KMART'S 'INTEGRITY PLEDGE' DRAWING POSITIVE RESPONSE

RICHARD TURCSIK

TROY, Mich. -- Kmart's new "integrity pledge" is being hailed by the discounter's vendors as a positive step in its turnaround and a model that should be followed by the rest of the industry.

"This action by Kmart is another excellent example of the positive steps their new management has taken over the past several months that will ensure their continued status as a critical customer partner in the vendor community," said Tom Maddi, business manager of special channel sales at Borden Inc., Columbus, Ohio.

"Borden has been, and continues to be, in full support of a growing and profitable Kmart. We identify our partnership with Kmart as critical to our own growth objective as well, and integrity is certainly a key element to that partnership," said Maddi, whose comments were echoed by several other marketers. The nation's third largest retailer, based here, instituted the integrity pledge last month. Its inception stems, in part, from a federal indictment brought against a former Kmart real estate official in January who is charged with taking kickbacks totaling more than $750,000.

Kmart hired Kroll Associates, a New York-based private investigation firm, to help with its own internal investigation. Kroll suggested Kmart "put a little more teeth" into its existing vendor relations policy, said Shawn Kahle, vice president of corporate affairs at Kmart.

Kroll suggested Kmart send pledges to all its management-level employees, as well as to all its vendors, outlining the company's position against accepting "personal benefits" that include gifts, gratuities, bribes, commissions, kickbacks, samples, services and promises of future employment.

Management and vendors have to sign the pledges and return them to the company, which Kmart said will "reaffirm our dedication to the highest ethical standards.

"Our goal in doing this is not so much to go on a witch hunt within the building or elsewhere, but to make sure everyone shares the same values and practices," Kahle told Brand Marketing.

"Half of the officers of this company have come here within the last 18 months, and it was very important to them that they send a very clear signal that the Kmart executive leadership team is serious about doing business in a forthright way and that all of our associates and vendors understand that. If we need to do anything to clean up the business, we will do it," she said.

While several major retailers, including Wegmans Food Markets and archrival Wal-Mart Stores, have similar policies, Kmart is believed to be the first to have vendors sign and validate the pledge, Kahle said.

"Our reaction from the vendor community has been very supportive," she added. "This makes sure that all of the vendors and suppliers who work with us are on a level playing field. Most of the vendors that we are working with have internal forms similar to this that they must sign. We think it is just a reinforcement of the opportunity for a business partnership with Kmart." Kathy Fauster, director of corporate communications at Fruit of the Loom, Chicago, said other retailers should follow Kmart's lead.

"We think this is a positive thing," she said. "We have a good solid relationship with Kmart and both companies have always conducted our business in a highly ethical fashion, so for us it is really still business as usual."

Terry Thompson, a spokesman for Pillsbury Co., Minneapolis, said, "Kmart's Pledge is wholly consistent with the way that we operate, and we would not begin to think an appropriate way of doing business is to provide others with gifts.

"If other retailers see they have a problem and they see pledges as one way of rectifying it, I would say they should adopt such a policy," he said.