low-level jobs can always be shipped offshore, but the jets are safe until the Chapter 11 filing. That's in the executive bill of rights, isn't it?

As for Scott, let's assume a Lear 31 is the epitomy of austere and practical executive travel (because I have no idea). It's like Scrooge pointing to his thin gruel as evidence that he's fair in his business dealings. But it proves little other than pathological miserliness.

[Jake]

"The real offense is that his sympathy, or lack thereof"

So now you are all the judge of what is the proper level of sympathy? Give me a break ...

And Chuchundra:

"He was talking about complaints from companies that supply Wal-Mart with their merchandise about Wal-Mart's hard-assed price negotiations. His point here is valid."

You act as if these suppliers have a "right" to Wal-Mart's business. They don't. You are creating rights that don't exist. If they don't want to sell their products to Wal-Mart, they don't have to, they can sell to all you socialists' darling company CostCo.

But wait, they aren't as successful or large as Wal-Mart so thats not fair either. Geez, with all of this subjective fairness to live up to, how can anyone be held responsible for anything?

And whats so wrong with negotiating? Or shopping around for the best price? That is how they provide such low prices to consumers.

Remember how much you disdain looking for the lowest price when you go get groceries or clothing for your kids, you are just being greedy...

Come'on guys and gals, don't impose all of these moral highground standards on big companies (especially those who provide the lowest prices to consumers anywhere) - you are starting to sound as bad as the Christian Right.

[Jake]

And Brad, IMHO it is very naive and misleading of you to suggest that gains in labor conditions were mainly brought about by labor laws and labor unions.

Remember, you don't have to work for anyone you don't want to. This ISN'T slavery (or socialism)!

With increased productivity came improved working conditions. Labor laws lead to unemployment and lower wages - which you then turn around and complain about!

[Chuchundra]

Jake...what the hell are you talking about?

[Jake]

I got completely distracted and misread your comment.

I don't know what the hell I was talking about.

[J Thomas]

Let's see. These suppliers are complaining because WalMart refuses to pay them enough.

And the reason they can't just sell to somebody else, to the highest bidder, is....

They have to sell to WalMart or lose out, because WalMart is too big a share of the whole market. So WalMart gets to dictate terms, and they have to take them, and the way they prove WalMart set their pittance too low is by going out of business.

This doesn't sound like a free market to me. This sounds like a command economy, like the soviets. Except it isn't government bureaucrats who set the quotas and the prices, it's WalMart.

The more I think of it, the more it seems like this is very similar to the things that the oldfashioned antitrust laws were supposed to stop. It's different because the old monopolists gouged the public to get big profits, while WalMart accepts low profits and passes the money on to consumers. but if we believe in free enterprise, why are we letting the WalMart commisars set prices by fiat?

[anne]

J Thomas

Has focused the argument properly on the nature and lack of balance in competition, whether of suppliers with Wal-Mart or employees with Wal-Mart. Nicely argued :)

[Matthew Ernest]

What the WalMart CEO demonstrates here is a problem common to both employees and customers of the company: the failure to recognize the point where value and cheapness diverge. He congratulates himself on using the "cheap" plane, but the pit stops will end up costing them.

My employer owns a fleet of jets (with restrooms!) that even the "average Joe" can fly on if there is reason to go to another site. They have regular schedules and everything. It does not cost less than a commercial flight in terms of moving a lump of flesh from one point to another, but when you consider how how much more of the business day can actually be spent on business instead of farting around in the airport it's a big win.

The customers congratulate themselves on getting the cheap crap because it cheap. But you do not continue buying cheap crap because it is cheap but because it is crap. And then you will pay and pay and pay.

[PaulC]

"His only point was that these suppliers are not suffering even though WalMart plays hardball with them."

CEOs zooming around in G5s is no more proof that suppliers are not "suffering" than Mobutu's palaces proved that former Zaire was the richest county on earth.

[Ellen1910]

I think the CEO's use of metonymy is intriguing.

Scott identifies corporations with their managements -- sort of a Caspar David Friedrich's "Wanderer" perspective. Below the sea of fog, labor escapes Scott's view.

[Auros]

"Remember, you don't have to work for anyone you don't want to. This ISN'T slavery (or socialism)!"

Perhaps somebody might want to explain to Jake that he is implicitly advocating the doctrine of Lochnerism, which has been a dead letter for some seventy years.

http://en.wikipedia.org/wiki/Lochner_v._New_York

Unless workers have strong labor protections, they are not in a position to negotiate with management; they ARE in fact, effectively enslaved. Just because an employee gets "paid", and is theoretically free to leave, that doesn't mean that in practical terms they can get by -- rent, health insurance, car payments, etc -- without giving in to whatever the employer demands. Absolute freedom of contract is a race to the bottom, as the employer finds ever more desperate saps.

[bncthor]

"I flew here today on a Lear 31 [jet] that had to make fuel stops. Our suppliers fly directly into Bentonville on their G5 [jets]. They're not stopping on the way. And they have got a bathroom."...

Mr. Scotts predictament causes me tear up.

[bncthor]

Where are my Puffs. My eyes are so misty I failed to insert to in front of tear.

[vachon]

I feel a case of the vapors comming on.

[Doctor G]

Keith, here's hoping you find yourself stuck in some small town where the only employer left is Walmart, in some backwards state that keeps your dreaded government assistance to a minimum, as you suffer from some painful medical condition with no insurance. Or you could wake up and realize that there is more value to human beings than their marginal product.

[weinerdog43]

Keith, why don't we just abolish child labor laws so that Mall Wart can hire kids to work at $.25 per hour? Even cheaper prices!

[Patrick Taylor]

> "I don't feel sorry for our suppliers," he shot back.
> "I flew here today on a Lear 31 [jet] that had to make
> fuel stops. Our suppliers fly directly into Bentonville
> on their G5 [jets]. They're not stopping on the way.
> And they have got a bathroom."...

Rather than complain about the lack of bathroom in the Lear Jet, I'd have though Mr. Scott would have just taken advantage of one of the many fuel stops ...

[astrid]

Barry P,

Did you have healthcare and subsidized housing? Did you have children? For how long? I happen to have grown up as a child of a foreign grad student in the US, and we could never have made it without my mom working full time at near miniumum wage, access to subsidized housing and healthcare coverage. And we were in better mental and physical condition to deal with the pressures of living on a small income.

It's not impossible survive and save up on very low wage, but the high and rising cost of healthcare, education and housing is making it harder and harder. Add to that job insecurity and the wear and tear of working poor life. It's just possible, but we can do better for them, and easily.

Just because something worse is out there is no reason to race to the bottom. Yes, most of the world have less stuff than the average Walmart greeter, but that's no reason to force American working poor into shanties. When the least of us suffers, we as a society suffers through higher crime and greater social instability.

Plus, Wal-mart is shifting a good chunk of its labor costs onto the public, making local communities the net revenue loser.