I realize that praising Costco here is a little like shouting "USA" at a VFW convention, but I'm more than willing to preach to the choir. This is from a Bloomberg columnist named Graef Crystal:
Costco Wholesale Corp. and Wal-Mart Stores Inc. both offer low-priced goods, yet when it comes to paying their employees, there is a difference in dollars and cents that starts with hourly workers and goes to the top.
Costco, the fourth-largest U.S. retailer, pays fulltime employees an average hourly wage of $17; Wal-Mart, the world's largest retailer, pays $9.68.
As for their CEOs, total 2004 pay for James Sinegal of the Issaquah, Washington-based Costco was $2.7 million; for H. Lee Scott of the Bentonville, Arkansas, Wal-Mart it was $17.9 million.
But is Scott worth it relative to Sinegal?:
Now if money really motivates executive performance, you would expect to see Scott lapping the field over Sinegal in total returns to investors. Just the opposite has occurred.
Scott became CEO of Wal-Mart on Jan. 14, 2000. Measuring from Jan. 13, 2000, to the market close this Aug. 19, Wal-Mart's cumulative total return was negative 25.5 percent. That was considerably lower than the negative 8.2 percent cumulative return on the Standard & Poor's 500 Index for the same period.
As for Costco, its cumulative return was negative 5.4 percent, relatively more favorable than that of both Wal-Mart and the S&P 500.
Viewed over Sinegal's entire tenure, which stretches back to sometime in August 1988, and measuring from July 29, 1988, through the close on this Aug. 19, Costco's total return was 10.6 percent a year versus the 11.7 percent a year return on the S&P 500 Index.
A bargain-priced CEO is undoubtedly one of the reasons that Costco can treat its workers so well.
JR