What’s a CEO to do?
Walmart chief Doug McMillon sits at the helm of the nation’s largest private employer — and its biggest brick-and-mortar retail enterprise — at a time of seismic change.
Digital disruption from e-commerce pure plays has sent many traditional names packing (think Sports Authority, Payless ShoeSource and Toys ‘R’ Us) and reshaped the way nearly every retailer does business. Meanwhile, a growing expectation — particularly among socially-conscious Gen Z and millennials — that corporations take up social causes coupled with rising social media activism and “cancel culture” have all helped redefine today’s brand-value equation.
A longtime seller of firearms, Walmart has already spent decades navigating the national conversations around gun violence and gun control. The retailer, for example, made headlines early last year when it said it would raise the minimum age to 21 from 18 to purchase a firearm as well as remove products that bear resemblance to assault-style rifles in the wake of the February 2018 mass shooting at Marjory Stoneman Douglas High School in Parkland, Fla.
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But, this month’s shooting at an El Paso, Texas Walmart outpost — which left 22 people dead — has recalibrated the company’s role in the national gun debate.
The retailer — much like Dick’s Sporting Goods did last year — had received praise from some activist groups over its public stance on helping to end gun violence. In the past few weeks, however, Walmart — and McMillon in particular — has faced heightened pressure to make more aggressive moves and end firearm sales at its stores.
While there’s been some debate about how significant gun sales are to the company’s overall business, McMillon told investors last week that Walmart represented about 2% of the market for firearms today. According to research firm IBISWorld International, U.S. gun sales in 2018 totaled $11 billion — putting Walmart’s revenues from the category at around $220 million.
“Walmart is like the McDonald’s of assault weapons,” said Howard Bragman, CEO of PR consultancy LaBrea Media. “It caters to a customer base who values that they could go to Walmart and buy [firearms]. So if it suddenly says to them ‘we’re not selling assault weapons any more,’ they would be very unhappy with [the company] and might express [that frustration] in other ways. It’s not a simple issue.”
Meanwhile, a social media firestorm, employee walkout and a petition of 130,000 signatures calling for the company to discontinue gun sales — which reportedly landed on McMillon’s desk this week — only add to the complexities.
“As a CEO, you have to be mindful of your organization’s culture — whatever that involves — so you’re not being distracted by something that is contrary to that or distracted by something that’s happening in social media,” explained Mike McKenna, founder and president of crisis leadership consultancy TEAM Solutions. “That would be first and foremost and, with that, comes a revisiting of the original purpose [for] why Walmart started selling firearms in the first place.”
McKenna says a key pillar of McMillon’s decision-making should hinge on whether Walmart’s original goals in taking on firearm sales remain valid in the current retail and social climate. If that objective remains intact, McKenna said he would advise Walmart’s CEO to “publicly and authentically” address the “current and future strategies” the company has or is implementing to ensure that “only lawful [firearm] sales are conducted to responsible buyers at its stores.”
“McMillon has to look forward,” he added. “In [shopping] — whether people are buying alcohol, shoes or a firearm — they need to make that purchase somewhere. [When it comes to the latter], Walmart is in a unique position as the world’s largest retailer to become a destination where that transaction can occur in a very visible, authenticated and responsible way.”
Similarly, Hersh Davis-Nitzberg, founder and CEO of Reputation Control Inc., said that while leaders like McMillon should be mindful of the sensitivities involving issues like gun violence, CEOs have a primary fiduciary duty to increase shareholder value and most of their decisions, by definition, have to be driven by the bottom line.
“These corporations need to protect their brands,” Davis-Nitzberg said. “At the end of the day, understanding who their market is [is] a reflection of protecting their brands. CEOs shouldn’t get involved in politics and things like that.”
Of course, there is an important caveat for deciding when a company should get address social media “noise.”
“A corporation is controlled by the people who are purchasing their products,” Davis-Nitzberg added. “If the people who are purchasing the products at Walmart are the ones getting vocal — then it becomes that much more imperative for Walmart to do something about [their gun policy] and respond in a way that will meet the needs of [its core customers].”
Even so, untangling the intricacies of a decision that could involve removing an entire category of products will take time, analysis and even introspection on the part of McMillon.
How does the largest retailer in the US — serving about 275 million shoppers weekly, per its 2019 annual report — nail down the group it could least afford to upset? (Some reports have suggested that nearly every American adult has shopped at Walmart in a given year.)
“If I were McMillon, I would have a whole team set up — a task force — and I would be monitoring this on a daily [and] weekly basis and testing public sentiment against what we’re doing and seeing how our own employees feel about it [as well as] looking at how other companies are handling this,” advised Bragman. “I would get the smartest advisors I could find and I wouldn’t get just one point of view on this. I would listen to a number of points of view.”
He added, “It’s very hard for a retailer to get rid of a huge line — albeit a profitable one.”
The high-stakes decision facing McMillon also comes at a critical time in the wider American corporate culture landscape: This month, the Business Roundtable — comprised of more than 180 CEOs from companies such as Macy’s, Target and Walmart — announced a change to its corporate governance principles, expanding its standard for corporate responsibility beyond shareholder value alone, to include conducting business for the benefit of all stakeholders such as suppliers, employees, communities and customers.
“McMillon will need to [also] talk to his employees,” said Bragman. “He should talk to the families of those people killed in the parking lot of his stores and listen to the pain. I would urge him to touch the humanity.”
So far, McMillon has postured that he’s open to reevaluating the company’s stance on firearms sales — and even suggested his support for stricter gun laws.
“In the national conversation around gun safety, we’re encouraged that broad support is emerging to strengthen background checks and to remove weapons from those who have been determined to pose an imminent danger,” McMillon said in the statement, addressing Walmart’s second-quarter earnings report last week. “We believe the reauthorization of the assault weapons ban should be debated to determine its effectiveness in keeping weapons made for war out of the hands of mass murderers. We must also do more to understand the root causes that lead to this type of violent behavior.”