Tuesday, August 9, 2005

Someone to Applaud

Costco's CEO, Jim Sinegal, is a hero! The NYT had a recent article on the wonder that is Costco.

"Despite Costco's impressive record, Mr. Sinegal's salary is just $350,000, although he also received a $200,000 bonus last year. That puts him at less than 10 percent of many other chief executives, though Costco ranks 29th in revenue among all American companies."

Why does Wall Street think that it's okay for CEO's to make millions and millions and that wages for the employees of the company -- the people who really make the company function -- should be paid low wages?

"Emme Kozloff, an analyst at Sanford C. Bernstein & Company, faulted Mr. Sinegal as being too generous to employees, noting that when analysts complained that Costco's workers were paying just 4 percent toward their health costs, he raised that percentage only to 8 percent, when the retail average is 25 percent."

The Analysts are upset (and short-sighted) since they feel Costco pays workers too much:
"Costco's average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam's Club. And Costco's health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco "it's better to be an employee or a customer than a shareholder."

What does Sinegal have to say?
""I've been very well rewarded," said Mr. Sinegal, who is worth more than $150 million thanks to his Costco stock holdings. "I just think that if you're going to try to run an organization that's very cost-conscious, then you can't have those disparities. Having an individual who is making 100 or 200 or 300 times more than the average person working on the floor is wrong."

And even Mr. Dreher himself admits:
"... so many people love the company. "It's a cult stock," he said.

Is the purpose of a corporation only to make money? Why can't a company also provide useful services and products to customers? Provide a livelihood and purpose for the employees? And make the company a better place, while also making enough money each year to continue along sustainably for many years to come?