story by Kim Souza
ksouza@thecitywire.com
The number of related-party transactions among execs and board members with Wal-Mart Stores continues to be higher than its competitors such as Costco and Kroger, according to recent Proxy filings with the federal Securities and Exchange Commission.
Corporate compliance experts say companies that began as family enterprises often take time to thin out the family ties within the board of directors and top management teams. It’s been nearly 53 years since Sam Walton first opened Wal-Mart Stores but family ties remain deep in the retailer’s board of directors and is also spreading wider between CEO Doug McMillon, executive vice president Rollin Ford and former CEO Mike Duke who, like McMillon, is also a company director.
A recent Wal-Mart proxy filing details nearly a dozen related party transactions between its board of directors and corporate officers/executives, which by law must be disclosed to shareholders.
One long-term related party transaction is between the Walton Family, specifically, Jim, Rob and the John T. Walton Estate who are owners of Arvest Bank and Wal-Mart, to which the Walton Family owns roughly 50%. The banking group leases space inside Wal-Mart Stores for branch operations paying the retailer about $500,000 annually in rent.
One other longtime relationship noted in the proxy is between the University of Arkansas and Wal-Mart Stores. Each year the retailer leases space at the UA to conduct its annual shareholder meetings, events as well as academic studies throughout the year. Last year Wal-Mart paid the university $1.5 million, including $900,000 for the use of facilities in connection shareholders’ meeting,
The family connection to the University of Arkansas is that UA Chancellor Dr. David Gearhart is the brother of Jeffrey Gearhart, an executive officer at Wal-Mart Stores. Chancellor Gearhart is slated to retire in July. Wal-Mart said it will in fiscal 2016 continue to use UA facilities for similar events and pay the university for studies and programs.
TIES TO MCMILLON
CEO McMillon has close ties to three family members who also work at Wal-Mart or for a supplier to the retailer, according to the proxy filing.
McMillon’s sister, Lori Haynie, is an executive officer at Mahco Inc. Last year Wal-Mart paid Mahco and its subsidiaries about $19.3 million in connection with sporting goods purchases and related products. The retailer expects to make similar purchases from Mahco this year.
McMillon’s brother and sister-in-law each work at Wal-Mart Stores, according to the proxy filing. His brother-in-law Greg Bray is a senior director in the finance department, earning roughly $182,900 in salary last year. Bray’s benefits are worth $108,400 which included 651 shares of restricted stock. He joined Wal-Mart in 2002.
Nichole Bray, sister-in-law to McMillon, is a senior manager in the company’s Information Systems Division, For fiscal 2015, Wal-Mart paid her a salary of approximately $126,800 with benefits worth $75,100.
DUKE,ROLLIN FORD CONNECTIONS
Director Mike Duke’s son-in-law, Stephen Weber, is a senior manager in Wal-Mart’s Information Systems Division earning a salary of $128,600, with benefits worth another $49,700.
Brittney Duke, a senior director in Wal-Mart’s Marketing department is the daughter of Mike Duke. She was hired by Wal-Mart on Feb. 1 from Saatchi & Saatchi X at a salary of $120,000. Wal-Mart expects she will receive compensation and other benefits in excess of $120,000 from the company in fiscal 2016
Rollin Ford, a chief administrative officer at Wal-Mart Stores, has three family members who also work for the retail giant.
Timothy Togami is a senior director in Wal-Mart’s Human Resources department and is the brother-in-law of Ford, according to the filing. For fiscal 2015, Wal-Mart paid
Togami a salary of $179,700, with another $106,800 in benefits.
Ford’s daughter, Jessica Ford Salmon, is a senior manager at Sam’s Club. For fiscal 2015, Wal-Mart paid her a salary of $94,500 with benefits of $29,700.
Brian Salmon is a senior buyer at Wal-Mart, and also the son-in- law of Ford. For fiscal 2015, Wal-Mart paid Salmon a salary of $85,400, with benefits worth another $42,600.
COMPARATIVE CONNECTIONS
The City Wire looked at competitor data for Kroger and Costco and found the related-party transactions there to be far less.
At Costco there was just one instance of a director’s family member being directly employed by the company. Executive Dennis Zook’s son was employed by the retailer in 2014 at a salary of $148,200, also earning a bonus of $36,147 and a grant of 2,340 shares of stock.
There were no such family references made by Kroger. The grocery giant did reference $10 million in purchases from Staples whose CEO Ronald Sargent is also a board member at Kroger.
Alan Ellstrand, a corporate governance expert at the University of Arkansas, said he was somewhat surprised at the number of family tie relationships at Wal-Mart compared to competitors.
“Perhaps it relates to the unique corporate culture at Wal-Mart, who has always done business with those it knows. This is also in keeping with the regional culture. It’s always been part of the Wal-Mart DNA to keep things close to the vest,” Ellstrand said.
He said while the number of related parties are greater at Wal-Mart than other companies, so is the overall size difference.
“I really don’t see that there has ever been any negative consequences of Wal-Mart hiring those it knows. Early on Sam Walton did the same thing,” Allstrand said.
Looking at other companies in the region like J.B. Hunt Transport, there are very few, if any instances of related party transactions pertaining to directors’ families.
Bryan Hunt, son of founders J.B. and Johnelle is a director, but has never worked in an executive position within the trucking firm. Instead he operates auto dealerships and auctions. There are no related party transactions involving his business interests.