A group of Wal-Mart institutional investors including Britain’s F&C Asset Management have filed a proposal for today’s annual meeting of the supermarket giant calling on the board to quantify the impact of a series of scandals and lawsuits by staff and devise a plan to improve its reputation.

The revolt is being led by the New York City Employees Retirement System, which holds 2.95 million Wal-Mart shares worth $138 million (£69.7 million). It is also backed by the state pension funds of Illinois and Connecticut as well as a number of Swedish pension funds.

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 government investigations and class action lawsuits by employees, including what is thought to be the largest sexual discrimation lawsuit in US history.

Ms Litvack 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.”

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 protégé of former chief executive Sam Walton, was fired for fraud and tax evasion stemming from embezzling company funds. More recently, Julie Roehm, a marketing executive who was fired for allegedly accepting gifts from an advertising agency, made her own allegations about Lee Scott, the chief executive. She claimed that he had violated Wal-Mart’s policies governing conflicts of interest with suppliers by accepting travel, concert tickets and preferential prices on yachts and jewellery.

The investors’ motion will be presented at Wal-Mart’s annual meeting in the Bud Walton stadium in its home town in Arkansas today. It calls on the board to issue a report to shareholders by September on the “negative reputational impact” of reported and known cases of management noncompliance with International Labour Organisation (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 that 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 labour 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, most of which had no pertinence to Wal-Mart’s operations.

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