A group of Wal-Mart institutional investors are planning a revolt at the supermarket giant's annual meeting tomorrow to be held in a sports arena close to its home base in Arkansas.

They have filed a proposal calling on the board to detail the impact of a series of scandals and class action law suits by staff and come up with a plan to improve its reputation.

The revolt at the annual meeting in the 19,000-capacity Bud Walton stadium - named after a Wal-Mart co-founder - at the University of Arkansas is being led by the New York City Employees Retirement System which holds 2.95 million Wal-Mart shares. It is also backed by Britain's F&C Asset Management and the state pension funds of Illinois and Connecticut as well as a Swedish state pension fund.

Karina Litvack, Head of Governance at F&C, said the fund had become increasingly concerned over the past few years by signs of failure in the giant grocer's internal controls that have led to a class action lawsuits by employees and government investigations.

Employees have filed suits alleging they are forced to "work off the clock" during breaks and after shifts, systematic discrimination against women and questionable tactics to prevent workers from voting for union representation.

Last year vice chairman Thomas Coughlin, a protege of former chief executive Sam Walton, was fired for fraud and tax evasion stemming from embezzling company funds. More recently, a fired marketing executive Julie Rhoem alleged the chief executive had violated Wal-Mart's policies governing conflicts of interest with suppliers by accepting travel, concert tickets and preferential prices on yachts and jewelry.

She said: "We got off to a promising start in 2005 with expectations of a dialogue with the independent directors on the Audit Committee. But when this simply withered on the vine, we had little choice but to bring our concerns about internal controls, labour violations and the erosion of the company's reputation to our fellow shareholders."

"We found that the company was not interested in engaging in a productive discussion about how it builds and supports a compliance culture and as a result, we have joined an international group to file a shareholder proposal."

"Weaknesses in internal controls have eroded the company's reputation as an attractive employer and are adding fuel to the fires of Wal-Mart's critics," she said. "We fear that its failure to deliver on these policy commitments is inhibiting Wal-Mart's ability to expand into new domestic markets."

The motion calls on the Board to issue a report to shareholders by September on the "negative reputational impact" of reported and known cases of management non-compliance with International Labor Organization (ILO) conventions and also on breaches of the company’s own legal and regulatory controls. It wants the report to include "recommendations and actions taken to improve compliance."

Wal-Mart's board has recommended shareholders vote against the motion. In a letter to shareholders it stressed: "The Company is fully committed to treating its Associates fairly and complying with all applicable labor and employment laws and regulations in all of the states and countries in which Wal-Mart operates."

It said the US had ratified only 14 ILO conventions since 1919, most of which had no pertinence to Wal-Mart's operations.

It said it had "consistently denied the allegations" that it did not comply with its own controls in all the law suits it faced, so making a report based on the assumption it had breached rules "would be contrary to the Company’s and the shareholders’ best interests. "

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