Costco, The Genuine Retail CSR Leader
Could Costco possibly be the most genuine leader when it comes to corporate social responsibility (CSR) and governance? Retailers across the country constantly crow about the achievements they have made on a bevy of issues from more sustainable fish (Safeway) to solar installations (Walmart). Other retailers are yanking the chains on pork producers to cease the cruel use of gestation crates and of course just about everyone is on the organic and local produce bandwagon. These shifts in business practices are great news for fish, pigs and of course, the environment and our health. But what about people who work in these stores, who stack, haul and crate the fish, pork and produce, whether they are free range, cruelty-free, duty free, or not? While most big box retailers insist on paying low wages with the claim that thin margins require reduced labor costs, Costco for years has been breaking the mold. While Wall Street squawks that the membership warehouse giant should push for higher profit margins and reduced labor costs, the company, led by its iconoclastic founder and former CEO, Jim Sinegal, constantly flicks his chin at The Street and its yammering analysts. The results: happy employees, enviable stock performance and a brilliant shopping model that, let’s face it, bludgeons consumers into shopping happily for more. So what makes Costco so successful? Arguably the biggest difference is how the retailer treats its workers. Walk into any Costco and look at the name tags. Chances are you will read the phrases “since 2002,” “since 1999” and “since 1995.” Costco workers get paid very well compared to their counterparts at chains including Walmart. In fact, employees working on the floor can make a salary that reaches the mid-$40,000 range; not bad for someone who starts working for the company out of high school. And while the vast majority of Costco’s employees are not unionized (most are legacy employees from Price Club that the Teamsters represent), over 80 percent have competitively priced health insurance plans. The outcome includes more productive workers, lower turnover and for what it’s worth, relatively high job satisfaction. Meanwhile Sinegal, who stepped down as the company’s CEO on December 31, earned a spartan salary compared to the vast majority of his counterparts. For years his salary, not including bonuses and stock options, hovered at $350,000. Critics lashed out when the company announced that current CEO Craig Jelinek would pull a salary of $650,000, but that is still a tepid amount compared to average CEO salaries, which are still on an upward trend despite the recent surge in “say-on-pay” shareholder votes. Meanwhile the stock has performed well, sliding only when the rest of the economy took a dive during the post 9/11 aftershock and the 2008 fiscal crisis. If you bought Costco stock a decade ago, your investment has roughly tripled in value. So along with happier workers come fair prices and a commitment to local companies. Take those famous Calvin Klein jeans that have been a mainstay at Costco over the years. Depending on the price, they could be marked at $29.99, but if the company can snag millions more, they could be $22.99. Wall Street would insist that regardless of the wholesale price, Costco should maximize its profit: but the company’s philosophy has long been that it will pass on savings to its customers. Most products in its warehouses are well-known national brands, but Costco does purchase local products. Karoun Armenian string cheese in Los Feliz, Goldilocks bread in Vallejo, hemp seeds in Santa Cruz and fruit from small San Joaquin Valley farms in Fresno are just a few examples that can be found in Costco’s warehouses. Not everything at Costco is perfect: some products are well, dubious; Joan Rivers chained herself to a shopping cart after the chain stopped selling her book; and some suppliers have landed Costco into hot water. But in the end, the company treats its employees and shareholders more than decently. And sales continue to trend upwards. If you believe all workers should have the chance to earn a decent wage and be rewarded for hard work, shopping at Costco is an easy choice to make. Published earlier today on Triple Pundit. You can follow Leon Kaye on Twitter. Read more about the debate over what is the social responsibility of business on Triple Pundit. Photo courtesy Wikipedia.