The Seven Signs of Ethical Collapse documents the phenomenon of the precursor in companies that find themselves in legal and ethical difficulty. The precursor can be a lawsuit that is dismissed, a regulatory agency investigation that finds nothing, an employee warning that is poo-pooed, or an internal report. When a business is rolling along doing just fine on the profit side of things, these precursors are ignored too frequently. Bad decision to ignore these rumblings. Wal-Mart has been living through the fall-out of failure to act when a precursor hits.
 In 1995, Wal-Mart hired Akin Gump Strauss Hauer & Feld to determine whether it was vulnerable should a sex discrimination suit be filed. The law firm’s report found the following:
- Â Men in salaried jobs earned 19% more than women in salaried jobs
- Men were five times as likely to be promoted into salaried and management jobs
- It would be “difficult to fashion a persuasive explanation for disproportionate employment patterns.â€
The law firm offered great advice: post all the job openings and begin a program to get women and minorities into management and salaried positions. However, by 2001, the lawsuit hit. And it is a doozy – the largest class-action employment suit this country has ever seen. Wal-Mart is appealed the federal appellate decision that has allowed the suit to go forward, but the lead lawyer for the women is already requesting a copy of the 1995 report.Â
Wal-Mart has responded that the report is 15 years old and “deeply flawed.†Indeed, Wal-mart now has a management team that is 45.8 percent female. An expert in discrimination litigation also indicated that women apply for cashier jobs more often than receiving jobs and there is pay disparity between those two functions. In other words, there may be explanations for the Akin Gump finding.
 Wal-Mart has claimed the privilege on the report. Most legal experts agree that the report is protected. However, the Barometer’s advice is that once there is a precursor report, respond to the issues and then follow up with another report that shows that you addressed the precursor. You can talk yourself blue in federal district court or the court of public opinion in trying to explain what really happened at your company. But, once there is a precursor, well, the die may well be cast unless the precursor issues are resolved.