Thanks to the
Mother Jones Blog, I found
this amazing article on Costco from the Seattle Weekly from December 2004. Here's the beginning:
It was classic Wall Street logic. In August 2003, the financial community decided it was fed up with Costco, the Issaquah-based discount warehouse chain and, at least until the recently announced Sears/Kmart merger, sixth largest retailer in the country on the basis of revenue. Costco was experiencing flat earnings growth for the year, and Wall Street thought it knew just what to blame. The company, proclaimed analysts, treated its employees too well. Costco's average U.S. hourly wage of approximately $16 an hour is widely considered to be the best in the retail business. And its approach to health care, as noted in a report at the time by the financial research and investment firm Sanford C. Bernstein & Co., "has been to provide employees with the best plan at the least expense to the employee." On Wall Street, this is not seen in a positive light. "Whatever goes to employees comes out of the pocket of shareholders," says Bernstein analyst Ian Gordon.
The financial guys noted another sin: Costco also treats its customers too well. Its bargain prices are legendary and, at the time analysts were tsk tsking, Costco was planning to add staff at checkouts in order to shorten lines. You might think that caring for customer is the No. 1 principle of business success. But again, Wall Street views the matter in terms of its slice of the pie. "It was spending what could have been shareholders' profit on making a better experience for customers," Gordon says. Or, as Deutsche Bank analyst Bill Dreher famously told BusinessWeek, "At Costco, it's better to be an employee or a customer than a shareholder."
As we all know by now, Costco is the anti-Wal-Mart:
Given the overpowering influence of Wal-Mart, the nation's largest private employer and the world's largest retailer, at times there has seemed no way out from the downward competitive pressure it exerts. Which is why Costco's defiantly different approach has grabbed the attention of the folks who study these things. Annette Bernhardt, a policy analyst at New York University's Brennan Center for Justice, says she and her colleagues frequently bring up the Costco/Wal-Mart dichotomy in order to illustrate high- and low-wage business models. "It has really given researchers and activists a language to talk to the American public about these issues," she says. Peter Cappelli, a professor of management at the Wharton School, plans to analyze the differences between the two companies for an upcoming study. Rutgers University labor economist Eileen Appelbaum pronounces Costco a company that "shows that you can compete without having to drive down the wages of employees."
We also know that this debate has serious political overtones:
Not entirely coincidentally, this debate over business values has been playing out amidst a highly charged battle of political values. The economic race to the bottom, particularly as it relates to outsourcing, figured in John Kerry's campaign against George W. Bush. Unsurprisingly, Costco and Wal-Mart are polar opposites in this arena as well. Sinegal and fellow Costco founder Jeffrey Brotman endorsed Kerry and made large financial contributions to Democratic campaigns. Wal-Mart's political action committee donated overwhelmingly to Republican campaigns, a pattern mirrored by the company's executives.
The lesson here is ultimately very simple. Business doesn't have to be about pinching pennies and treating your employees like slaves. Costco does very well being the good guy; in fact, it's the Fifth largest retailer in the country now. We need to encourage similar companies to overcome the Republican-induced culture of greed that has taken over this country and travel the same road.
And, of course, the first step in that is to stop shopping at Wal-Mart.
JR