Chair apparent

Walmart pits nepotism against experience

Walmart Stores' choice of new chairman pits nepotism against experience. The $240-billion retailer is replacing Rob Walton, who is retiring after 23 years in the role, with Greg Penner, his son-in-law. That'll rile shareholders who want independent oversight. Penner has solid credentials - and the Walton family owns half the company. But he needs to prove he can get Walmart back on track.

Penner has an impressive resume. He joined Walmart's board in 2008 and was made vice-chairman last year. A former Goldman Sachs analyst, he served in a variety of management roles at the retailer, including finance chief of the group's Japan operations. He then in 2005 set up Madrone Capital Partners, a Walton-family-backed Silicon Valley investment firm. He has also been a director at Chinese search engine Baidu since 2004. The dotcom experience in particular should be valuable to Walmart as the retailer redoubles its efforts to compete with the likes of Amazon online.

Having a family keep control, or near-control, of a public company can sometimes be a benefit. The Ford clan, for example, took an enlightened approach to governance - and its own survival - when it replaced family scion Bill Ford with Alan Mulally in 2006. It later gave the new boss a free hand as he fought to save Ford Motor from bankruptcy during the financial crisis. That, though, only happened after years of inaction - making the family's involvement smack more of nepotism.

There's certainly a good case for change at Walmart, governance aside. Its shares have been underperforming the S&P 500 Index since 2013, and retail peers since around 2010. The company was also dealt a black eye after a 2012 Mexican bribery scandal. An independent chairman would arguably be in a better position to hold management accountable for getting performance back on track while looking after the concerns of all shareholders.

Appointing a family insider is a finger in the eye to those owners who backed a resolution calling on the company to appoint an independent chairman. The measure was defeated at Walmart's annual meeting on Friday. The exact result is not yet public, but last year around 40 per cent of non-Walton shareholders supported a similar measure.

Unlike the Fords, who control 40 per cent of the company thanks to a dual-class stock structure, the Waltons vote their common shares just like everyone else. Together with Walmart's announcement Friday that it would reshuffle board committees to give its majority of independent directors a bigger role, that may justify giving Penner a shot. It's now up to the new chairman to show his mettle.