Wal-Mart's Public Relations Problem

Aug. 18, 2006 — -- Andrew Young was hired to help Wal-Mart Stores Inc. with its public relations.

It didn't quite work out that way. This week ended with Wal-Mart distancing itself from the civil rights icon.

Earlier this year Young, the former mayor of Atlanta and lieutenant for Martin Luther King Jr., became chairman of Working Families for Wal-Mart, a nonprofit organization funded by the retail giant to combat criticism of the company.

Young was considered an asset as Wal-Mart moved into minority and urban areas. With more than 1,100 discount stores in the United States, Wal-Mart has "just about saturated suburbs and rural America," says Dorian Warren, of the Harris School of Public Policy at the University of Chicago. "So the only untapped markets that are left for Wal-Mart to expand into for other stores are inner cities."

"Wal-Mart hired Young to deflect a lot of the criticism Wal-Mart's receiving among minority communities and urban markets they're really trying to break into," says Nu Wexler of Wal-Mart Watch, a group funded by union and liberal interest groups.

Part of Young's job was to defend Wal-Mart from the charge that it drives mom-and-pop stores out of business.

Making that case, Young told the Los Angeles Sentinel, a black community newspaper, that those small shops "are the people who have been overcharging us, selling us stale bread and bad meat and wilted vegetables. ... They've ripped off our communities enough. First it was Jews, then it was Koreans and now it's Arabs. Very few black folks own these stores."

Wal-Mart Watch circulated and publicized Young's comments. By Thursday night, Young had apologized and resigned as chairman of Working Families for Wal-Mart. And Walmart began to distance itself from the man it thought would help it, saying in a statement that "Young's comments do not represent our feelings. ... We were outraged."

Young's comments became ammo in a war that Wal-Mart is waging against an ever-expanding force of bashers. Expansion plans in Chicago have hit a serious snag; Maryland legislators have tried to force the retailer to spend more than 8 percent of its income on health insurance for its workers. Currently, the company provides health innsurance for less than 50 percent of its 1.3 million member U.S. work force.

Democrats on the campaign trail now regularly attack the company -- often to prove their working class and environmental credentials -- on charges that range from discrimination to not providing health insurance to paying low wages.

One such example: Sen. Joe Biden, D-Del., this week in Des Moines, Iowa, proclaimed that "Wal-Mart's formula is how they can survive a race to the bottom."

The presumed frontrunner for the Democratic presidential nomination has a more intriguing history with the big-box retailer. From 1986 through 1992, back when she was first lady of Arkansas, Sen. Hillary Clinton, D-N.Y., sat on the corporate board of directors of the Bentonville, Ark.-based company. Last year she returned a $5,000 campaign donation from Wal-Mart; a spokeswoman said the money was returned "because of serious differences with current company practices."

"Wal-Mart has become a symbol, just like Willie Horton became a symbol," says crisis management consulatant Eric Dezenhall. "It's a symbol of too much power in the hands of too few."

And the company is figuring out how to fight back.

"We as a company have to develop the skills to operate in a more complex world," Wal-Mart president and CEO H. Lee Scott Jr. told TV interviewer Charlie Rose earlier this month.

But with this latest incident, Wal-Mart finds itself in a spot no company wants to be in -- needing a PR campaign to defend its PR campaign.

Charles Herman contributed to this report.