* Pension fund files lawsuit against retailer in Delaware
* CalSTRS holds more than 5.3 mln Wal-Mart shares
* Fund stops short of calling for CEO to step down
By Brad Dorfman and Tom Hals
May 4 The second-largest U.S. public pension
fund said that allegations of bribery in Mexico and a cover-up
by top management at Wal-Mart Stores Inc raise the
question of whether top leadership should remain in place at the
But officials with the California State Teachers' Retirement
System, which sued current and former Wal-Mart executives on
Thursday, stopped short of calling for CEO Mike Duke to step
"The leadership question is on the table," Jack Ehnes, CEO
of CalSTRS, said when asked Friday whether Duke, a defendant in
the lawsuit, should step down.
Ehnes, however, said that the purpose of the lawsuit was to
determine whether the alleged actions occurred and declined to
say specifically whether Duke should leave the CEO post.
Ehnes spoke during a conference call with reporters. His
fund holds more than 5.3 million Wal-Mart shares.
A Wal-Mart spokesman declined to comment on Ehnes' statement
about Wal-Mart's leadership.
The New York Times reported last month that Wal-Mart de
Mexico, which is 69 percent owned by Wal-Mart,
orchestrated a widespread bribery campaign to win market
dominance in the last decade.
The article alleged that senior Wal-Mart executives knew
about the matter and tried to cover it up. Duke was head of
Wal-Mart's international business during part of the time
covered by the article.
"This could well be the Fortune 100 version of Watergate,"
The world's largest retailer has shed billions of dollars in
market value since the allegations surfaced. The company's
shares, which lost almost 4 percent in April, were down 10 cents
at $58.89 on Friday on the New York Stock Exchange.
If the allegations are true, Wal-Mart may have violated the
U.S. Foreign Corrupt Practices Act (FCPA), which forbids bribes
to foreign government officials, and run afoul of Sarbanes-Oxley
rules that require corporate gatekeepers to report material
violations of securities laws.
CalSTRS, a $153 billion pension fund, said it is an index
investor and as a result is required to hold shares of the
retailer, which is a component of the Dow Jones Industrials
Average as well as many other indexes.
Generally, CalSTRS tries to work with corporate boards and
executives on corporate governance issues, Ehnes said. But given
the allegations in the Wal-Mart case, the board and management
would be adversaries to CalSTRS in the process, he said.
CalSTRS brought a type of shareholder action known as a
derivative lawsuit, which seeks a recovery for the company, not
shareholders. The pension fund is seeking to essentially stand
in the shoes of Wal-Mart and sue the company's executives and
directors for damage they have done to the retailer. Such
lawsuits often result in changes in corporate governance.
It filed the case in Delaware's Chancery Court.
Earlier this week, New York city's comptroller said its
pension funds would vote their 4.7 million shares against five
Wal-Mart directors standing for reelection at the annual
shareholders meeting on June 1, including Duke.
Ehnes said that "it wouldn't be hard to infer" that CalSTRS
intends "to withhold our votes on those directors." But he said
the retirement plan would leave any organized "vote no" campaign
to New York pension funds.
The case is California State Teachers' Retirement System v
Aida M. Alvarez, Delaware Court of Chancery, no. 7490.