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Giving Something Back

“I believe that every right implies a responsibility; every opportunity an obligation; every possession a duty.”

—JOHN D. ROCKEFELLER, JR.

By now, I hope I’ve given you a pretty clear impression of what my business priorities have been over the years. If I’ve explained myself well, you know that I have concentrated all along on building the finest retailing company that we possibly could. Period. Creating a huge personal fortune was never particularly a goal of mine, and the proof of that lies in the fact that even to this day most of my, and my family’s, wealth remains in the form of Wal-Mart stock. I think most people in our position would have hedged their bets a long time ago and diversified into all kinds of investments. As it’s happened, though, our very simplistic, very personal investment strategy has turned out far better than anyone could ever have expected. So Wal-Mart stock has made the Waltons a very wealthy family —on paper anyway.

I won’t deny for a second that my approach has been single-minded. I’ve concentrated on keeping our Wal-Mart stores and Sam’s Clubs on track, and I have to admit that I never have spent a great deal of my time, or energy, thinking about what some of the broader implications of our family’s wealth could be. Maybe it’s because we have never had any intention of liquidating our stock. Even so, the annual dividend income from that stock has become large in its own right, and it’s that income which represents the actual wealth available to us.

As I told you early on, this kind of wealth seems to naturally attract all kinds of folks who just want us to give them a handout. We have never been inclined to give any undeserving stranger a free ride, and we will never change our minds about that. Nor do we believe that because we have money, we should be called upon to solve every personal problem that comes to our attention, every problem of the community, the state, or, for that matter, the country.

We do, however, believe in worthy causes, and we realize how fortunate we’ve been as a family. So we are committed to using our personal resources for as much benefit as possible—in the areas we feel need the most help, employing the methods we think hold the most promise. And our family’s gifts reflect a wide variety of interests, spread across numerous organizations, with a heavy emphasis on education.

Most of the giving we have done has been either anonymously, or linked to strict requests for no publicity, and I’m not going to go into the financial details of our charitable activities here because I don’t think it’s anybody’s business but our own. I will tell you, though, that we think we do our part.

In addition to a lot of educational institutions, recipients of Walton family gifts include church groups and community projects like zoos and libraries and recreation facilities. We support hospitals and medical research programs. We fund arts groups and theater groups and symphonies. We give to conservation and environmental causes and veterans’ groups, as well as to economic development groups and free enterprise groups. We support public schools and private schools. Since charity almost always begins at home, many of the recipients are in the communities or at institutions to which Helen and I, or our children, have personal ties. But we have also supported national organizations and even a few local causes of national importance in such cities as New York and Washington. Helen has been actively, and publicly, supportive of a number of institutions, including the Presbyterian Church, the University of the Ozarks, and the National Museum for Women in the Arts. And I have supported such groups as the Citizens Against Government Waste, Students in Free Enterprise, and the Arkansas Business Council—which folks around here insist on calling “The Good Suit Club.”

We also have some pet projects to which Helen and I together are strongly, and personally, committed. In the last ten years we have funded a special scholarship program we started which sends kids from Central America to college here in Arkansas. Right now we’ve got about 180 of them enrolled at three different Arkansas schools, and we pay about $13,000 a year per student to provide tuition, transportation, books, and room and board. We got the idea while we were traveling around down in that part of the world. And when we learned that the then Soviet Union and Cuba had programs to teach their values to kids from other places, we decided Americans ought to be doing the same sort of thing with our values. We want kids to learn about the tremendous potential of the free enterprise system and to see for themselves what all the advantages are of a stable, democratic government. Besides that, it will help some of these students, who wouldn’t have otherwise received any college education, to return to their countries and do something about their serious economic development problems. Who knows, maybe one day some of them will be running Wal-Marts or Sam’s Clubs in Honduras or Panama or Guatemala—or even Nicaragua. Closer to home, the Walton family sponsors seventy scholarships of $6,000 each every year for children of Wal-Mart associates.

So we feel pretty good about what we’ve done up until now. But I do realize there’s a bigger issue at stake here, and I’ve been doing a lot of thinking on it lately. As a family, we’ve been in the planning stages of how we want to leverage our resources for a while now, but really the serious business of getting it done will begin after I’m gone. Helen and I expect that an amount at least equal to our share of the family assets will go to nonprofit organizations over a number of years.

In all likelihood, education is going to be the issue we focus on the most. It is the single area which causes me the most worry about our country’s future. As a nation, we have already learned that we must compete worldwide with everybody else, and our educational process has more to do with our ability to compete successfully than anything else. Unless we get ourselves on the right track pretty quickly, and start rebuilding our system into one that compares favorably with the rest of the world’s, we could seriously jeopardize the future of this great country of ours. Frankly, I’d like to see an all-out revolution in education. We’ve got to target the inner-city schools and the rural poverty pockets like the Mississippi Delta and figure out a way to make a difference. We have to start at the preschool level, and develop ways to change the environment for children so they have a chance to stay in school and learn to value their educations. We have to look at the effects of so many single mothers and fathers leaving their kids at home with no guidance, and find ways to help them encourage their kids.

Incidentally, my share of the proceeds from this book will go to the New American School Corporation, which is a private initiative started by business leaders who have pledged to raise $200 million for the development of “break-the-mold schools.” It’s a true nonpartisan effort aimed at helping American schools meet the six goals established by a national governors’ task force, which was convened by President Bush, and chaired by Arkansas governor Bill Clinton.

As the family focuses more broadly on educational reform, we want to be very careful. We are devout believers in the Wal-Mart way of doing things, and we want some basis by which to measure our investment. We’re not satisfied that the traditional methods by which charitable foundations are operated really meet our criteria. Some people have crowed a great deal about all their philanthropy over the years, but too many of these foundations, I suspect, were only begun as tax shelters without much real sense of purpose. Many of them seem to have become very nice places to work for a small group of folks who have built up pretty thick crusts of administration and bureaucracy. Those are two of the things we have fought the hardest to keep out of our company, so naturally we don’t want them clogging up our nonprofit efforts.

We are going to insist that whatever program we support incorporates those same values. When it comes to college educations and scholarships, for example, I’ve always favored programs that require the recipients to work and kick in some of their own money. For that matter, I’ve always preferred to hire people who had to at least partly work their way through school—no doubt because of my own background. The secret lies in motivating kids who aren’t getting educated today to want to put themselves through school, and to make them understand the rewards they can expect when they do.

So we are going to approach philanthropy with the same lack of reverence we gave to the traditional methods of the retail business when we started out there. We are going to see if we can’t shake up some of the time-honored assumptions about what you can teach people, about what you can do with people whose self-esteem has been beaten down, and about how you can motivate ordinary people to do extraordinary things. As just one example of the kinds of folks we’re calling on in putting this effort together, we asked Lamar Alexander, the former governor of Tennessee and now U.S. Secretary of Education, to attend our last family meeting here in Bentonville and talk with us about some of the ideas he’s come across for improving our public education system.

We don’t come by this passion for improving education out of some fuzzy-headed notion or something we read somewhere. We see the need every day at Wal-Mart. In the old days, just being bright and willing to work hard was enough to give you all the opportunity you needed at our company. But we are such a sophisticated company today, and have moved so rapidly in the areas of technology and communications, that skill and knowledge in these fields have become a vital part of our business. None of this is news to anyone who keeps up with world business trends. This is the direction in which we’re all headed. And to succeed, we’re just going to have to do a better job of educating and training our work force.

One aspect of this whole philanthropy issue that has annoyed me considerably over the years is the criticism by some of our detractors that Wal-Mart doesn’t do its fair share of giving to charities. The criticism seems to come from folks who say we don’t meet the standard guidelines for corporations, guidelines which are set, I guess, by the people who run the charity business.

Wal-Mart, like many other corporations, conducts a very aggressive United Way campaign which meets with great success among our associates every year. In fact, we keep our United Way goal sign in the yard right outside my office here so everybody can see how we’re doing. We strongly believe in United Way because—in spite of all the publicity it received recently for some problems in the national office—most all the money that’s collected in these campaigns is directed locally. We believe in locally directed charities, so we have a matching grant program for associates who want to raise money for charities of their choice. We’re also a big contributor to the Children’s Miracle Network Telethon—which supports locally directed children’s hospitals. Last year, Wal-Mart and its associates were the largest single contributors to this campaign—at $7.5 million.

I think quite a few companies use charitable giving guidelines as a way to say, in effect, “We gave at the office,” when it comes to thinking about what overall good the companies should be accomplishing. In my opinion, Wal-Mart is an entirely different sort of enterprise from that and I would argue that our relentless effort to improve our business has always been tied to trying to make things better for the folks who live and work in our communities. We have built a company that is so efficient it has enabled us to save our customers billions of dollars, and whether you buy into the argument or not, we believe it. That in itself is giving something back, and it has been a cornerstone philosophy of our company.

For example, we did $43 billion in sales this year. For the last ten years—1982 to 1992—we have averaged sales of, say, $13 billion a year. So that’s about $130 billion in sales. If we only saved our customers 10 percent over what they would be paying if we weren’t there—and I think that’s very conservative—that would be $13 billion we’ve saved them. That’s $13 billion which is a product of a free market system that allows us to operate efficiently, and it’s the reason our customers love us so. The truth is that Wal-Mart has been a powerful force for improving the standard of living in our mostly rural trade areas, and our customers recognize it.

We do a lot of things to take care of our own. Some of them you already know about. Our associates have almost $2 billion in their profit sharing fund, some of which I suppose the company could have given to charity instead. We have a relief fund for associates who are the victims of natural disasters. And each year, every Wal-Mart store sponsors one student in its community to a $1,000 scholarship.

Beyond that, we feel very strongly that Wal-Mart really is not, and should not be, in the charity business. We don’t believe in taking a lot of money out of Wal-Mart’s cash registers and giving it to charity for the simple reason that any debit has to be passed along to somebody—either our shareholders or our customers. A few years ago, when Helen convinced me that our associates here in Bentonville needed a first-class exercise facility, she and I paid the million dollars in construction costs ourselves, plus an annual subsidy for a few years to get it started. We paid for it to show our sincere appreciation to the associates, but also because I don’t believe in asking the customers or the shareholders to pay for something like that—as worthy a cause as it may be. By not designating a large amount of corporate funds to some charity which the officers of Wal-Mart may happen to like, we feel we give our shareholders more discretion in supporting their own charities. And I have been particularly proud of the really generous community support shown by some of our shareholders who have been with us since way back when—especially the early store managers. Willard Walker and Charlie Baum are two guys who have just done great things for the community with some of what they’ve accumulated through their Wal-Mart holdings.

Maybe the most important way in which we at Wal-Mart believe in giving something back is through our commitment to using the power of this enormous enterprise as a force for change. One of the better examples of what I’m talking about is our Bring it Home to the U.S.A. program, which we started in 1985 in response to the soaring U.S. trade deficit.

Wal-Mart, like every other American retailer, is a huge importer of merchandise from overseas. In some cases—too many in my opinion—importing is really our only alternative because a lot of American-made goods simply aren’t competitive, either in price, or quality, or both. We committed ourselves to seeing if we could do anything to improve the situation. The remedy we envisioned wasn’t some blind patriotic idea that preaches buying American at any cost. We, like any other retailer, will only buy American if those goods can be produced efficiently enough to offer good value. We’re not interested in charity here; we don’t believe in subsidizing substandard work or inefficiency. So our primary goal became to work with American manufacturers, and see if our formidable buying power could help them deliver the goods and, in the process, save some American manufacturing jobs. I sent out an open letter to our suppliers, inviting them to work with us on the program. “Wal-Mart believes American workers can make the difference,” I told them, “if management provides the leadership.”

We were surprised ourselves at the results. It turned out that if Wal-Mart committed to high volume purchases well in advance of shipping deadlines, a lot of American manufacturers could save enough on the purchase of materials, personnel scheduling, and inventory costs to realize significant efficiency gains. So, in fact, they could turn out a wide variety of merchandise—flannel shirts, candles, men’s knit shirts, ladies’ sweaters, bicycles, beach towels, film, videotapes, furniture, even toys—at competitive prices. We also took a close look at our overseas buying practices and discovered a number of hidden costs, such as having to own inventory from the time it leaves port on a ship. Using that data, we developed a formula which enabled us to make a true apples-to-apples cost comparison of buying something overseas versus buying it at home. Now, if we can get within 5 percent of the same price and quality, we take a smaller markup and go with the American product.

What we learned was that we had fallen into a pattern of knee-jerk import buying without really examining possible alternatives. In the past, we would just take our best-selling U.S.-made items, send them to the Orient, and say, “See if you can make something like this. We could use 100,000 units of this, or more, if the quality holds up.” I’m sure a lot of other retailers do the same thing. Today, we instruct our buyers to make trips to places like Greenville, South Carolina; Dothan, Alabama; Aurora, Missouri; and hundreds of other out-of-the-way places in Pennsylvania, New York, Ohio, or New Hampshire, before just routinely dashing off a letter of credit to the Far East. If we could all take a little extra trouble to work some of these deals out—and the manufacturers will continue to come up with their own creative programs—I think there’s still a tremendous amount of untapped potential left in this idea.

As usual, some of our critics—mostly unions in this case—took a shot at me for this idea. They said I was wrapping myself in the flag and pulling a typical Sam Walton promotion to hide the fact that we sell a lot of import goods. These folks, I’m afraid, are really living in the past. They don’t believe in a free market.

They’re not interested in new solutions. And they only care about jobs if they are union jobs, many of which, frankly, have priced themselves out of the market either with unrealistic wages or total inflexibility. With this approach, we estimate we have saved or created almost 100,000 American manufacturing jobs. So before anybody dismisses Bring it Home as a publicity stunt, they should listen to the people whose jobs were saved, or created, by the program.

FARRIS BURROUGHS, PRESIDENT, FARRIS FASHIONS—BRINKLEY, ARKANSAS:

“It’s the best thing that ever happened to Brinkley, and certainly the best thing that ever happened to me. Before, we had a contract with Van Heusen for Penney’s and Sears, but in 1984 they told us they were moving everything to China. We were struggling from season to season with ninety jobs, when I got this call from a guy claiming to be Sam Walton. It turns out he actually was Sam Walton, and he wanted to know if we thought we could make 50,000 dozen flannel shirts for him. I’ll tell you what, though. He’s the only guy I ever worked for who looked me right in the eye and said, ‘Son, if you can’t make money off this project, don’t do it.’ Most retailers couldn’t care less whether the manufacturer makes money or not.

“Anyway, today we’re making about two and a half million Wal-Mart shirts, and we’ve gone from 90 employees the week Mr. Sam called to 320 today. And we know where it comes from. Every Christmas, we give our employees Wal-Mart gift certificates.”

There’s no charity at all involved in this program, and, in fact, I’m proud to say that it benefits us at Wal-Mart in a very direct way. Every job we save creates another potential Wal-Mart customer who’s not worrying about where his or her next dollar’s coming from. They have a job, and we have a customer. So we all come out ahead. Farris was one of our early success stories, and since then we’ve worked out all kinds of Buy American deals with small and large manufacturers, including Fieldcrest Cannon, 3M, Sunbeam, Mirro Foley, U.S. Electronics, Kentogs, Capital-Mercury, Mr. Coffee, Lasko, and Huffy.

From the time the program began in 1985, until the end of last year—1991—we estimate that we bought American-made goods with a retail value of more than $5 billion that would previously have been purchased overseas. And just to keep everybody thinking along these lines, we always post our latest tally and our latest Bring it Home success story right by the door where all our vendors have to enter our building to make sales calls.

In the same spirit, we’re in the early stages of an environmental initiative, encouraging suppliers and manufacturers to eliminate any wasteful practices—such as unnecessary packaging—that we can. Also, we have a fairly new program in which we donate 2 percent from purchases of Sam’s American Choice products—a selection of our own private label products —toward scholarships for students studying mathematics, hard sciences, and computer sciences.

We aren’t the least bit naive about how big a stick Wal-Mart swings in the world of retailing these days. We know we can be very influential—powerful if you prefer. So today I think it’s important for our people to remember that things aren’t the same as the old days, when we were the scrappy underdog having to fight for every single break. We still want to drive a hard bargain, but now we need to guard against abusing our power. We want to find more ways, like Bring it Home, in which we can use our influence to give something back.