Investor sentiment and family reputation could be driving the Walton family’s announcement that it intends to cap its stake in US hypermarket chain Walmart at 50%, according to a business academic from Arkansas, where the company is headquartered.
Share buyback programmes have caused the family’s stake to rise above the threshold, and it has consequently announced it will rid itself of shares “from time to time” to stop this.
This month the family announced it would be gifting 6% of its Walmart stake to the newly established Walton Family Trust, and said the money would facilitate the family’s philanthropy.
The trust will sell this stake, worth around $15 billion, over a number of years.
Alan Ellstrand, chair of the management department at the University of Arkansas, said the move is likely intended to appease minority investors, while also contributing to the family’s legacy through philanthropy.
“I believe that the Walton family is sensitive to not wanting to signal strong control of the company. Of course, on one hand, owning nearly 50% of the stock puts the Walton family in the position of exercising significant control over the company as the primary stockholder.
“However, with less than 50% ownership it gives a stronger appearance that the firm is still widely publicly traded—something that is consistent with the values of the company and the Walton family.”
After the death of Sam Walton, all CEOs have been non-family members.
“By reducing their ownership, the Walton family can be seen as signaling to the investment community that they will not take a stronger role in the operations of the firm,” he said.
“At the same time they are the primary (not majority) shareholder and still maintain sufficient control of the firm, with Rob Walton being chairman of the board — an important leadership role, but not a day-to-day manager.”
Ellstrand believes the stock sale is part of a stronger commitment from the family and firm to support charitable causes, saying: “I believe that the Walton family wants that to be part of their legacy.”
The Walton family already owns a number of charitable trusts, including the Walton Family Foundation, which has contributed more than $5 billion to charitable organisations since 1987.
However, it has donated to some contentious causes, such as charter schools, and the family’s retail behemoth has been criticised for its poor treatment of workers.
Walmart was founded by Sam Walton in 1962 in Rogers, Arkansas. The discount department store business now operates more than 11,000 retail units and reportedly employs 2.2 million individuals around the world – almost as many people as the total population of Arkansas.
Earlier this year, Walmart announced it would raise employee wages to $10 an hour, a move that analysts estimate could cost the firm up to $1.5 billion per year.
The retailer reported revenue of $485.6 billion for the year ended January 2015.