Waltons fend off shareholder bid to loosen their control of Wal-Mart

FAYETTEVILLE, Arkansas (Reuters) - Wal-Mart Stores Inc's founding family maintained its control of the world's No. 1 retailer as the board named a Walton family member chairman, and shareholders defeated a measure calling for an independent chair.

Pressure to make the chairman's job independent rose slightly from a similar vote last year to 16 percent of shares cast, but the Waltons, who own around 51 percent of Wal-Mart's shares, and their supporters easily defeated the measure.

The failed measure's proponents argued that a greater degree of independent oversight was needed for a company dealing with a three-year-old probe into alleged bribery overseas.

Greg Penner, 45, the new chairman, has been on the board since 2008 and was named vice chairman last June. That move was widely seen as setting the stage for him to succeed Rob Walton, the 70-year-old son of founder Sam Walton and chairman for the past 23 years.

The change is effective as of the end of the annual shareholders' meeting on Friday, near Wal-Mart headquarters in Arkansas.

?We voted for an independent chair and Greg Penner is not independent," New York City Comptroller Scott Stringer said in a statement. "The Wal-Mart board's decision to name Penner as chairman serves the interests of the Walton family at the expense of the company and its outside shareowners and is further evidence of the need for an overhaul of the board.?

Penner told the 14,000 workers, shareholders and others at the meeting that the board's structure was sound. After Friday's election, 10 of the 15 directors will be independent. Rob Walton will remain as a director.

"Because of our family?s commitment, combined with strong independent director voices, we have a great balance. This is so important right now with the tremendous change all of retail is going through," said Penner, one of three family members on the board.

Both major proxy advisory firms, Institutional Shareholder Services and Glass Lewis, had recommended that investors vote for the independent chairman proposal, which was one of five that were rejected.

Penner started his career as an analyst at Goldman Sachs Group Inc before joining Wal-Mart as a management trainee and served in a number of roles, including as chief financial officer of its Japan operations and chair of the board's technology and e-commerce committee. Since 2005 he has been a partner at Madrone Capital Partners, an investment firm associated with the Walton family.

"Mr. Penner can likely use background in e-commerce and global finance to balance organic growth, new investment and capital return," Cowen analyst Oliver Chen said in a research note. "Also, we believe he brings a younger energy to WMT, while continuing family tradition."

Penner became part of the Walton family through his marriage to Carrie Walton Penner, granddaughter of company founder Sam Walton.

Wal-Mart shares were down about 1 percent at $73.43, bringing its decline so far this year to over 15 percent.

"This is business as usual for Walt-Mart and the Walton family dominion of the company," said Louis Malizia, assistant director of the Capital Strategies Department of the International Brotherhood of Teamsters General Fund, which had submitted the independent chair plan.

"The claims of long-term succession planning ring hollow and do not fit with the move for greater independence on the board committees."

John Davis, faculty chair of the families in business program at Harvard Business School, said, "It?s a very responsible family ? it?s worked very well so far. You are taking a big risk not to have a family chairman.?

Having a family member as chairman ?can really be a strong foundation that reassures management that they are giving them lots of support to think long-term, act long-term, invest in innovation, and take chances.?

To strengthen the responsibilities of independent directors, Wal-Mart said it was realigning its board committees so most of the independent directors would serve on at least two committees. Its governance committee will be made up exclusively of independent directors.

(Reporting by Nathan Layne in Fayetteville, Arkansas and Sruthi Ramakrishnan in Bengaluru; Writing by Christian Plumb; Editing by Saumyadeb Chakrabarty, Steve Orlofsky and Phil Berlowitz)

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