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Top execs quit scandal-hit Wal-Mart China

TWO top executives at Wal-Mart China resigned today, a week after the company closed 13 stores in southwestern China amid a false labeling scandal.

Ed Chan, president and CEO of Wal-Mart China, left for personal reasons after close to five years of service, the company said in a statement today. Clara Wong, senior vice president for human resources at Wal-Mart China, also stepped down.

Scott Price, president and CEO of Wal-Mart Asia, will serve as the interim head of the company's China business until a new leader is appointed.

No correlation has yet been found between the resignations and the current investigation over the "pork fraud" Wal-Mart China is accused of.

Twelve of its stores in China's southwest city of Chongqing were found guilty of selling ordinary pork as organic by a local watchdog last month.

The stores have made an illicit profit of over 540,000 yuan (US$84,500) from selling 63,547 kilograms of falsely labeled pork over the past 20 months, according to the Chongqing Administration of Industry and Commerce.

The authority fined the company 2.69 million yuan and ordered all its 13 outlets in the city to suspend operations for 15 days last week. Two Wal-Mart China employees have been arrested by the local police and 25 others were detained for further investigations.

"We hope Wal-Mart can really implement corrective actions and do some housekeeping this time," Chen Su, deputy director of the administration, said last week.

The company has been punished 21 times since it entered Chongqing in 2006 for selling expired or substandard food, and luring customers with false or exaggerated advertisements.

Such misbehavior has occurred 9 times so far this year in China, while the US retail giant is trying to accelerate its expansion in the high-growth market.

Wal-Mart currently operates 353 outlets in 130 Chinese cities, including 104 stores run by Trust-Mart, in which it bought a 35 percent stake in 2007. It has opened about 40 new stores annually over recent years, but its money-spinning speed is way below that.

After reporting revenues of US$ 7.5 billion in 2010, which accounted for only 1.78 percent of the company's global figure of US$ 420 billion, the US headquarters ordered Wal-Mart China to slash its costs by US$2 million in the second quarter of this year.

Last May, Wal-Mart China announced in an internal email memorandum that the company's chief financial officer at the time, Roland Lawrence, and chief operating officer at the time, Rob Cissell, had left "to explore other opportunities." The resignations, however, were widely associated with the pressure of generating more revenue and profit.

Price, the interim China head, said he was confident the management team would continue to lead Wal-Mart's expansion in the country.

"China is an important market for Wal-Mart, and its 12th five-year plan will provide strong opportunities for the retail industry," he said.

 

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