Costco Ignores Wall Street Advice to Hammer Employees

According to the New York Times, Jim Sinegal listens politely to Wall Street analysts who say what’s wrong with his company is that it doesn’t treat its employees as badly as Wal-Mart. Then he goes right on doing what Costco‘s always been doing…providing decent health insurance coverage and wages to its loyal employees. And selling tons of goods to his loyal customers and making a tidy profit as well. Sinegal isn’t willing to close down a store just because of a successful unionization drive as Wal-Mart has done. In fact, some 10% of Costco employees are unionized.

Jim Sinegal, Costco CEO

What a breath of fresh air in corporate America! I only wish more corporate chieftains would take a page from Sinegal.

I started out a Price Club member in the 1980s when Sol Price was the boss. I once met him together with the president of Brandeis University for a fundraising meeting and he was a caring, humane person which impressed me greatly.

What amazed me about Price Club when I first began shopping there was of course the great bargains, but also the top quality merchandise. You could invariably trust that whatever item you bought there, it was going to top quality. So naturally, you opened your wallet and perhaps even bought more than you needed or intended. An ex girl-friend memorably called it the ‘$500 Club’ (this was back when $500 meant something).

When Costco and Price Club merged, I remained a good customer. But inevitably, the prices inched up, the quality inched down. Now, you can’t always be sure the quality is as impeccable as it used to be. You have to be more careful in what you choose to buy. You’re not always going to get quite the bargain you hope for. In fact, I think the advent of e-tailing has probably taken a bite out of Costco’s businesses because you can certainly find many electronics and related categories cheaper online. But you can still find items at Costco that are worth buying.

And don’t get me wrong here…I don’t think Jim Sinegal is an angel. In fact, the Times article alludes to the fact that Costco is notorious for squeezing suppliers to the point of ruin and beyond. I used to fundraise for City of Hope Medical Center within the home furnishings industry. My volunteers (mostly furniture reps) told me lots of horror stories about the life of a Costco supplier being one of sheer misery.

But at least Costco supplies a needed service at a reasonable price. That’s more than can be said for all those Wall Street fat cats telling Jim Sinegal to cut expenses and shaft his employees in the process. Their mantra seems to be: “maximize profit/minimize expense–employees be damned.”