Warren Stephens: Inside the Wal-Mart Culture

After Stephens Inc. took Wal-Mart public in 1970, Jack Stephens took a seat on the board of directors and remained there for almost a decade. During that time, he took his teenage son Warren to a board meeting in Bentonville, where Sam Walton’s legendary frugality was on full display.

“I remember we went in and sat at folding Formica-topped tables. And they provided you lunch, but if you wanted a cup of coffee or Coke, you went over and put a dime — it was a dime then — in the vending machine. They didn’t pay for your soft drinks; they gave you a sandwich,” Warren Stephens recalled.

After the meeting, as father and son drove to Harrison to spend the night with a family friend, Jack Stephens contrasted Wal-Mart board meetings with those of another company he served as a director, Burlington Northern Inc., which provided its board members with overnight accommodations and fine dining.

“He said, ‘I think Sam’s got it about right,’” Stephens recounted.

Jack Stephens’ tenure as a Wal-Mart director had ended by the time Warren finished school and joined the family business in 1981, but Stephens Inc. was still helping raise money for the retailer’s astonishing growth. Before a successful convertible bond offering in the U.S., Stephens Inc. and Morgan Grenfell & Co. of London tried to put together a European bond offering for Wal-Mart.

That deal didn’t work out, Warren Stephens said, but the British investment bankers got their own taste of the Wal-Mart culture.

“I did get to know some of the guys from Morgan Grenfell, and they wanted to come up and meet David Glass, who was CFO at the time,” Stephens said. “We got into David Glass’ office, and it was two guys from Morgan Grenfell and me. And David had his chair and a metal desk, and then he had two chairs in front of him. And I had to stand up the whole time, and the Morgan Grenfell guys sat down because that’s all the room there was.

“And that was in the ’80s. They were very, very, very cost-conscious.”

Three decades and trillions of dollars in sales later, Walton’s tight-fisted approach to management remains intact, Stephens said, despite the recent New York Times report about widespread bribery by Wal-Mart de Mexico.

“David [Glass] succeeded as CEO, and he wasn’t going to let that culture change. And I know Lee Scott didn’t let that change, and I know Mike Duke hasn’t let that change,” Stephens said.

“It’s kind of a joke, but if you ask Mike Duke to go play golf, their internal rules are so stringent that he’s got to be real careful that he doesn’t inadvertently break one of them by doing something with somebody or taking something that could be viewed as, not a bribe, but an inducement.

“They are just so careful about all that, and I hate this thing that has happened to them in Mexico because I know how seriously they are taking all that. Their U.S. rules — that could never have happened.”