An Open Letter to Walmart and Michael T. Duke on Human Capital Accounting

This open letter is a project of the 2012 Presidio Graduate School’s Capital Markets class.  To read more letters, visit the project page here.

We are writing this letter as students of business and public management, future leaders, consumers and world citizens. Over two decades ago, Walmart committed to being at the forefront of retail environmental sustainability and we applaud Walmart’s efforts to date. Walmart’s commitment to clean energy, waste diversion, and local sourcing not only creates an important legacy, but has a tremendous ripple effect across industries and the business community.

With the same innovative leadership that Walmart has displayed with environmental sustainability and supply chain management, we urge Walmart to leverage its unparalleled global influence to revolutionize how companies value their most important asset – employees. Decades of research and lived experience continues to show that human capital is what makes businesses truly innovative, competitive, and successful.

As workers walk out in protest for the first time in the company’s history, this is an opportunity to consider the social side of sustainability with the same leadership that Walmart embraced in the context of environmental sustainability. Human capital accounting – or accounting for people – is a concept that has been developing for several decades, yet has not been adopted by major firms in the United States.

The underlying principle, the one we are asking Walmart to adopt, shifts the fundamentals of accounting by moving human capital from an expense on the profit and loss statement to an asset on the balance sheet. Although a handful of technology firms have begun to account for human resources on the balance sheet using models that are in alignment with financial theory, Walmart will be the first U.S. company to lead the charge. We believe that Walmart’s advocacy toward updating Generally Accepted Accounting Principles (GAAP) to include valuation of human capital will not only create a much needed change in American business accounting, but it will support Walmart’s commitment to in Walmart’s own words, “have an opportunity and a responsibility to make a difference on the big issues that matter to us all.” (Walmart)

If leadership of environmental capital was the legacy of Walmart in the last decade, let leadership of human capital be Walmart’s legacy of this decade and many more to come.

Inna Volynskaya, Ryn Longmaid, Amy Johnson and Laila Rezai

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