Costco CEO Criticized for Being Too Good to Employees

Noah Brand wonders why the NY Times focuses on the negatives when it comes to ethical business practices

With the holiday shopping season upon us, millions of retail employees are finding longer shifts, seasonal labor, and all the aggravation that comes with the busiest consumer month in the year. Retail is generally agreed to be thankless, ill-paid work, and hardly a serious career. This article in the New York Times, however, paints a brighter picture for workers at one major chain. Costco, the high-volume discount warehouse chain run by Jim Sinegal, pays its employees better than anyone else in the industry, and reaps the benefits of happier, healthier, more loyal workers.

Workers seem enthusiastic. Beth Wagner, 36, used to manage a Rite Aid drugstore, where she made $24,000 a year and paid nearly $4,000 a year for health coverage. She quit five years ago to work at Costco, taking a cut in pay. She started at $10.50 an hour – $22,000 a year – but now makes $18 an hour as a receiving clerk. With annual bonuses, her income is about $40,000.

“I want to retire here,” she said. “I love it here.”

What’s telling about the article, though, is that it runs in the Times’ Your Money section, where the “you” in the name is assumed to be a rich investor. Thus, the above quote from a satisfied and decently-treated worker is the last paragraph in their coverage, coming after many more paragraphs like these:
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.

“He has been too benevolent,” she said. “He’s right that a happy employee is a productive long-term employee, but he could force employees to pick up a little more of the burden.”

It doesn’t speak well for the business culture in this country when it’s considered bad practice to refrain from gouging the most vulnerable members of one’s organization. Still, with the most wonderful time of the year filling every shopping mall with Christmas music for the next four weeks, it’s comforting to hear that the CEO of at least one major retail chain doesn’t feel the need to be a Grinch. Thanks, Mr. Sinegal, and may others follow your example. You’re a good man.
Photo: TheShrubberyBlog / Flickr

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About Noah Brand

Noah Brand is an Editor-at-Large at Good Men Project, and possibly also a cartoon character from the 1930s. His life, when it is written, will read better than it lived. He is usually found in Portland, Oregon, directly underneath a very nice hat.

Comments

  1. This is awesome. :D I work in a chain supermarket in the UK and though the health costs issue is taken care of by the NHS here and not employers, it’s fantastic to hear of a chain supermarket that is looking after its employees in this way. Happy staff is the best sign in retail, and as retail staff work so closely with the customers who are funding the business, doing things to keep your staff happy is really an excellent investment! I’m surprised the NY Times does not agree.

  2. Consider what happened with Ben and Jerry’s. When they went public it was just a matter of time before they were acquired by another entity. The amount of money they spent on social responsibility created a situation where the potential shareholder value that could be squeezed out exceeded the transaction costs of an acquisition.

    In this analyst’s opinion these dollars could be invested elsewhere to achieve optimal shareholder value.

    On the other hand- companies like the Container Store have made high pay and excellent benefits into a competitive advantage. Looks like Costco is pursuing a similar strategy- if it works everybody wins.

  3. No wonder its so nice to shop there.

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