Evaluation of Monitoring Potential of Walmarts Board of Directors

Summary

The principal responsibility of the board of directors is to oversee the execution of strategies, plans, and activities performed by a companys management. There are various areas that can be considered for evaluating the monitoring effectiveness of the board of directors. This paper evaluates the monitoring potential of Walmarts board of directors.

Corporate Governance Practices

The corporate governance practices of Wal-Mart ensure the independence of the board of directors. In this regard, the foremost indicator of the boards ability to effectively monitor managements decisions and activities is the degree of independence. At present, 10 out of 16 board members of Wal-Mart are independent, which implies a strong monitoring potential of the board (Annual Report 2014, 2014). Moreover, there are six board committees that are responsible for monitoring the performance of the companys board of directors and management. These committees include the following.

Audit Committee (4 members)
Compensation, Nominating and Governance Committee (3 members)
Executive Committee (5 members)
Global Compensation Committee (4 members)
Strategic Planning and Finance Committee (6 members)
Technology and eCommerce Committee (5 members) (Schedule 14A Proxy Statement Pursuant to Section 14(a) of the Securities, 2014).

Leadership Structure of Board

An important area of consideration is the leadership segregation at Wal-Mart, which signifies the efficiency and effectiveness of the board to oversee strategic decisions and managements activities. For this purpose, the company segregated the role of Chief Executive Officer and Chairman of the board of directors since 1988 (Schedule 14A Proxy Statement Pursuant to Section 14(a) of the Securities, 2014). As a result of this, the monitoring potential of the company increased.

Strengths and Weaknesses of Board Structure

The strengths and weaknesses of the structure of Wal-Marts board of directors are discussed in the following.

Strengths

The foremost strength of Wal-Marts board of directors is its independence, which is regarded as a key to ensuring effective oversight by the board. At present, there are 16 directors of the company, out of which 10 are independent directors. Apart from this, it is also pertinent to mention here that the board members are committed to effectively discharging their overseeing responsibilities. During the last year, 97 percent attendance was recorded in all board meetings, which reflected a high level of commitment by board members (Annual Report 2014, 2014).

Weaknesses

By taking into account the profiles of existing directors and potential candidates for directorship at Wal-Mart, it could be highlighted that there are only a few individuals on the companys board who represent different industries and corporations. This weakness can affect the companys vision and its strategies due to the unavailability of diverse board members. For instance, Wal-Mart currently places a strong emphasis on its online retailing business. This strategy requires a visionary plan to undertake activities in an effective manner. However, by looking at the board members profiles, it can be observed that existing board members do not have experience of working in such a market, which would create hurdles for efficient decision-making (Annual Report 2014, 2014).

Ethical Concerns

In the past, the company faced several ethical issues including the forced exclusion of Tom Coughlin in 2005 from Wal-Marts board of directors. He was charged with embezzling accounts (Barbaro, 2006). Moreover, there were criticisms related to the companys policies and strategies related to its recruitment. Apart from these, there were no other significant ethical concerns reported against the business.