I'd have to have a Costco within 100 miles of my home to explain that from the shoppers' perspective (although I'm sure many of you will chime in below), however, on Friday,
20/20 gave the world an idea just how progressive Costco's business model really is:
Costco has the lowest employee turnover rate in retailing. Its turnover is five times lower than its chief rival, Wal-Mart. And Costco pays higher than average wages -- $17 an hour -- 40 percent more than Sam's Club, the warehouse chain owned by Wal-Mart. And it offers better than average benefits, including health care coverage to more than 90 percent of its workforce.
How can they afford to be so generous?:
Costco doesn't have a P.R. department and it doesn't spend a dime on advertising. There's a real business advantage to treating employees well, [Costco CEO Jim] Sinegal said. "Imagine that you have 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for you," he explained.
Let's talk about Sinegal some more:
[T]he most remarkable thing about Sinegal is his salary -- $350,000 a year, a fraction of the millions most large corporate CEOs make.
"I figured that if I was making something like 12 times more than the typical person working on the floor, that that was a fair salary," he said.
Of course, as a co-founder of the company, Sinegal owns a lot of Costco's stock -- more than $150 million worth. He's rich, but only on paper.
Nell Minow, editor and founder of the Corporate Library and an expert on corporate governance, said she was shocked to discover that Sinegal's employment contract is only a page long. "I would love to clone him," she said.
Wall Street, on the other hand, thinks otherwise:
And conventional wisdom in this case comes from Wall Street. Analysts seem to be the only critics of Costco and Sinegal. They think the company could make even more money if it paid its workers less -- like Wal-Mart does.
Sinegal is unfazed by his critics. "Wall Street is in the business of making money between now and next Tuesday," he said. "We're in the business of building an organization, an institution that we hope will be here 50 years from now. And paying good wages and keeping your people working with you is very good business."
Isn't nice to know that there's at least one multi-millionaire in this country who still thinks there is a limit to how much money anybody needs?
JR