Beyond the Big Bonus: Analyzing Walmart’s Human Capital Score after Tax Bill Payouts

Blog February 7, 2018

After the tax reform bill passed in January, major companies raced to announce bonuses and new benefits for employees, earning some good press in the process.

For investors who are concerned about good governance, executive compensation, or just a company’s treatment of workers, one bonus is never the end of the story.

Bonuses and wage increases should be considered in the context of share buybacks which should boost executive compensation, as governance activists point out. An example is William Lazonick, professor of economics at University of Massachusetts Lowell, who told the Financial Times that “the only benefit of share buybacks is to people who are in the business of selling shares: executives.”  Marketwatch reports that executive compensation rules will change in several ways with the tax bill’s passage, and consequences to be determined.

One granular place to start researching company performance beyond the bonus is benchmark and sector comparisons of performance in the area of Human Capital broadly, or Compensation more narrowly.

Here’s a look at how the Insight360 platform can be used to evaluate news like this, looking at retail giant Walmart in the context of the cohort of bonus awarders, as well as its sector of consumption (that classification according to the Sustainability Accounting Standards Board, SASB).

First, to start the research process, here’s a selection of the companies who announced bonuses or benefits. USA Today compiled a list you can find in the table below.

Insight360 allows investment professionals and portfolio managers to examine groups of companies in portfolios–below is a portfolio made up of Walmart and its bonus-awarding peers.

In Portfolio View on Insight360, each category can be examined independently.

It’s no surprise to see the portfolio’s score for the Compensation category beats the benchmark–it does so by 6.9{ee6f7b21a88f3da98ca5d6e8214e0339d03b9192302bfa7f9e07cd67f1356a2c}, showing that the bonus awards broadly speaking come from a group of companies that outperform the S&P 500 benchmark.

But what about individual firms, in this case, Walmart?

The chart below shows another Insight360 portfolio tool, a heat map that illustrates differences between companies in a portfolio.  

The portfolio is grouped into higher-ESG Momentum and lower-ESG Momentum cadres.  Keep in mind that these scores are the overall metrics for companies based on all ESG categories, not just Compensation.

Where does Walmart sit?  It’s the poorest-performing company in the high ESG Momentum group, with a long-term Insight score of 50.  While that’s a neutral rating on the Insight360 platform, it doesn’t compare well with the bonus cohort.

It’s worth looking at how Walmart compares to peers in its sector.

A peer comparison of Walmart versus other firms in the Consumption sector shows that Walmart hasn’t outperformed.

Since late 2016, Walmart’s long-term Insight score has lagged the sector average, whether you include all categories, or only those that match SASB’s materiality map.

Drilling down to the Compensation category again, Walmart’s performance improves somewhat but is still below the sector average since June 2017.

Even the jump in the company’s near-term Pulse score with the news of its bonuses hasn’t been entirely positive when you drill down and do qualitative analysis with Insight360.

Events in the system point out that Wal-mart paired the bonus announcement with moves to cut 1,000 office jobs and close some Sam’s Club locations.

The headlines captured on Insight360 include:

  • “Wal-Mart Reportedly Cutting 1000 Office Jobs After Raising Store Worker Wages” – Fortune
  • “The Other Ugly Truth About Minimum Wage Hikes.” – Forbes

The story of Walmart’s bonuses are an example of how investment professionals can use Insight360 to drill down and examine the long-term ESG performance of a company.  It’s a valuable tool to augment the daily drumbeat of news that influences stock prices and investor sentiment.