Watch stocks you care about
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
Retail giant Wal-Mart Stores (NYSE: WMT ) has long seen its reputation tarnished by allegations that it mistreats employees. But now, the company is spearheading a government-backed effort to create an "employer mandate," which would force most companies to provide health insurance to employees. Wal-Mart's tack may not be as bizarre as it sounds -- nor as commendable.
Many companies naturally oppose Wal-Mart's position; the National Retail Federation said it was "flabbergasted" by the retailer's move. Despite its historically bitter opposition to unions, Wal-Mart's even joined forces with the Service Employees International Union, sending a letter to President Obama in support of an employer mandate. Politics makes strange bedfellows, indeed.
Quit hogging the covers!
True, Wal-Mart's huge size can help it create big benefits for communities and the environment -- when it decides to do so. But let's apply a bit of healthy skepticism to the idea that Wal-Mart has suddenly taken an altruistic interest in its employees' health.
Wal-Mart says the mandate will only be effective if the government commits to reducing health-care costs for companies, so it's clearly hoping for favorable government intervention. Meanwhile, the Senate Finance Committee is considering an alternate plan that might result in more onerous health care requirements for companies hiring lower-wage workers. By backing "employer mandates" instead, Wal-Mart is rooting for the less costly of the two prospective plans.
Beyond its own bottom line, Wal-Mart may also hope that changes to the law will ultimately give it an advantage over its competitors. Consider Wal-Mart's massive size and annual revenue, then imagine the kind of squeeze an employer mandate for health care might place on smaller rivals' profitability and competitiveness. Bad news for them would be great news for Wal-Mart.
This sort of strategy, known as "regulatory capture," is an effective -- if sneaky -- way to get a leg up on rival businesses. For example, advocates of government regulation of tobacco hailed the recent signing of a landmark anti-smoking bill. But Altria (NYSE: MO ) lobbied for it, too, since provisions in the law will lock in Marlboro's iron grip on American market share. (Rival Lorillard has reportedly dubbed the bill the "Marlboro Monopoly Act.")
Tobacco's not the only business to benefit from some covert help from Uncle Sam. Witness the former attorney for Monsanto (NYSE: MON ) who rather conveniently served as deputy commissioner for policy at the Food & Drug Administration when it issued rules about genetically modified foods. And I suspect Google (Nasdaq: GOOG ) may face trouble from Uncle Sam in the near future. A number of former lawyers for the copyright-loving Recording Industry Association of America have since moved into the Justice Department, and I doubt they're too fond of Google's efforts to loosen laws protecting intellectual property.
Far less noble than it sounds
In my opinion, companies shouldn't need government prodding -- or handouts -- to improve their behavior. (More encouragement from consumers wouldn't hurt, though.) Happier employees do better at their jobs and create more satisfied customers, all of which enhances a company's competitive advantage in the long term. Starbucks (Nasdaq: SBUX ) , Costco (Nasdaq: COST ) , and Whole Foods Market (Nasdaq: WFMI ) have stood out from their retail peers by proactively providing health-care benefits to many of their workers.
When Uncle Sam gets involved, even well-intentioned regulation can fall prey to favoritism toward the powerful and well-connected. That's not true competition, and however much it may boost favored companies' profits, I don't respect it. Despite its altruistic veneer, I think the Bentonville behemoth's being as ruthless as ever -- and hoping the government will lend it a hand.
Do you think Wal-Mart's finally turned toward the side of the angels, or is it just waiting to stick the knife in? Share your thoughts in the comment box below.
Celebrate Independence Day with some related Foolishness: