By now, I hope I've given you a pretty clear impression of what my business priorities have been overthe years. If I've explained myself well, you know that I have concentrated all along on building the finestretailing company that we possibly could. Period. Creating a huge personal fortune was never particularlya goal of mine, and the proof of that lies in the fact that even to this day most of my, and my family's,wealth remains in the form of Wal-Mart stock. I think most people in our position would have hedgedtheir bets a long time ago and diversified into all kinds of investments. As it's happened, though, our verysimplistic, very personal investment strategy has turned out far better than anyone could ever haveexpected. So Wal-Mart stock has made the Waltons a very wealthy family on paper anyway.
I won't deny for a second that my approach has been single-minded. I've concentrated on keeping ourWal-Mart stores and Sam's Clubs on track, and I have to admit that I never have spent a great deal ofmy time, or energy, thinking about what some of the broader implications of our family's wealth could be.
Maybe it's because we have never had any intention of liquidating our stock. Even so, the annualdividend income from that stock has become large in its own right, and it's that income which representsthe actual wealth available to us.
As I told you early on, this kind of wealth seems to naturally attract all kinds of folks who just want us togive them a handout. We have never been inclined to give any undeserving stranger a free ride, and wewill never change our minds about that. Nor do we believe that because we have money, we should becalled upon to solve every personal problem that comes to our attention, every problem of thecommunity, the state, or, for that matter, the country.
We do, however, believe in worthy causes, and we realize how fortunate we've been as a family. So weare committed to using our personal resources for as much benefit as possiblein the areas we feel needthe most help, employing the methods we think hold the most promise. And our family's gifts reflect awide variety of interests, spread across numerous organizations, with a heavy emphasis on education.
Most of the giving we have done has been either anonymously, or linked to strict requests for no publicity, and I'm not going to go into the financial details of our charitable activities here because I don't thinkit's anybody's business but our own. I will tell you, though, that we think we do our part.
In addition to a lot of educational institutions, recipients of Walton family gifts include church groups andcommunity projects like zoos and libraries and recreation facilities. We support hospitals and medicalresearch programs. We fund arts groups and theater groups and symphonies. We give to conservationand environmental causes and veterans' groups, as well as to economic development groups and freeenterprise groups. We support public schools and private schools. Since charity almost always begins athome, many of the recipients are in the communities or at institutions to which Helen and I, or ourchildren, have personal ties. But we have also supported national organizations and even a few localcauses of national importance in such cities asNew YorkandWashington. Helen has been actively, andpublicly, supportive of a number of institutions, including the Presbyterian Church, the University of theOzarks, and theNationalMuseumfor Women in the Arts. And I have supported such groups as theCitizens Against Government Waste, Students in Free Enterprise, and the Arkansas BusinessCouncilwhich folks around here insist on calling "The Good Suit Club."We also have some pet projects to which Helen and I together are strongly, and personally, committed.
In the last ten years we have funded a special scholarship program we started which sends kids fromCentral America to college here in Arkansas. Right now we've got about 180 of them enrolled at threedifferent Arkansas schools, and we pay about $13,000 a year per student to provide tuition,transportation, books, and room and board. We got the idea while we were traveling around down inthat part of the world. And when we learned that the then Soviet union and Cuba had programs to teachtheir values to kids from other places, we decided Americans ought to be doing the same sort of thingwith our values. We want kids to learn about the tremendous potential of the free enterprise system andto see for themselves what all the advantages are of a stable, democratic government. Besides that, it willhelp some of these students, who wouldn't have otherwise received any college education, to return totheir countries and do something about their serious economic development problems. Who knows,maybe one day some of them will be running Wal-Marts or Sam's Clubs in Honduras or Panama orGuatemalaor even Nicaragua. Closer to home, the Walton family sponsors seventy scholarships of$6,000 each every year for children of Wal-Mart associates.
So we feel pretty good about what we've done up until now. But I do realize there's a bigger issue atstake here, and I've been doing a lot of thinking on it lately. As a family, we've been in the planning stagesof how we want to leverage our resources for a while now, but really the serious business of getting itdone will begin after I'm gone. Helen and I expect that an amount at least equal to our share of the familyassets will go to nonprofit organizations over a number of years.
In all likelihood, education is going to be the issue we focus on the most. It is the single area whichcauses me the most worry about our country's future. As a nation, we have already learned that we mustcompete worldwide with everybody else, and our educational process has more to do with our ability tocompete successfully than anything else. Unless we get ourselves on the right track pretty quickly, andstart rebuilding our system into one that compares favorably with the rest of the world's, we couldseriously jeopardize the future of this great country of ours. Frankly, I'd like to see an all-out revolution ineducation. We've got to target the inner-city schools and the rural poverty pockets like the MississippiDelta and figure out a way to make a difference. We have to start at the preschool level, and developways to change the environment for children so they have a chance to stay in school and learn to valuetheir educations. We have to look at the effects of so many single mothers and fathers leaving their kids athome with no guidance, and find ways to help them encourage their kids.
Incidentally, my share of the proceeds from this book will go to the New American School Corporation,which is a private initiative started by business leaders who have pledged to raise $200 million for thedevelopment of "break-the-mold schools." It's a true nonpartisan effort aimed at helping Americanschools meet the six goals established by a national governors' task force, which was convened byPresident Bush, and chaired by Arkansas governor Bill Clinton.
As the family focuses more broadly on educational reform, we want to be very careful. We are devoutbelievers in the Wal-Mart way of doing things, and we want some basis by which to measure ourinvestment. We're not satisfied that the traditional methods by which charitable foundations are operatedreally meet our criteria. Some people have crowed a great deal about all their philanthropy over theyears, but too many of these foundations, I suspect, were only begun as tax shelters without much realsense of purpose. Many of them seem to have become very nice places to work for a small group offolks who have built up pretty thick crusts of administration and bureaucracy. Those are two of the thingswe have fought the hardest to keep out of our company, so naturally we don't want them clogging up ournonprofit efforts.
We are going to insist that whatever program we support incorporates those same values. When itcomes to college educations and scholarships, for example, I've always favored programs that require therecipients to work and kick in some of their own money. For that matter, I've always preferred to hirepeople who had to at least partly work their way through schoolno doubt because of my ownbackground. The secret lies in motivating kids who aren't getting educated today towant to putthemselves through school, and to make them understand the rewards they can expect when they do.
So we are going to approach philanthropy with the same lack of reverence we gave to the traditionalmethods of the retail business when we started out there. We are going to see if we can't shake up someof the time-honored assumptions about what you can teach people, about what you can do with peoplewhose self-esteem has been beaten down, and about how you can motivate ordinary people to doextraordinary things. As just one example of the kinds of folks we're calling on in putting this efforttogether, we asked Lamar Alexander, the former governor of Tennessee and now U.S. Secretary ofEducation, to attend our last family meeting here in Bentonville and talk with us about some of the ideashe's come across for improving our public education system.
We don't come by this passion for improving education out of some fuzzy-headed notion or somethingwe read somewhere. We see the need every day at Wal-Mart. In the old days, just being bright andwilling to work hard was enough to give you all the opportunity you needed at our company. But we aresuch a sophisticated company today, and have moved so rapidly in the areas of technology andcommunications, that skill and knowledge in these fields have become a vital part of our business. Noneof this is news to anyone who keeps up with world business trends. This is the direction in which we're allheaded. And to succeed, we're just going to have to do a better job of educating and training our workforce.
One aspect of this whole philanthropy issue that has annoyed me considerably over the years is thecriticism by some of our detractors that Wal-Mart doesn't do its fair share of giving to charities. Thecriticism seems to come from folks who say we don't meet the standard guidelines for corporations,guidelines which are set, I guess, by the people who run the charity business.
Wal-Mart, like many other corporations, conducts a very aggressive United Way campaign which meetswith great success among our associates every year. In fact, we keep our United Way goal sign in theyard right outside my office here so everybody can see how we're doing. We strongly believe in UnitedWay becausein spite of all the publicity it received recently for some problems in the nationalofficemost all the money that's collected in these campaigns is directed locally. We believe in locallydirected charities, so we have a matching grant program for associates who want to raise money forcharities of their choice. We're also a big contributor to the Children's Miracle Network Telethonwhichsupports locally directed children's hospitals. Last year, Wal-Mart and its associates were the largestsingle contributors to this campaignat $7.5 million.
I think quite a few companies use charitable giving guidelines as a way to say, in effect, "We gave at theoffice," when it comes to thinking about what overall good the companies should be accomplishing. In myopinion, Wal-Mart is an entirely different sort of enterprise from that and I would argue that our relentlesseffort to improve our business has always been tied to trying to make things better for the folks who liveand work in our communities. We have built a company that is so efficient it has enabled us to save ourcustomers billions of dollars, and whether you buy into the argument or not, we believe it. That in itself isgiving something back, and it has been a cornerstone philosophy of our company.
For example, we did $43 billion in sales this year. For the last ten years1982 to 1992we haveaveraged sales of, say, $13 billion a year. So that's about $130 billion in sales. If we only saved ourcustomers 10 percent over what they would be paying if we weren't thereand I think that's veryconservativethat would be $13 billion we've saved them. That's $13 billion which is a product of a freemarket system that allows us to operate efficiently, and it's the reason our customers love us so. The truthis that Wal-Mart has been a powerful force for improving the standard of living in our mostly rural tradeareas, and our customers recognize it.
We do a lot of things to take care of our own. Some of them you already know about. Our associateshave almost $2 billion in their profit sharing fund, some of which I suppose the company could have givento charity instead. We have a relief fund for associates who are the victims of natural disasters. And eachyear, every Wal-Mart store sponsors one student in its community to a $1,000 scholarship.
Beyond that, we feel very strongly that Wal-Mart really isnot, andshould not be, in the charity business.
We don't believe in taking a lot of money out of Wal-Mart's cash registers and giving it to charity for thesimple reason that any debit has to be passed along to somebodyeither our shareholders or ourcustomers. A few years ago, when Helen convinced me that our associates here in Bentonville needed afirst-class exercise facility, she and I paid the million dollars in construction costs ourselves, plus an annualsubsidy for a few years to get it started. We paid for it to show our sincere appreciation to theassociates, but also because I don't believe in asking the customers or the shareholders to pay forsomething like thatas worthy a cause as it may be. By not designating a large amount of corporate fundsto some charity which the officers of Wal-Mart may happen to like, we feel we give our shareholdersmore discretion in supporting their own charities. And I have been particularly proud of the reallygenerous community support shown by some of our shareholders who have been with us since way backwhenespecially the early store managers. Willard Walker and Charlie Baum are two guys who have justdone great things for the community with some of what they've accumulated through their Wal-Martholdings.
Maybe the most important way in which we at Wal-Mart believe in giving something back is through ourcommitment to using the power of this enormous enterprise as a force for change. One of the betterexamples of what I'm talking about is our Bring it Home to the U.S.A. program, which we started in1985 in response to the soaring U.S. trade deficit.
Wal-Mart, like every other American retailer, is a huge importer of merchandise from overseas. In somecasestoo many in my opinionimporting is really our only alternative because a lot of American-madegoods simply aren't competitive, either in price, or quality, or both. We committed ourselves to seeing ifwe could do anything to improve the situation. The remedy we envisioned wasn't some blind patrioticidea that preaches buying American at any cost. We, like any other retailer, will only buy American ifthose goods can be produced efficiently enough to offer good value. We're not interested in charity here;we don't believe in subsidizing substandard work or inefficiency. So our primary goal became to workwith American manufacturers, and see if our formidable buying power could help them deliver the goodsand, in the process, save some American manufacturing jobs. I sent out an open letter to our suppliers,inviting them to work with us on the program. "Wal-Mart believes American workers can make thedifference," I told them, "if management provides the leadership."We were surprised ourselves at the results. It turned out that if Wal-Mart committed to high volumepurchases well in advance of shipping deadlines, a lot of American manufacturers could save enough onthe purchase of materials, personnel scheduling, and inventory costs to realize significant efficiency gains.
So, in fact, they could turn out a wide variety of merchandiseflannel shirts, candles, men's knit shirts,ladies'sweaters, bicycles, beach towels, film, videotapes, furniture, even toysat competitive prices. Wealso took a close look at our overseas buying practices and discovered a number of hidden costs, suchas having to own inventory from the time it leaves port on a ship. Using that data, we developed aformula which enabled us to make a true apples-to-apples cost comparison of buying somethingoverseas versus buying it at home. Now, if we can get within 5 percent of the same price and quality, wetake a smaller markup and go with the American product.
What we learned was that we had fallen into a pattern of knee-jerk import buying without reallyexamining possible alternatives. In the past, we would just take our best-selling U.S.-made items, sendthem to the Orient, and say, "See if you can make something like this. We could use 100,000 units ofthis, or more, if the quality holds up." I'm sure a lot of other retailers do the same thing. Today, weinstruct our buyers to make trips to places like Greenville, South Carolina; Dothan, Alabama; Aurora,Missouri; and hundreds of other out-of-the-way places in Pennsylvania, New York, Ohio, or NewHampshire, before just routinely dashing off a letter of credit to the Far East. If we could all take a littleextra trouble to work some of these deals outand the manufacturers will continue to come up with theirown creative programsI think there's still a tremendous amount of untapped potential left in this idea.
As usual, some of our criticsmostly unions in this casetook a shot at me for this idea. They said I waswrapping myself in the flag and pulling a typical Sam Walton promotion to hide the fact that we sell a lotof import goods. These folks, I'm afraid, are really living in the past. They don't believe in a free market.
They're not interested in new solutions. And they only care about jobs if they areunion jobs, many ofwhich, frankly, have priced themselves out of the market either with unrealistic wages or total inflexibility.
With this approach, we estimate we have saved or created almost 100,000 American manufacturingjobs. So before anybody dismisses Bring it Home as a publicity stunt, they should listen to the peoplewhose jobs were saved, or created, by the program.
FARRIS BURROUGHS, PRESIDENT, FARRIS FASHIONSBRINKLEY, ARKANSAS:
"It's the best thing that ever happened to Brinkley, and certainly the best thing that ever happened to me.
Before, we had a contract with Van Heusen for Penney's and Sears, but in 1984 they told us they weremoving everything to China. We were struggling from season to season with ninety jobs, when I got thiscall from a guy claiming to be Sam Walton. It turns out he actually was Sam Walton, and he wanted toknow if we thought we could make 50,000 dozen flannel shirts for him. I'll tell you what, though. He's theonly guy I ever worked for who looked me right in the eye and said, 'Son, if you can't make money offthis project, don't do it.' Most retailers couldn't care less whether the manufacturer makes money or not.
"Anyway, today we're making about two and a half million Wal-Mart shirts, and we've gone from 90employees the week Mr. Sam called to 320 today. And we know where it comes from. EveryChristmas, we give our employees Wal-Mart gift certificates."There's no charity at all involved in this program, and, in fact, I'm proud to say that it benefits us atWal-Mart in a very direct way. Every job we save creates another potential Wal-Mart customer who'snot worrying about where his or her next dollar's coming from. They have a job, and we have acustomer. So we all come out ahead. Farris was one of our early success stories, and since then we'veworked out all kinds of Buy American deals with small and large manufacturers, including FieldcrestCannon, 3M, Sunbeam, Mirro Foley, U.S. Electronics, Kentogs, Capital-Mercury, Mr. Coffee, Lasko,and Huffy.
From the time the program began in 1985, until the end of last year1991we estimate that we boughtAmerican-made goods with a retail value of more than $5 billion that would previously have beenpurchased overseas. And just to keep everybody thinking along these lines, we always post our latesttally and our latest Bring it Home success story right by the door where all our vendors have to enter ourbuilding to make sales calls.
In the same spirit, we're in the early stages of an environmental initiative, encouraging suppliers andmanufacturers to eliminate any wasteful practicessuch as unnecessary packagingthat we can. Also, wehave a fairly new program in which we donate 2 percent from purchases of Sam's American Choiceproductsa selection of our own private label products toward scholarships for students studyingmathematics, hard sciences, and computer sciences.
We aren't the least bit naive about how big a stick Wal-Mart swings in the world of retailing these days.
We know we can be very influentialpowerful if you prefer. So today I think it's important for our peopleto remember that things aren't the same as the old days, when we were the scrappy underdog having tofight for every single break. We still want to drive a hard bargain, but now we need to guard againstabusing our power. We want to find more ways, like Bring it Home, in which we can use our influence togive something back.
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