Walmart De Mexico

Case 3.9 – Walmart de Mexico

1.) Possibly the most obvious control that Walmart could have implemented was that it could have had upper management/top level executives within Walmart’s U.S. division tell the executives of Walmart de Mexico and the other foreign subsidiaries that the use of bribery is forbidden. Anyone who was found to be in violation of this policy would be subject to immediate termination. This would discourage bribery, because the executives would be afraid to risk the loss of their jobs. Bribery is somewhat common in Mexico, so the executives may have been able to rationalize their bribes that way, by saying “everyone does it.”

Another possible control that could have been implemented was one that was actually mentioned in the case. In 2011-2012, Walmart created a network of international “FCPA compliance directors” that would report to a “Global FCPA Compliance Officer” at their Bentonville headquarters. This showed that Walmart was serious about stopping the FCPA violations. Had this policy been in place earlier, it may have deterred the foreign executives from performing the bribery.

Another control that could have been implemented involves restricting disbursements unless all appropriate documents are presented and authorized by upper level management. Having this authorization would help prevent this bribery because there would be someone other than the bribing executives reviewing the disbursements and documentation. Internal auditors can test this control periodically and report on any departures from the control to appropriate management. This gives two Walmart two different opportunities to find the bribery. Either the management authorizing the disbursement could catch it, or the internal auditor could catch it.

It’s hard to tell if these controls would have been cost effective for Walmart. This is because it is difficult to measure the costs in dollars. Walmart was hit with other costs for the bribery. Having their internal auditors test the control regarding appropriate documentation and authorization may increase the salary payments to their internal auditors, since it is a control they would have to test that they didn’t have to test before. Also, there could be other costs involved with the creation of the FCPA compliance directors and the compliance officer. On the other hand, costs can be expressed in terms other than dollars. For instance, Walmart likely lost the trust of some of their investors and the FCPA violation and investigation probably hurt the Walmart image. The benefits involved with detecting and preventing the bribery definitely outweigh the costs of implementing these controls, though.

2.) If an accountant of a public company discovers that the client has violated a law, they should tell their immediate supervisor or manager of the issue. It is then the responsibility of the supervisor