Reeling from the escalating costs and public relations fallout that has accompanied a federal bribery investigation, Walmart, late last year, announced a renewed focus on global compliance efforts. Now, the company is threatening to cut into executive bonuses if compliance-related goals are not met.

In November 2011, the retailing giant, pushed by investigative reporting by the New York Times, notified U.S. officials of potential violations of the Foreign Corrupt Practices Act, specifically bribes paid to facilitate new store openings in Mexico. The transgressions have proven costly, with Walmart reporting it spent more than $157 million during the past fiscal year (which ended on Jan. 31), an average of $604,000 per working day, to cover related expenses. As part of its self-promoted penance, Walmart went public with plans to beef-up its compliance programs.

The company has now detailed plans to link executive compensation to compliance priorities in its latest proxy, released this week ahead of its annual shareholders' meeting on June 7. The plan is presented as a “significant change' to its executive compensation program for fiscal year 2014. Executive incentive compensation programs will “continue to be based on the financial measures of sales, operating income, and ROI,” but will additionally include a compliance component.

“Our company has made significant improvements to our compliance programs around the world and has taken a number of specific, concrete actions with respect to our processes, procedures, and people,” Walmart wrote. “These steps have included aligning our global compliance, ethics, investigations, and legal functions under one organization; creating new senior global compliance and investigations positions and hiring seasoned professionals to fill these positions; and implementing enhancements to how we report and investigate allegations of wrongdoing worldwide.”

Beginning in fiscal year 2014, annual cash incentives for each of the company's Named Executive Officers (NEOs) and certain other Executive Officers will be tied to achieving compliance objectives, as determined by an evaluation of key policies, processes, and controls. NEOs will also be responsible for preparing a timetable for “implementing further enhancements on a prioritized basis.” These priorities “will address the key components of a corporate compliance program,” including leadership and resources, standards and controls, communication, systems, training, and monitoring.

Senior management will also be required to provide quarterly reports to the Audit Committee on progress implementing compliance objectives. If, in the Committee's judgment, the company has not made adequate progress, the Compensation, Nominating, and Governance Committee (CNGC) may reduce or eliminate cash incentive compensation for the relevant Executive Officers.

CEO Michael Duke, who earned just shy of $21 million last year, has also agreed to “an additional compliance component” for his upcoming bonus. The Audit Committee and CNGC will have the authority to consider compliance matters for both fiscal 2013 and fiscal 2014 in evaluating his cash incentives.