Wal-Mart Stores Inc.'s June 1 annual meeting will featureAerosmith and Cheap Trick as the warm-up acts. The realentertainment starts when shareholders vote whether to re-elect thecompany's board.

In recent days, one pension fund after another has vowed to voteagainst some or all directors in the wake of allegations thatexecutives bribed Mexican officials to open stores faster. All 16members of the board, including Chief Executive Officer Mike Dukeand Chairman Rob Walton, are up for election. Adding to thepressure, the U.S. is weighing whether to charge executives withcrimes that could bring jail time.

The New York City Pension Fund plans to vote against five boardmembers because “you have a founder-controlled company with a setof directors who meet the test of independence but have ties to thecompany,” said Michael Garland, Executive Director of CorporateGovernance for the New York City Comptroller's Office, whichmanages the fund.

“Outside shareholders need truly independent directors,” Garlandsaid in a phone interview. “There is a question about proper andethical conduct of certain executives.”

Wal-Mart, based in Bentonville, Arkansas, said that lastNovember it voluntarily disclosed potential violations of theForeign Corrupt Practices Act to the U.S. Justice Department andU.S. Securities and Exchange Commission. The company said thatoutside law firms are helping the U.S. probe the bribery claims,and it's reviewing its compliance program worldwide.

The case came under scrutiny after The New York Times reportedApril 21 that Wal-Mart covered up an internal probe begun in 2005after a company lawyer said he funneled bribes to Mexicanofficials. On May 17, Wal-Mart said the “ongoing media andgovernmental interest” could impact the perception of “its role asa corporate citizen.”

On May 22, the California State Teachers' Retirement System,which holds less than 1 percent of Wal-Mart's shares, said it wouldvote against the entire board and questioned whether directors canbe counted upon to oversee the bribery investigation.

“Calstrs does not have confidence the current board has theindependence and leadership needed to address these difficultissues,” Calstrs Chief Executive Officer Jack Ehnes said in astatement.

The California Public Employees' Retirement System, which alsoowns less than 1 percent of outstanding shares, said it plans tovote against the re-election of nine directors, including Walton,Duke and his predecessor Lee Scott.

While the board vote will be largely symbolic because the Waltonfamily controls 47 percent of Wal-Mart shares, the pressure on thecompany will probably intensify.

Cracking Down

The federal government has been cracking down harder on overseasbribery since the Bush administration, when the Justice Departmentbegan aggressively targeting executives.

“Federal prosecutors have said they don't want to use theorganization to be a scapegoat,” said Brandon Garrett, a lawprofessor at the University of Virginia. “The last thing thegovernment wants to do is fine the company and see all of theindividuals go unpunished.”

The Justice Department has suffered setbacks in its efforts toprosecute individuals. Still, of at least 93 people charged from2005 to 2012, prosecutors won convictions against at least 47 ofthem, according to the law firm Shearman & Sterling LLP. The 31defendants who've been sentenced got an average of 2 years and 2months in prison.

Prosecutors are charging higher-level executives even if theyaren't accused of directly making a bribe, said John Kelly, anattorney with law firm Bass, Berry and Sims who once worked for theJustice Department. If they allowed the bribes to continue, theycould be prosecuted, he said.

The difficult part of these cases is proving that executivesknew company managers were engaging in illegal activity and failedto take action or looked the other way, according to Kelly.

“You have to have proof of them ignoring the truth and that'sdifficult,” Kelly said.

Because these investigations move slowly, some Wal-Martexecutives could be retired before charges are filed. It took theJustice Department three years from the time it settled a caseagainst Siemens AG to charge individual executives.

Even if Wal-Mart executives aren't charged, the company may haveto remove anyone involved to maintain credibility with investorsand auditors, said Will Barry, an attorney with Washington law firmRichards Kibbe and Orbe.

“It's possible that external auditors aren't comfortableaccepting representations from these people,” Barry said.

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