Exclusive Interview With Wal-Mart CEO Lee Scott

This is a rush transcript from "Your World with Neil Cavuto," March 27, 2007, that may be updated:

NEIL CAVUTO, HOST: Well, Wal-Mart (Lee Scott. Good to have you, Lee, thanks for coming.


CAVUTO: I have got to ask you, just psychologically, when the company is bashed, and you know, bandied about in the press as being unfair to workers and all that, does it weigh on you, do you ever just say, God, I'm sick of this?

SCOTT: No. It bothered me a little this morning when I was getting dressed and you say I was the most controversial CEO in America. But, no. If you spend your time in the stores talking to associates and customers, and in the Sam's Clubs, you get a better perspective of what we are, and I think it emboldens you and encourages you to go on.

CAVUTO: All right. But you know how you are a political football. Hillary Clinton used to sit on your board, bashes you. Barack Obama all but bashes you. And John Edwards, in a prior appearance with us, Lee, had this to say about you. Let's listen to this.


JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: The difference between the two is Costco actually pays its employees a more reasonable wage and they have health care coverage. That is a big thing for people who work at Wal-Mart. So what we want to see happen, what we want to see happen is we want to see Wal-Mart move in the direction of what some other big corporations are doing and being more responsible for their employees.


CAVUTO: What do you say about that?

SCOTT: Well, I say it is politics. People are catering to the special interests that they believe will provide the impetus for them to be president, to get the nomination. And I think over the long term, if you think of the 137 million shoppers in the Wal-Mart Stores in the U.S. every week, that I think our customers and our associates see through that.

CAVUTO: But do you worry that they are beginning to define you? We are going to get into a lot of your good works, what you have done for charity, what have done for the environment, what you have done to address a lot of things that are important to this very political crowd that is bashing, that it does not filter through their negative comments.

SCOTT: No. Our results show that it has almost no impact on our customers. Our customers judge us based upon how do they see the associates in the store and the club. Are they happy? Are they friendly? Is that people greeter saying hello? Are they saying thank you when you check-out? Our customers pay attention to what the prices are and the assortment and are we in this stock?

Do I think that it resonates a little bit and they wonder about the company, and what the company is doing? That is probably true. But they value this company based upon their store, their store in their community, and that is the relationship they have. And I think that is the reason that the criticism has not had the impact that our critics would like to have.

CAVUTO: Well, did you ever think -- who am I to offer advice? But the rap you get from advertising executives, Mr. Scott, is that, hey, take offense, come out and say, you know what? At the end of the day, we save our customers to $2,000 a year. End of the day, that is it. Why don't you do that?

SCOTT: Well, we do that.

CAVUTO: No. No one is hearing that.

SCOTT: Well, it is the difference between what you say and what people hear, and how well it is broadcast. This world today that you live in, I am not sure that it is newsworthy, the fact that we provide opportunity, or that 11,000 or 12,000 people show up for 300 jobs, or that we promote internally the number of people that we do regardless of their education level, that we save customers money so they can lead a better life.

Those are the things that we are expected to do. Those are the things we as a company we do. I guess in this world today that is not terribly newsworthy. A little like your conversation of focusing on the number of people who are not paying for their home mortgages today and forgetting about the fact that 87 percent of the people in the subprime category are in fact in houses because of that opportunity.

CAVUTO: But in the days of Sam Walton, founding Wal-Mart, what have you, Wal-Mart was a corporate rock star. It could do no wrong. You saved folks a lot of money. You opened up in areas that typical retailers, at the time, the Kmarts, the Caldors of that era wouldn't even touch. So you did that.

You saved them a lot of money, and now you are bashed on either health benefits, low pay, is there anything that sticks like that? Among your workers, do they scratch their heads and say, you know, Lee, yes, yes, we are in getting a bum rap.

SCOTT: Well, our workers get very upset about the company being attacked all of the time, because they work in the store. They know how they are treated. They know what the opportunities are. They know what job they had before they started at Wal-Mart. They knew what the benefits were there and the pay. So they know there are better off. So yes, and what they want me to do is to speak out, whether it be on programs like this, or in the press or wherever. They want Wal-Mart to speak out.

CAVUTO: Why don't you?

SCOTT: I do.

CAVUTO: Not a lot.

SCOTT: Oh, much more than I would like.


CAVUTO: But the reason why I mention this is, as you know, image is everything, and perception becomes reality. And I guess what I am asking you is whether this has any personal fallout for you. That that -- you are trying to run this behemoth. You are trying to save customers money. And you get slapped around a lot.

SCOTT: No. This is -- it is a great company that provides a great service, not only in this country, Mexico, Nicaragua, Argentina, Brazil, China, in causing people to be able to live better, both the associates and our customers. We have critics who want us to be a better company.

CAVUTO: No. Do you know what you have?


CAVUTO: I think you have critics who want you to be a union company. Now if you were, do you think all of this would go away, all of this criticism?

SCOTT: Let me, if I could, finish my thought. We have a select group of people who are critics of the company that want us to be better. The issues you are talking about really are from the unions that came after we started the Supercenter Program, and we entered into groceries. And that is where I think the major force behind this criticism is. We cannot appease them. We are not.

CAVUTO: They want you to be unionized, right?

SCOTT: They may.

CAVUTO: All right. They do. I talk to a lot of them. All right. Now.

SCOTT: That is not their choice. That is our associates'.

CAVUTO: Absolutely. Now do you think in your heart of hearts, if you were, then all of the people criticizing you about health benefits, hourly rates, all of that, all of that, they would all go away?

SCOTT: You are darn right. This is about politics and power. It is not about right and wrong.

CAVUTO: Now you have workers who, when a store opens up in a given area -- and I have seen this in Pennsylvania of all places, one of your stores opened not too far away, I think for 300 positions, close 3,000 people came. And I am told that that is typical.


CAVUTO: The mom-and-pop stores are the ones that come back and say, yes, but they have driven out thousands more from their jobs. What do you say?

SCOTT: I say that is not correct. If you actually look at where we build stores and look at the economic activity that is created around it, go to the West Side of Chicago, where we opened that very controversial store, and look at the growth and development around there today and the jobs that been created. I would not argue that there is not somebody who is disadvantaged if we come in. There may be a competitor that goes out of business. I do not know that. But what we do see is that, overall, there is more economic activity and small businesses can compete, and do very well.

CAVUTO: Hillary Clinton sat on your board, now bashes you. What do you think of her?

SCOTT: I like Hillary Clinton. I do not believe Hillary Clinton bashes us. I am not familiar with her bashing us. I have a lot of respect for her. She is.

CAVUTO: Her campaign says you treat your workers unfairly.

SCOTT: I am not sure what he campaign says. I just am not familiar with the senator saying that.

CAVUTO: But you like her. If she became president of the United States, you would be all right with that?

SCOTT: I'm not talking about how I'm going to vote.

CAVUTO: Do you have a horse in the race?

SCOTT: I tell you how I would judge people. When Hillary Clinton served on our board, I was assistant director of the private fleet, very low-level job, she always treated me with respect and courtesy.

CAVUTO: All right. Well, she saw a future CEO probably, right? You never know. All right. Lee Scott, we will have more right after this.


CAVUTO: All right. We are back with Wal-Mart CEO Lee Scott.

Lee, there is so much I want to get into here. And I know you eschew talk about '08, but is it fair to say since Wal-Marts are associated more with or red states than blue that you are a more red guy than a blue guy?

SCOTT: I am not going to get into my personal politics. I am on the record of having supported Republicans and Democrats. So and really my politics aren't relevant to the company.

CAVUTO: OK. It is a little bit of a scandal that has been out in the press, Julie Roehm, a former top advertising executive, she was forced out allegedly while (INAUDIBLE) trying to steer Wal-Mart's $580 million account to an outside advertiser. It has gotten to be a little messy, because she allegedly had an affair with a subordinate, Sean Womack. You guys came back, released some pretty salacious e-mails. Where does this thing stand?

SCOTT: I think in the courts.

CAVUTO: Where they having an affair?

SCOTT: I think it stands in the courts.

CAVUTO: So they started by wanting to sue you.


CAVUTO: You came back like a ton of bricks. Did you find evidence to support the fact that she was trying to influence advertising decisions at this outside agency?

SCOTT: I think you just need to read the court filings. I think it really lays out Wal-Mart's position on this in a very straightforward way.

CAVUTO: You do not allow internal affairs of between workers, I take it?

SCOTT: Particularly when you have reporting relationship.

CAVUTO: So that is why she was let go?

SCOTT: I think it is all laid out in the court documents.


CAVUTO: But you are not going to answer that.

SCOTT: No, I'm not. And I do not want to be deposed on it, either.

CAVUTO: OK. Fine. Let me also get a handle on how you are dragged into things over which I do not think you have any control. There have been a number of ads attacking you guys. But this stood out in our minds as we were going through them as at least one of the more unusual.

Have a look at this and I want you to respond to it.


UNIDENTIFIED MALE: Since 9/11, it is one of the greatest threats we face. A nuclear weapon in the hands of Usama bin Laden, shipped through an American port. But even though a Wal-Mart container arrives in the U.S. every 45 seconds, containers that could carry the weapons used in the next terrorist attack, Wal-Mart opposes scanning 100 percent of port containers, leaving America vulnerable to protect their profits. Wal-Marts, profits first, America's security second.


CAVUTO: That is from your friends at wakeupwalmart.com. What do you think of that?

SCOTT: Well, it is desperate. It certainly is not true, and it just smacks of being desperate.

CAVUTO: I mean, but to drag you into now being -- fostering potential terrorist acts against this country, when it gets that badly, something is wrong with the P.R., you know what I'm saying?

SCOTT: No, I don't. I mean, I think if you look.

CAVUTO: So you don't think any impressionable Americans will look at that and say, gee, this is not the Wal-Mart I thought?

SCOTT: No. I think most of our customers are very smart, that's why they shop with us. If you look what we are doing on container security itself, we are working with Homeland Security, we are doing tests in different markets, we are very actively involved in that.

People have -- our opponents have decided to try to make a political issue out of that for Wal-Mart. Well, first of all, I am not aware of us having a vote in Congress. In fact, if we did, probably there would be a lot of different votes than what we have seen. So it does not make any sense. So I think -- what I have seen, the reaction, is that is in bad taste. It shows the desperation on their part, and it is unfortunate that they did it, but our customers do not believe that kind of idiocy.

CAVUTO: Now there is no disputing the fact that even if people do not shop at Wal-Mart, you and I were saying this during the break, low prices that have been really the rule of this low inflationary environment for so long, are, in part, because of what you guys do. Do you think that the inflation rate in this country would be higher if you were not around?


CAVUTO: Significantly so?

SCOTT: Significantly. Our buyers work diligently with our suppliers to take cost out, to drive efficiencies in, and when suppliers come to us and say, you know, the price of oil is up, we want a 3 percent increase in price. Our buyers sit down and say, where can we take cost out? What can we do? I -- that has an impact in this economy when you are the size that we are.

CAVUTO: Now the Supreme Court has a case pending where they will effectively decide whether it is in a Wal-Mart or a Target or a Kmart's purview to sort of set such standards. Is that a dangerous precedent?

SCOTT: Well, I think it is dangerous in many ways, and that is because if you want society to continue to grow and evolve, then I think rewarding efficiencies and having consumers get the benefit of those efficiencies makes all of the sense in the world. When you have a predetermined price on everything, if Wal-Mart gets more efficient and can't pass those price-savings on, those cost-savings on to customers, then all of a sudden, over a long period of time, not in the short term, but the long period of time, I think that you diminish consumption, you diminish economic activity. I think this idea of discount retailing is wonderful for this country.

CAVUTO: You announced plans recently to exit the banking business. You were going to sort of dip your toe in it. Now I guess you are not. What was that in response to?

SCOTT: Well, it would be -- you can't exit someplace you have not been. So.

CAVUTO: But you seemed to be eager to dive into the pool.

SCOTT: We had simply asked for a charter for an industrial loan corporation.

CAVUTO: Right.

SCOTT: And we were going to do backroom processing. It became very, very controversial, and very political, and it was clear that we were not going to be able to do that. So we have withdrawn our application for that charter, and we are looking at how can we get another bite of that apple because our customers in many ways, are underserved, 20 percent do not have a checking account, and how do we serve those people? Today we do it with check-cashing, with wire transfers and money orders at extraordinarily competitive rates but very probable for us. We are going to take another look at it.

CAVUTO: Oh, really? So it is not a dead issue?

SCOTT: Oh, no.

CAVUTO: OK. More of Lee Scott, one last bite, after this.


CAVUTO: Well, keep in mind Wal-Mart is among the biggest employers in the world, certainly the most significant one in this country, and now there is talk of a slowdown in this country maybe building steam.

Lee Scott, are you worried?

SCOTT: I think it feels like -- with fuel prices going up, it feels like it is going to be a challenging year. I wouldn't say worried is the right word. But I think we are cautious, thinking through what it means, fuel prices have an impact on our basic customer -- have an impact on everyone. And, you know, it seems the upper end of the market is doing very, very well. The entry level wage people who struggled a little more are having a tougher time.

CAVUTO: All right. Was it because you recognized that slowdown that you started offering bonuses anywhere from $500 to $1,000 or more for workers in response to this slowing economy?

SCOTT: No, no. We had a -- last year we underwent a massive amount of change, had an impact on our long-term associates. As the year went on, it became evident that the changes that we had made were having a positive benefit for the company, that the people who lead the Wal-Mart Stores U.S. Group stepped back in and said, you know what? This has worked. We are going to give some of those dollars back to our associates.

And we created then a bonus program for the 20-year associates, and then every year for many years we have -- at this time of year, we pay out a bonus on individual stores, so we have people who earn up to $1,800 bonus in individual stores. But that has always been a part of the program.

CAVUTO: Let me ask you about this gas price connection to your sales, you were telling me something interesting during the break, that there is a clear correlation.

SCOTT: Clear correlation is the greatest correlation in Wal-Mart's comp store sales, it is not the unemployment rate, inflation rate, housing starts or anything else. It is the change in fuel price. If you think about how many people today live paycheck to paycheck, which are a lot of people, and they are barely making ends meet. When they put more money in their tank, that is less that they have to spend at a Wal-Mart Store.

CAVUTO: So your biggest worry is looking at gasoline prices? If they get out of whack, no matter what you are doing, that is a problem.

SCOTT: If they -- things, the geopolitical issues that we are faced today, they have a big impact on the citizens of this country, and actually, the citizens of many other countries.

CAVUTO: You do not get much press for this, of course, we have been reporting it, but that your charitable giving is among the highest of any corporation in the world, it was recently reported up 10 percent, north of $272 million. That is a lot of cash that has just accumulated. That is a big push for you, is it not?

SCOTT: It always has been. Sam Walton and believed that you had to give back to those communities, because he was a small-town retailers. Small-town retailers participate in the community, therefore if a Wal-Mart Store is going to make profits, they needed to reinvest. And we have done that, and this year, I think it was $272 million or $274 million that we gave back to those communities, and -- which is the right thing to do.

CAVUTO: I know this is a little bit dated, but you have also done a lot of environmentally-friendly stuff. A lot of liberal groups that typically would bash you, like that. I know that Bob and Harvey Weinstein had a big party for you. A lot of big Democrats were there. It must have seemed like a weird setting for you.

SCOTT: Out of body.


CAVUTO: Was it? I mean.

SCOTT: It is. But it is also interesting that people such as yourself will call us to task for our sustainability efforts. Our efforts are -- what we are focused on is eliminating waste. We made, based on our calculation, tens of millions of dollars more in profit last year because of the elimination of trash, the elimination of packaging, the elimination of waste in the system. And it is.

CAVUTO: So this was a cost issue to you, not just sort of appease a group kind of thing?

SCOTT: That is right. It is the right thing to do for the business. Over the long term, by doing things that are going to be great for this environment, we will be a stronger, more profitable company, and be able to roll back prices even further.

You tell me what is wrong with that. And I apologize if somebody is so conservative that they hate the fact that that means that it is going to be good for the environment.

CAVUTO: See, you have got conservatives and liberals bashing you. You can't win.

SCOTT: No, I -- you can win. And I'm going to tell you, you just do the right thing.

CAVUTO: All right. How are you feeling these days?

SCOTT: I feel really -- I just spent several days with my granddaughter, and I am rejuvenated and ready to go.

CAVUTO: And in this is for the long haul?

SCOTT: Oh, yes. This is a great company with wonderful associates. We will be in the stores tomorrow. And hopefully surprise a few people in a positive way.

CAVUTO: Lee Scott, the man who runs the most successful retailer on the planet, Wal-Mart. And by the way, a reminder, you can catch this entire interview, if you missed any of it, on foxnews.com. As Lee would probably tell you, it is the best business news Web site around, but his mike is off now, so he can't argue with me.


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