April 22, 2008
Transparency and the Public Eye: Wal-Mart's Shank Controversy

First off, since the following post is about reputation, I wanted to share with everyone the resulting white paper from the recent PR News Webinar I participated in with Peppercom. The paper is entitled "D=BC²: Are You a Digital Einstein?" See more here.

Sometimes, you can't help but wonder what companies are thinking. But here's a rule of thumb that I think might help anyone out in their decision-making process. If it's the type of move that you don't want the public to know about, then don't make it. Transparency is crucial.

Take, for instance, all the blogosphere discussion regarding Wal-Mart from earlier this month. For those who haven't heard the story, a Wal-Mart employee suffered serious brain damage after being hit by a truck in her van several years ago. She eventually won a settlement with the trucking company, but Wal-Mart decided to sue her in order to recoup medical expenses that had been paid out for her injury. As if this didn't seem suspect enough, it was complicated by the fact that the amount Wal-Mart was asking for was more than the amount the woman received, after lawyer fees. Ultimately, Wal-Mart took the funds remaining in the woman's trust, which amounted to approximately $277,000.

Keith Olbermann and others went after the company, and the corporate communications director for Wal-Mart first responded to the resulting flurry of negative buzz on the blogosphere by saying that "Wal-Mart's benefit plan was entitled to more than the amount that remained."

While Wal-Mart may have seen the move as magnanimous, not asking for all they were entitled to, to many on the outside, it looked particularly cruel. The story was made all the more damaging for Wal-Mart because the brain-damaged former employee was the mother of a soldier who was killed in the Iraq war and is now confined to a nursing home. According to accounts as this story was widely reported, Debbie Shank--the employee--suffers from short-term memory loss and constantly is hearing the news about her son's death as if for the first time.

Influential blogger Jeff Jarvis was particularly hard on the company, saying:

No amount of PR and no number of company blogs can make a bad company look good -- or smart. Wal-Mart is the poster pig for that lipstick. Again and again, they prove themselves to be mean, greedy, and stupid. Again and again, they and their PR people are forced to apologize. And it's clear: They never learn. The culture remains venal. Management remains blind to the fact that their moral myopia is bad for the brand and bad for business. Even the PR company, Edelman, fails to realize that this is bringing them down.

Shortly thereafter, Wal-Mart decided to change their decision, releasing a statement from EVP Pat Curran that said, "Occasionally, others help us step back and look at a situation in a different way. This is one of those times. We have all been moved by Ms. Shank's extraordinary situation."

But, of course, the damage control after the fact is clouded in bloggers and the public eye by the fact that it seems they only changed this decision after it caught the public eye--that those claiming to "be moved" by the situation were not worried with it at all as this case passed its way through the court system.

Perhaps Wal-Mart's upper management really didn't know what happened. Perhaps they really did intervene. The problem here is that, without substantial regret displayed on the company's part, it looks like a case of being sorry for getting caught more than being sorry for what happened to Debbie Shank.

Saddest of all is the fact that this looms much larger over what many felt was a positive move when Wal-Mart launched an uncensored blog for its employees in charge of buying items for stores to review those products, and give their honest opinion in the process. I really felt the decision by Wal-Mart to give their employees more of a public voice was a sign that the company was being a little bit more savvy in its approach to digital culture, but all of the fallout from the Shank situation has been a case of one step forward and eight steps back for their reputation.

Of course, Wal-Mart is operating with major cache...They are entrenched in many parts of the country, and the world. They have the massive girth as a company to let a little of their reputation erode over time. How many of these hits they can take before they start to dull their edge, though, is a crucial question for them to ponder--especially when, in the grand scheme of things, a little more strategic planning and thought to situations like these beforehand would have kept them from sullying their reputation so publicly.