Company Name: Wal-Mart Stores, Inc.
Public Availability Date: March 16, 2006

Document Sections:

INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER

[INQUIRY LETTER]

January 23, 2006

U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549

Re: Wal-Mart Stores, Inc.Notice of Intent to Omit from Proxy Materials Shareholder Proposal of the As You Sow Foundation

Ladies and Gentlemen:

Wal-Mart Stores, Inc., a Delaware corporation (the "Company"), files this letter under Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to notify the Securities and Exchange Commission (the "Commission") of the Company's intention to exclude a shareholder proposal (the "Proposal") from the proxy materials for the Company's 2006 Annual Meeting of Shareholders (the "2006 Proxy Materials"). The Proposal was submitted by the As You Sow Foundation (referred to hereinafter as the "Proponent"). The Company asks that the staff of the Division of Corporation Finance of the Commission (the "Staff") not recommend to the Commission that any enforcement action be taken if the Company excludes the Proposal from its 2006 Proxy Materials for the reasons described below. A copy of the Proposal and all correspondence is attached to this letter as Exhibit A. In accordance with Rule 14a-8(j), six copies of this letter and its attachments are enclosed.

Due to the volume of proxy materials that the Company must produce and distribute to its shareholders, the Company plans to commence the printing of the 2006 Proxy Materials on or about April 11, 2006 so that it may commence mailing the 2006 Proxy Materials by no later than April 14, 2006. Accordingly, we would appreciate the Staff's prompt advice with respect to this matter.

The Proposal

The Company received the Proposal on or about December 12, 2005. The Proposal requests that the Board of Directors of the Company, "amend the company's Equality of Opportunity policy to bar intimidation of company employees exercising their right to freedom of association." In addition, the Proposal requests that "The company should develop systems to prevent future violations of federal labor law from occurring and publish reports to shareholders on its progress."

Grounds for Exclusion

The Company seeks to omit the Proposal from its 2006 Proxy Materials on the grounds that: (1) the Proposal relates to the ordinary business operations of the Company so as to be excludable under Rule 14a-8(i)(7); (2) the Proposal is vague, indefinite, and materially misleading and excludable under Rule 14a-8(i)(3); and (3) the Proposal includes multiple proposals and violates Rule 14a-8(c).

1. The Proposal Relates to the Company's Ordinary Business Operations and is Excludable under Rule 14a-8(i)(7)

Under Rule 14a-8(i)(7), a proposal may be omitted from a registrant's proxy statement if such proposal "deals with a matter relating to the company's ordinary business operations." The policy underlying the ordinary business exclusion is "to confine the resolution of ordinary business problems to management and the board of directors, since it is impracticable for shareholders to decide how to solve such problems at an annual shareholders meeting." Release No. 34-40018 (May 21, 1998) (the "1998 Release"). In the 1998 Release, the Staff noted that one of the central considerations underlying this policy, which relates to the subject matter of the proposal, is that "[c]ertain tasks are so fundamental to management's ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight." 1998 Release. However, certain proposals "relating to such matters but focusing on sufficiently significant policy issues (e.g., significant discrimination matters) generally would not be considered to be excludable." 1998 Release. "The second consideration relates to the degree to which the proposal seeks to 'micro-manage' the company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment." 1998 Release. Furthermore, in a 1983 release, the Staff stated that merely requesting that the registrant prepare a special report will not remove the proposal from the ordinary business grounds for exclusion. See Release No. 34-20091 (August 16, 1983). For the reasons discussed below, the Company believes that it may exclude the Proposal because it relates to ordinary business operations.

The relationship between management and its employees is an integral part of the day-to-day conduct of ordinary business operations. The negotiation of wages, hours, and working conditions are fundamental business issues for employers. The first proposal contained in the Proposal could constrain the ability of the Company to manage its employee relationships in a lawful manner. The Staff has permitted exclusion of shareholder proposals that, like the Proposal, seek to address a company's relationship with employee labor unions because they fall under the category of ordinary business pursuant to Rule 14a-8(i)(7). See United Parcel Services, Inc., (February 23, 2004) (proposal requested a report "to shareowners on the UPS relationship with the International Brotherhood of Teamsters"); Modine Manufacturing Co. (May 6, 1998) (proposal requested a corporate code of conduct to address the right to organize and maintain unions); Humana Inc. (October 17, 1990) (proposal requested the company to recognize and bargain collectively with a particular union); UAL, Inc. (March 3, 1986) (proposal requested a review of "management's handling of union negotiation").

Modine Manufacturing Co. presented a proposal very similar to the Proposal. In Modine, the Proponent sought a resolution that would "direct the Board of Directors to create a Board Committee to develop a corporate code of conduct guaranteeing the right of employees to organize and maintain unions and affirming the principles of collective bargaining in good faith." The Staff found the proposal excludable under Rule 14a-8(c)(7). The Proposal, like the proposal in Modine, would, as a matter of policy, seek "to compel the Company to deal with a collective bargaining unit rather than act on its own business judgment." The Proposal, like the proposal in Modine, "would dictate a particular avenue to be pursued, and establish constraints on the function of management" and accordingly is excludable under 14a-8(c)(7).

2. The Proposal is Materially Vague, Indefinite, and Materially Misleading and is Excludable under Rules 14a-8(i)(3) and 14a-9

The Company intends to omit the Proposal from its 2006 Proxy Materials on the grounds that the Proposal is materially vague, indefinite, and materially misleading in violation of Rule 14a-9.

Rule 14a-8(i)(3) permits a company to omit from its proxy materials a shareholder proposal and any statement in support thereof "[i]f the proposal or supporting statement is contrary to any of the Commission's proxy rules, including 17 C.F.R. §240.14a-9, which prohibits materially false or misleading statements in proxy soliciting materials." Rule 14a-9 provides, in pertinent part, that:

(a) No solicitation subject to this regulation shall be made by means of any proxy statement, form of proxy, notice of meeting or other communication, written or oral, containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading....

The Staff has declared that it would concur in a company's reliance on Rule 14a-8(i)(3) to exclude a proposal where a company: (i) demonstrates objectively that the proposal is materially false or misleading or (ii) if the resolution is so inherently vague or indefinite that neither the stockholders nor the company would be able to determine with any reasonable certainty exactly what actions or measures the proposal requires. See Staff Legal Bulletin 14B (September 15, 2004) ("SLB 14B"). The Staff has also consistently taken the position that shareholder proposals that are vague and indefinite are excludable under Rule 14a-8(i)(3) as inherently misleading because neither the shareholders nor the company's board of directors would be able to determine, with any reasonable amount of certainty, what action or measures would be taken if the proposal were implemented. See, e.g., The Proctor & Gamble Company (October 25, 2002) (permitting omission of a proposal requesting that the board of directors create a specific type of fund as vague and indefinite where the company argued that neither the shareholders nor the company would know how to implement the proposal); Philadelphia Electric Company (July 30, 1992) (permitting omission of a proposal regarding the creation of a committee of share owners because "the proposal is so inherently vague and indefinite" that neither the share owners nor the company would be able to determine "exactly what actions or measures the proposal requires"); and NYNEX Corporation (January 12, 1990) (permitting omission of a proposal relating to non-interference with the government policies of certain foreign nations because it is "so inherently vague and indefinite" that any company action "could be significantly different from the action envisioned by the shareholders voting on the proposal").

The Proposal, in fact, bundles multiple proposals: (1) that the Company "amend the company's Equality of Opportunity policy to bar intimidation of company employees exercising their right to freedom of association," (2) that "the company should develop systems to prevent future violations of federal labor law from occurring," and (3) asking the Company to publish reports to shareholders on its progress. Linking these separate proposals renders the Proposal as a whole indefinite and materially misleading because stockholders will be unable to evaluate and then to vote separately on these three separate proposals.

As a result of the bundled proposals in the Proposal, the Company is of the view that it may exclude the Proposal pursuant to Rule 14a-8(i)(3).

3. The Proposal Violates Rule 14a-8(c) Because It Is More Than One Proposal and Therefore Violates Rule 14a-8(i)(3).

Rule 14a-8(c) provides that: "[e]ach shareholder may submit no more than one proposal to a company for a particular shareholders' meeting." The Proposal actually is three proposals.

Included Proposal 1: "Shareholders request that directors amend the company's Equality of Opportunity policy to bar intimidation of company employees exercising their right to freedom of association."

Included Proposal 2: "The company should develop systems to prevent future violations of federal labor law from occurring...."

Included Proposal 3: "The company should ... publish periodic reports to shareholders on its progress."

Included Proposal 1 and Included Proposal 2 relate to different subject matters, one to an amendment to an internal policy relating to employment discrimination, and the other to the development of systems to prevent future violations of federal labor laws. Proposal 3 is a separate proposal requiring a report on progress the Company makes on development of systems. Included Proposal 1 and Included Proposal 2 differ in subject matter, and the requested report is inapplicable to Included Proposal 1. Accordingly, the Proposal violates Rule 14a-8(c) by including more than one proposal for the shareholders' meeting of the Company to which the 2006 Proxy Materials will relate.

As required by Rule 14a-8(f)(l), the Company informed the Proponent that the Proposal failed to meet the eligibility requirement under Rule 14a-8(c). The Company did so by means of a letter to the Proponent dated December 29, 2005, a copy of which is attached hereto as Exhibit B (the "Request Letter"). The Request Letter: (i) informed the Proponent that, the Proposal contained three separate proposals, (ii) informed the Proponent that Rule 14a-8(c) permitted no more than one proposal to be submitted by a proponent with respect to a particular shareholders' meeting, (iii) requested that the Proponent reduce the number of proposals in the Proposal to one proposal and resubmit the revised proposal to the Company, and (iv) notified the Proponent that any response to the Request Letter needed to be postmarked, or transmitted electronically, no later than 14 days from the date on which the Proponent received the Request Letter. The Company received the Proposal on December 16, 2005 and sent the Request Letter to the Proponent on December 29, 2005, both by facsimile transmission and by means of overnight courier. Therefore, by means of the Request Letter and as is required by Rule 14a-8(f)(l), the Company notified the Proponent that the Proposal failed to meet the eligibility requirement of Rule 14a-8(c) within 14 calendar days after the date on which the Company received the Proposal. The Proponent did not reply to the Company's Request Letter.

The Company has concluded that the Proposal: (i) violates the eligibility requirement of Rule 14a-8(c) and, as a result, is not eligible to be included in the 2006 Proxy Materials and (ii) violates Rule 14a-8(i)(3), in that it is "contrary to [one] of the Commission's proxy rules," and, as a result, may be excluded from the 2006 Proxy Materials.

Conclusion

Based on the foregoing representations, the Company hereby requests that the Staff confirm that it will not recommend any enforcement action if the Proposal is excluded from the Company's 2006 Proxy Materials. Should you disagree with the conclusions set forth herein, we would appreciate the opportunity to confer with you prior to the issuance of the Staff's response. Moreover, the Company reserves the right to submit to the Staff additional bases upon which the Proposal may properly be excluded from the 2006 Proxy Materials.

By copy of this letter, the Proponent is being notified of the Company's intention to omit the Proposal from its 2006 Proxy Materials.

Please acknowledge receipt of this letter by date-stamping the accompanying acknowledgment copy and returning it to the undersigned in the self-addressed postage pre-paid envelope provided. Please call the undersigned at (479) 277-3302 if you require additional information or wish to discuss this submission further.

Thank you for your consideration.

Respectfully Submitted,

/s/

Samuel A. Guess

Enclosures

cc: As You Sow
311 California Street, Suite 510
San Francisco, California 94104

[INQUIRY LETTER]

December 12, 2005

H. Lee Scott, Jr.
CEO
Wal-Mart Stores, Inc.
702 Southwest Eighth Street
Bentonville, AR 72716-0215

Dear Mr. Scott:

As You Sow is a non-profit organization whose mission is to promote corporate accountability. We are a shareholder of Wal-Mart stock.

We are concerned about many reports that have surfaced in the last two years alleging unfair treatment of Wal-Mart associates and contract supply chain workers. The reputation and economic value of our company are at risk due in part to these allegations which have been investigated by the US Congress and featured prominently in international media coverage.

Accordingly, we are filing the enclosed resolution for inclusion in the proxy statement for a vote at the next stockholders meeting in accordance with Rule 14-a-8 of the General Rules and Regulations of the Securities Exchange Act of 1934.

As You Sow will maintain the required number of shares through the scheduled shareholders' meeting in accordance with SEC standards. Proof of ownership is attached.

We look forward to dialogue with Wal-Mart management on assuring freedom of association to associates without intimidation in the hope that mutually agreeable positions can be reached, making this shareholder proposal unnecessary.

Sincerely,

/s/

Conrad B. MacKerron
Director, Corporate Social Responsibility Program

Attachments

[APPENDIX]

BAR WORKER INTIMIDATION

Whereas: The reputation and economic value of our company are at risk due in part to numerous serious allegations of unfair treatment of Wal-Mart associates and contract supply chain workers. These charges have been investigated by the US Congress and featured prominently in international media coverage.

A report by the Democratic staff of the US House Committee on Education and the Workforce documented class action lawsuits on gender discrimination in pay and opportunities for advancement; litigation for withholding of earned wages and forcing associates to work unpaid overtime hours; and aggressively discouraging workers from exercising their right to freedom of association.

A handbook provided to company managers states "Wal-Mart is opposed to unionization of its associates." But the company appears to have moved beyond opposition to repeatedly violating federal labor laws. Between 1998-2003, at least 288 unfair labor practice charges were lodged against the company, accusing it of interfering with employees' freedom of association. 94 of these charges resulted in formal complaints against our company by the National Labor Relations Board. Federal prosecution of unfair labor practices resulted in 11 rulings against the company and 12 settlements. (Source: American Rights at Work)

The company has a double standard on workers' rights. It opposes unions in North America but allows unionization of retail stores in China. Chinese unions are used primarily as a means of party control over workers; independent unions are illegal. The same unions are the only ones allowed in Chinese supplier plants where $15 billion of goods are made for our company under conditions that often violate International Labor Organization core labor standards. Worker exploitation in supplier factories can damage our company's reputation and lead to the loss of brand value.

Promotion of human rights is a cornerstone of foreign policy, says the US State Department. How can we inspire other countries about democracy and human rights when management tolerates intimidation of US workers? Harassment of workers who talk to unions, forced overtime and locking employees in stores are considered human rights violations by ILO in overseas supplier factories. We believe they are human rights violations when they occur in a US Wal-Mart as well.

These policies contribute to a broad public perception that management has not dealt with workers fairly. An August 2004 memo done for Wal-Mart by McKinsey & Co. said a national survey of 1,800 consumers concluded "sincere concerns exist that Wal-Mart is not treating its employees well, is too aggressive, and is hurting local communities."

"Wal-Mart's stock price has fallen 27 percent since 2000.. .a drop that many have attributed, in part, to investors' anxiety about the company's image," notes The New York Times (Nov. 1, 2005).

Resolved: Shareholders request that directors amend the company's Equality of Opportunity policy to bar intimidation of company employees exercising their right to freedom of association. The company should develop systems to prevent future violations of federal labor law from occurring and publish periodic reports to shareholders on its progress.

[INQUIRY LETTER]

December 29, 2005

VIA FACSIMILE AND FEDERAL EXPRESS

Conrad B. MacKerron
Director, Corporate Social Responsibility Program
As You Sow
311 California Street, Suite 510
San Francisco, CA 94104
Fax (415)391-3245

Dear Mr. MacKerron:

On December 16, 2005, Wal-Mart received multiple shareholder proposals submitted by you on behalf of As You Sow, which you requested be included in Wal-Mart Stores, Inc.'s (the "Company") Proxy Statement for its 2006 annual meeting of shareholders. Under the Securities and Exchange Commission Rule 14a-8, a copy of which is attached to this letter as Exhibit A, you must meet certain eligibility requirements for your proposal to be considered for possible inclusion in the Company's 2006 Proxy Statement.

Your submission includes three distinct proposals: one proposal regarding the amendment of the Company's "Equality of Opportunity" policy, one proposal regarding the development of "systems to prevent" violations of federal labor laws, and another proposal regarding the publication of "periodic reports" on Wal-Mart's "progress." Rule 14a-8(c) provides that each shareholder may submit no more than one proposal to a company for a particular shareholders' meeting. Please reduce the number of your shareholder proposals to one and send to my attention a single proposal that satisfies the requirements of Rule 14a-8.

Finally, to comply with Rule 14a-8, your response to this letter must be postmarked, or transmitted electronically, within 14 days of receiving this letter. Lastly, please be reminded that the revised submission should be consistent with the proxy rules regarding shareholder proposals, attached as Exhibit A, including the 500 word limitation.

Sincerely,

/s/

Samuel A. Guess

[INQUIRY LETTER]

March 6, 2006

Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, NE

Washington, DC 20549

Re: Shareholder proposal of As You Sow Foundation; no-action request by Wal-Mart Stores, Inc.

Dear Sir/Madam:

Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, the As You Sow Foundation (the "Foundation") submitted to Wal-Mart Stores, Inc. ("Wal-Mart" or the "Company") a shareholder proposal (the "Proposal") asking Wal-Mart's board to amend the Company's Equality of Opportunity policy to prohibit intimidation of company employees exercising their right to freedom of association; develop systems to prevent future violations of federal labor law from occurring; and to report to shareholders on the Company's progress in this regard.

By letter to the Division of Corporation Finance dated January 23, 2006, Wal-Mart indicated that it intends to omit the Proposal from the proxy materials for the Company's 2006 annual meeting of shareholders and asked for assurance that the Division's Staff would not recommend enforcement action if the Proposal were excluded. Wal-Mart contends that it is entitled to exclude the Proposal in reliance on (i) Rule 14a-8(i)(7), as dealing with Wal-Mart's ordinary business operations; (ii) Rule 14a-8(i)(3), on the ground that the Proposal is materially false or misleading; and (iii) Rule 14a-8(c), because the Proposal violates the one-proposal rule. As discussed more fully below, Wal-Mart has not met its burden of showing its entitlement to rely on any of these exclusions, and its request for relief should accordingly be denied.

Ordinary Business

Rule 14a-8(i)(7) allows omission of a proposal that "deals with a matter relating to the company's ordinary business operations." The Rule itself does not define "ordinary business operations," though the exclusion was intended to import into the Rule 14a-8 context the state corporate law concept that management, not the shareholders, manage a company's business and affairs. Put another way, "management cannot exercise its specialized talents effectively if corporate investors assert the power to dictate the minutiae of daily business decisions." ¹

In the 1990s, the Commission and its Staff grappled with the excludability on ordinary business grounds of proposals dealing with employment-related topics. In 1992, the Staff granted relief to Cracker Barrel Old Country Stores, Inc. allowing exclusion of a proposal dealing with employment discrimination on the basis of sexual orientation. In its determination, the Staff stated that the "employment-related nature" of a proposal would mandate omission under the ordinary business exclusion even if the proposal dealt with employment policies or practices that implicated a "social issue." ² The Cracker Barrel determination marked a reversal in practice for the Staff, which had addressed the excludability of employment-related proposals on a case-by-case basis starting in 1983.³

The Cracker Barrel determination sparked significant outcry from shareholders and organizations involved in advocating for stronger shareholder rights. In response, Congress asked the Commission in 1996 to study the issue; the following year, the Commission proposed to reverse the Cracker Barrel position and return to a case-by-case analysis of employment-related proposals. The Commission explained that since the original Cracker Barrel decision, "the relative importance of certain social issues relating to employment matters ha[d] reemerged as a consistent topic of widespread public debate" and the Commission had "gained a better understanding of the depth of interest among shareholders in having an opportunity to express their views to company management on employment-related proposals that raise sufficiently significant social policy issues."⁴

The release in which the Commission adopted the proposed changes and returned to the pre-Cracker Barrel regime (the "1998 Release")⁵ affirmed the continuing relevance of the standard set forth in a 1976 Commission release (the "1976 Release")⁶ that had been applied by the Staff prior to the Cracker Barrel determination. The 1976 Release stated that proposals that have "significant policy, economic or other implications" are not excludable on ordinary business grounds, and gave as an example a proposal asking a company not to construct a proposed nuclear power plant, which the 1976 Release characterized as presenting "economic and safety considerations ... of such magnitude" that the proposal does not involve an ordinary business matter. On the other end of the spectrum, the 1976 Release stated that proposals that are "mundane in nature and do not involve any substantial policy or other considerations" would be excludable on ordinary business grounds.

The 1998 Release also provided guidance regarding the policy considerations that inform the Staff's application of the standard articulated in the 1976 Release. First, the Staff asks whether the proposal deals with "tasks so fundamental to management's ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight. Examples include the management of the workforce, such as the hiring, promotion, and termination of employees, decisions on production quality and quantity, and the retention of suppliers." These kinds of decisions, made daily within large corporations, must be informed by specific, concrete information-regarding an employee's disciplinary history or the rate of defects in a supplier's product, for example-to which management has access but shareholders cannot generally obtain. It would be inefficient, and would defeat the purpose of centralized corporate management, to provide shareholders with this kind of detailed information and solicit their input on day-to-day management matters.

But even proposals dealing with issues like employment, suppliers and production may fall outside of the realm of ordinary business if they "focus[] on sufficiently significant social policy issues (e.g., significant discrimination matters)"; a proposal focusing on significant policy issues would "transcend the day-to-day business matters and raise policy issues so significant that it would be appropriate for a shareholder vote."

Second, the Staff determines "the degree to which the proposal seeks to 'micro-manage' the company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment. This consideration may come into play in a number of circumstances, such as where the proposal involves intricate detail, or seeks to impose specific time-frames or methods for implementing complex policies." The 1998 Release made clear, however, that in some cases, differing timelines or implementation methods could rise to the level of a significant policy issue: "Timing questions, for instance, could involve significant policy where large differences are at stake, and proposals may seek a reasonable level of detail without running afoul of these considerations."

Both of the policy considerations set forth in the 1998 Release support a conclusion that the Proposal is not excludable on ordinary business grounds. The Proposal operates at the policy level, asking Wal-Mart's board to expand the Company's Equality of Opportunity policy to prohibit intimidation of employees exercising their right of free association. The Proposal does not interfere with Wal-Mart's decision to hire, promote, compensate or terminate any particular employee or group of employees, nor does it deal with any other "mundane" matter such as wages or benefits requiring the kind of textured, day-to-day familiarity with the company that members of management, and not shareholders, possess.

Wal-Mart likens the Proposal to several other proposals which the Staff determined were excludable under the ordinary business exclusion because they addressed or attempted to dictate elements of the company's labor-management relations. The Proposal, however, would not require reporting on the relationship between Wal-Mart and a particular labor union or unions, as the United Parcel Services Inc. proposal, which focused on cost/benefit and risk analysis, sought. There, the Staff determination explained that exclusion was permitted because the proposal addressed "relations between the company and its employee representatives," reasoning which does not apply to the Proposal. Unlike the UAL, Inc. proposal, the Proposal does not request a report on "management's handling of union negotiations." ⁷ Nor does the Proposal urge Wal-Mart to recognize and bargain collectively with a particular union, as the Humana, Inc. proposal suggested.⁸

Wal-Mart points to the determination in Modine Manufacturing Co.,⁹ where the proposal asked the company to "develop a corporate code of conduct guaranteeing the right of employees to organize and maintain unions and affirming the principles of collective bargaining in good faith." The proposal in Modine shares with the Proposal the inclusion in a code of conduct of principles regarding freedom of association, though the Proposal stops short of asking Wal-Mart to state its support for collective bargaining.

The no-action letter in Modine, however, was issued on May 6, 1998, prior to the May 21 issuance of the 1998 Release reversing the Commission's Cracker Barrel position. Modine thus can not be relied upon in discerning the Staff's approach to proposals dealing with employment issues. The outmoded nature of the analysis is evidenced by the fact that Modine cited several Cracker Barrel-era letters, including two allowing exclusion of proposals regarding employment discrimination, a subject that is considered by the Staff to raise "significant policy issues" in the post-Cracker-Barrel era. The Staff's broad explanation that the proposal could be excluded because it deals with "relations between the company and its Employees" also suggests that the Staff did not engage in the necessary post-Cracker-Barrel analysis.

More fundamentally, for Wal-Mart in 2006, the issue of employees' ability to exercise their right to freedom of association is a significant policy issue defeating application of the ordinary business exclusion. The labor policies of the company, the largest U.S. private employer, and how they are administered have serious direct and indirect financial, reputational, and regulatory implications for the U.S. economy.

Economic studies have indicated that when Wal-Mart enters a community, it has a measurable impact on the rest of the labor market. One of the most recent studies, "The Effects of Wal-Mart on Local Labor Markets," was performed by David Neumark, Professor of Economics at the University of California-Irvine, and Research Associate at the National Bureau of Economic Research. The study, which looked at the impact on county employment, found that "in the retail sector, on average, Wal-Mart stores reduce employment by two to four percent. There is some evidence that payrolls per worker also decline, by about 3.5 percent...There is stronger evidence that total payrolls per person decline, by about five percent in the aggregate, implying that residents of local labor markets earn less following the opening of Wal-Mart stores." ¹⁰ This demonstrates that because of Wal-Mart's size and influence, its labor policies have impacts and implications far beyond the company's own policies for hiring and compensating individuals.

The company has also come under extraordinary scrutiny in the past several years for its treatment of its employees. According to a 2004 report by the Democratic Staff of the House Committee on Education and the Workforce, Wal-Mart "has come to represent the lowest common denominator in the treatment of working people." ¹¹ The House Report stated that over 100 unfair labor practice charges were filed against Wal-Mart in the past several years, with 43 filed in 2002 alone. At least 60 complaints have been issued at the National Labor Relations Board against Wal-Mart since 1995, for actions ranging from illegal firing of union supporters to worker intimidation to unlawful surveillance.¹² On a 2002 PBS NOW segment, Leonard Page, the former general counsel of the NLRB, described a "common pattern of illegal conduct" in five or six organizing drives which "appeared to involve, ah, rather high officials of Wal-Mart stationed in Bentonville.¹³ A week after a small meat cutting department at a Texas store voted to unionize, Wal-Mart announced that it would phase out its meat cutting departments and rely solely on pre-packaged meat.¹⁴

Public outrage over Wal-Mart's treatment of its employees-including its anti-union tactics-has begun to have tangible effects on Wal-Mart. As a 2003 Business Week cover story put it, "But the more size and power that 'the Beast of Bentonville' amasses, the greater the backlash it is stirring among competing retailers, vendors, organized labor, community activists, and cultural and political progressives." ¹⁵ The article noted that "intensifying grassroots opposition" threatens to thwart Wal-Mart's ambitious expansion strategy into urban America.¹⁶ A report commissioned in 2003 by the L. A. City Council found that the low wages paid to Wal-Mart employees exert downward pressure on wages paid by other retailers, strain public services (including the health care system, as Wal-Mart employees who lack employer-provided coverage use emergency rooms inappropriately) and harm small businesses.¹⁷

Legislative initiatives to ban or limit big-box retail stores have passed in a number jurisdictions, spurred in some cases by concerns over Wal-Mart's treatment of its employees. In 2004, Inglewood, California voters defeated a Wal-Mart-backed initiative that would have allowed the company to open a Supercenter in the city. The opposition was motivated in part by Wal-Mart's anti-union tactics, as shown in the flyer attached as Exhibit A, which was distributed by the Coalition for a Better Inglewood.¹⁸ The flyer describes Wal-Mart's anti-union activities and the unfair labor practice charges that have been filed against the company.

Similarly, the "Facts" section of the web site for Our Community First, a group opposing a Wal-Mart store in Bend, Oregon, leads with "Walmart and Workers=Low-Wage, Lawsuits & Anti-Unionism."¹⁹A New Jersey community group mobilizing against a proposed Wal-Mart store featured Wal-Mart's treatment of workers, including its attitude toward unions, on its web site.²⁰ North Snohomish (Washington) Community Matters, a group that describes its mission as "halting the infiltration of the Wal-Mart Corporation into our local communities," highlights Wal-Mart's "unfair labor policies" on its home page.²¹ An article in the Contra Costa Times stated that opponents of a Wal-Mart store in Hercules, California (the application for which was recently withdrawn by Wal-Mart) were concerned about the company's anti-union stance, among other things.²² These examples make clear that Wal-Mart's anti-union tactics contribute to community opposition to Wal-Mart stores.

Wal-Mart has recently been the subject of substantial, and often quite critical, attention in the media and popular culture, which provides additional evidence that the public sees Wal-Mart's Mart's treatment of its workers as a significant policy issue. PBS's Frontline produced a widely-discussed documentary entitled "Is Wal-Mart Good For America?" ²³ Robert Greenwald's documentary, "Wal-Mart: the High Cost of Low Price," which explores Wal-Mart's anti-union efforts as well as other issues related to the company, kicked off its release with 6,800 screenings at house parties, churches and other establishments.²⁴ The film continues to be shown nationwide, months after its initial release.²⁵ Activists report using the film in conjunction with other activities in campaigns to prevent stores from opening.²⁶

Scrutiny of Wal-Mart's practices has translated into low public opinion of the company: A November 2005 poll by Zogby International found that 56% of those polled agreed with the statement, "I believe that Wal-Mart is bad for America. It may provide low prices, but these prices come with a high moral and economic cost for consumers." Only 39% agreed with the statement, "Wal-Mart is good for America. It provides low prices and saves consumers money every day." ²⁷

In sum, Wal-Mart's anti-union tactics, including intimidation of employees, are an important factor in community opposition to new Wal-Mart stores. Given the importance of expansion to Wal-Mart's business strategy, such opposition has the potential to reduce Wal-Mart's profits. Unflattering portrayals in the financial and general mediaincluding descriptions of anti-union activity-only reinforce the perception of Wal-Mart as a poor corporate citizen. As a result, Wal-Mart's policies on employees' freedom of association rise to the level of a significant policy issue, making exclusion of the Proposal on ordinary business grounds inappropriate.

Materially False or Misleading Statements/One-Proposal rule

Wal-Mart claims that it is entitled to exclude the Proposal in reliance on Rule 14a-8(i)(3), which allows exclusion of a proposal that violates any of the Commission's other proxy rules, including Rule 14a-9, which prohibits false or misleading statements. Wal-Mart urges that because the Proposal is misleading because it is actually multiple proposals, and thus neither Wal-Mart's shareholders nor its board of directors would be able to determine with reasonable certainty what actions or measures would be taken if the Proposal were implemented. In a related argument, Wal-Mart also contends that the Proposal violates the one-proposal limitation contained in Rule 14a-8(c).

The Commission has stated that a proposal with multiple elements does not violate the one-proposal rule if the elements "are closely related and essential to a single well-defined unifying concept." ²⁸ Here, the elements of the Proposal clearly relate to a single, well-defined unifying conceptensuring that Wal-Mart respects its employees' right to associate freely. The Proposal asks Wal-Mart to expand its Equality of Opportunity policy to prohibit intimidation of employees exercising their right to freedom of association. To ensure that the Proposal is implemented effectively, and that an amendment to the policy is not simply empty language, the Proposal also asks Wal-Mart to develop a system for ensuring compliance. Finally, the Proposal asks that Wal-Mart shareholders be informed of the company's implementation efforts.

In American Power Conversion,²⁹ a similarly-structured proposal was found to involve a single unifying concept. The proposal there asked the company to (i) make a greater effort to locate women and persons of color as nominees to the board, (ii) develop a plan and issue a public statement committing the company to a policy of board inclusiveness; and (iii) issue a report relating to the diversity of its board and general nominating criteria. The Staff rejected the company's argument that the proposal was really three separate proposals and thus violated the one-proposal rule.

Similarly, in Alltel Corporation,³⁰ the proposal asked the board to adopt a policy that stock splits would only be declared once the stock price reaches a specified level and to require shareholder approval of stock splits. The company argued that the proposal involved two separate proposals with differing purposes, but the Staff declined to grant no-action relief.

The American Power Conversion and Alltel determinations make clear that a proposal can consist of multiple elements, even when those elements ask the company's board to take different actions, as long as a single well-defined unifying concept ties those elements together. That requirement is satisfied here and Wal-Mart should accordingly not be permitted to exclude the Proposal in reliance on Rule 14a-8(c) or (i)(3).

* * * *

If you have any questions or need additional information, please do not hesitate to call me at (415) 391-3212, ext. 31. The Foundation appreciates the opportunity to be of assistance to the Staff in this matter.

Very truly yours,

/s/

Conrad B. MacKerron
Director
Corporate Social Responsibility Program

cc: Samuel A. Guess
Associate General Counsel
Wal-Mart Stores, Inc.
Fax # 479-273-4505

-----FOOTNOTES-----

¹ Medical Committee for Human Rights v. SEC. 432 F.2d 659, 679 (D.C. Cir. 1970), vacated as moot, 404 U.S. 403(1972).

² Cracker Barrel Old Country Stores, Inc. (Oct. 13, 1992).

³ ACTWU v. Wal-Mart Stores, Inc., at 886

⁴ Exchange Act Release No. 40018, "Amendments to Rules on Shareholder Proposals" (May 21, 1998). The extent of recent shareholder concern about employment-related policies was evidenced by the 58% of votes cast that favored a proposal to ban sexual orientation discrimination at Cracker Barrel's corporate parent, CBRL Holdings, in 2002. See William Baue, "Record Shareholder Vote Prompts Cracker Barrel to Bar Sexual Orientation Discrimination," SocialFunds.com (Dec. 12, 2002) (available at http://www.socialfunds.corn/news/article.cgi/article988.html).

⁵ See Exchange Act Release No. 40018. supra note 4.

⁶ Exchange Act Release No. 12999, "Adoption of Amendments Relating to Proposals by Security Holders" (Nov. 22, 1976) (hereinafter "1976 Release").

⁷ United Parcel Services, Inc. (Feb. 23, 2004); UAL, Inc. (Mar. 3, 1986).

⁸ Humana. Inc. (Oct. 17, 1990).

⁹ Modine Manufacturing Co. (May 6, 1998).

¹⁰ David Neumark, Junfu Zhang, and Stephen Ciccarella, The Effects of Wal-Mart on Local Labor Markets, " Nov. 2005, NBER Working Paper No. 11782, http://www.nber.org/papers/Wl 1782.

¹¹ Democratic Staff of the House Committee on Education and the Workforce, "Everyday Low Wages: The Hidden Price We All Play for Wal-Mart," at 3 (Feb. 16, 2004) (hereinafter, "House Report").

¹² Id.

¹³ See http://www.pbs.org/now/transcript/transcript_wahiiart.html.

¹⁴ Id. at 4.

¹⁵ Anthony Bianco and Wendy Zellner, "Is Wal-Mart Too Powerful?" Business Week (Oct. 6, 2003).

¹⁶ Id.

¹⁷ Peter Rodino & Associates, "Final Report on Research for Big Box/Superstore Ordinance," Oct. 28, 2003 (available at http://www.lacity.org/council/cd13/ houscommecdev/cd13houscommecdev239629107_04262005.pdf).

¹⁸ The flyer can be found on http://www.laane.org/ad/docs/FactsWagesBenefitsWorkerRights.pdf.

¹⁹ See http://www.notanothenvalmart.org/facts.html.

²⁰ See http://www.letsstopwalmart.org/.

²¹ See http://www.nsnocommunitymatters.org/.

²² Tom Lochner, "Wal-Mart Succumbs to Opposition," Contra Costa Times, Feb. 3, 2006.

²³ See http://www.pbs.org/wgbh/pages/frontline/shows/wahnart/.

²⁴ See http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2005/10/30/MNG4QFGE3Hl .DTL.

²⁵ See http://www.wahnartmovie.com/find.php (web site listing screening dates and locations).

²⁶ See, e.g., http://www.huffnigtonpost.corri/robert-gTeenwald/walrnart-the-high-cost-o_b_10991.html.

²⁷ Emily Kaiser, "U.S. Majority Says Wal-Mart Bad for AmericaPoll," Reuters,
Dec. 1, 2005.

²⁸ 1976 Release; supra note 6.

²⁹ American Power Conversion (Mar. 10, 2000).

³⁰ Alltel Corporation, (Feb. 7, 2000).

[STAFF REPLY LETTER]

March 16, 2006

Response of the Office of Chief Counsel Division of Corporation Finance

Re: Wal-Mart Stores, Inc. Incoming letter dated January 23, 2006

The proposal requests that the board amend the company's Equality of Opportunity policy to bar intimidation of company employees exercising their right to freedom of association, develop systems to prevent future violations of federal labor law, and publish periodic reports to shareholders on its progress.

There appears to be some basis for your view that Wal-Mart may exclude the proposal under rule 14a-8(i)(7), as relating to Wal-Mart's ordinary business operations (i.e., relations between the company and its employees). Accordingly, we will not recommend enforcement action to the Commission if Wal-Mart omits the proposal from its proxy materials in reliance on rule 14a-8(i)(7). In reaching this position, we have not found it necessary to address the alternative bases for omission upon which Wal-Mart relies.

Sincerely,

/s/

Mark F. Vilardo
Special Counsel