A SUCCESSION AT WAL-MART PUTS AN INSIDER AT THE HELM
c.2013 New York Times News Service
As Wal-Mart enters a fiercely competitive holiday season while still hampered by sluggish sales, the company’s board announced Monday that Michael T. Duke, its chief executive, would retire early next year and a longtime executive, C. Douglas McMillon, would replace him.
McMillon, 47, president of Wal-Mart International, will take the helm Feb. 1, just after the holiday season, the company said. He was also elected to the board effective immediately and Duke will help with the transition.
“Doug is uniquely positioned to lead our growing global company and to serve the changing customer, while remaining true to our culture and values,” S. Robson Walton, chairman of Wal-Mart’s board, said in a statement. “He has broad experience — with successful senior leadership roles in all of Wal-Mart’s business segments — and a deep understanding of the economic, social and technological trends shaping our world.”
Duke, 63, has been the company’s chief executive since 2009 and was vice chairman from 2005 to 2009.
His departure had been rumored for several months, industry watchers said. “The question was not whether, but when,” said Craig Johnson, president of Customer Growth Partners, a retail consulting and research firm. The choice to name McMillon — who will be the youngest chief executive to lead the company since its founder, Sam Walton — elevates an insider with deep roots in the company.
He joined Wal-Mart in 1984 as a summer associate in a distribution center, then rejoined in 1990. From 2006 to 2009, he was president of Sam’s Club, Wal-Mart’s warehouse stores division.
McMillon’s new salary and compensation package were not revealed Monday. His salary for fiscal 2013 was nearly $930,000, while his total compensation was slightly more than $9.5 million, according to the company.
Duke’s salary was about $1.3 million, and his total compensation was roughly $20 million. After retiring, he will stay on as an adviser for a year.
“The opportunity to lead Wal-Mart is a great privilege,” McMillon said in the company’s statement. “Our company has a rich history of delivering value to customers across the globe and, as their needs grow and change, we will be there to serve them.”
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At the shareholders’ meeting in 2012, McMillon told a story of receiving a Post-it note about the price of trilene fishing line from Wal-Mart’s founder, “Mr. Sam,” in 1991, his first day on the company’s merchandising team. Kmart’s price, the note said, was just a bit lower than Wal-Mart’s.
“This is from Sam Walton,” McMillon’s new boss said, he recounted. “Have you fixed it?”
At Wal-Mart, a connection to “Mr. Sam” is currency.
McMillon’s main competitor for the job, industry experts said, was probably William S. Simon, chief executive of Wal-Mart U.S. Simon joined Wal-Mart in 2006 from Brinker International, a company that owns restaurant franchises like Chili’s Grill and Bar.
“It looks like they took an insider over an outsider,” said Sucharita Mulpuru, an analyst at Forrester.
“Bill Simon joined more recently, he had more of a restaurant background,” Mulpuru said. “Doug McMillon is more of a company lifer, so to speak. He’s been at the company a long, long time.”
In recent years, Mulpuru said, the international arm of Wal-Mart has been a greater engine of growth than either the domestic division or Sam’s Club, and since 2009 McMillon has been running the international operation. In October, the company announced it would open up to 110 new facilities in China by 2016.
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In recent years, Wal-Mart’s international division has been touched by scandal, though McMillon has not been implicated. The Justice Department has been investigating whether Wal-Mart violated the Foreign Corrupt Practices Act in Mexico and other countries, since The New York Times reported last year that officials at Wal-Mart de Mexico paid bribes to grease the wheels of expansion.
Brooke Buchanan, a Wal-Mart spokeswoman, said the activities being investigated preceded McMillon’s leadership of Wal-Mart International.
In its most recent quarterly earnings release, Wal-Mart acknowledged that it faces headwinds going into the holiday season. With its core customers still encountering stagnant wages and persistent unemployment, the company trimmed its yearly earnings forecast.
In addition to those challenges, McMillon will take Wal-Mart’s helm as the retailer faces challenges from organized labor. Unions and their allies are threatening to stage protests at 1,500 Wal-Mart stores across the nation on Black Friday to demand that the company increase wages.
And last week, the general counsel of the National Labor Relations Board accused Wal-Mart of illegally firing or otherwise retaliating against workers in 14 states for pushing for higher wages.
In recent weeks, Wal-Mart has been busily promoting its holiday deals in one of the most fiercely competitive sales seasons in recent memory. Major retailers are already slashing prices and many have been chipping away at the lure of Black Friday deals by offering them even earlier, driven partly by the short window this year between Thanksgiving and Christmas. Nonetheless, this next few days will probably be among the busiest of the holiday season.
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David Tovar, Wal-Mart’s vice president for corporate communications, said the timing of the announcement about McMillon, just four days before Black Friday, was dictated by the schedule of company board meetings — the November meeting is closest to the company’s new fiscal year, which begins Feb. 1.
“This was solely his decision, a personal decision Mike made to retire at this point,” Tovar said of Duke. “Other than playing a lot of golf, I don’t think he’s going to be working on anything at this point.”
When Duke leaves the company, he will be entitled to more than $113 million in deferred compensation.