the costco model

I have a love-hate relationship with Costco. On one hand, I hate that Costco, and the other “big box,” deep discount retailers like Wal-Mart and Sam’s Club, routinely run locally owned retail establishments out of business. But, on the other hand, I love that Costco’s been able to compete against Wal-Mart and Sam’s Club without necessarily stooping to their level. Whereas the companies of the Walton empire are consistently demonstrating that shareholder value is more important than the safety, security and well-being of their employees (and their families), the leadership at Costco, it seems, has taken pains to head in the other direction, even though doing so isn’t rewarded on Wall Street.

Costco and Sam’s Club, while serving essentially the same function, have defined themselves as the polar opposites of one another in almost every way. Whereas you commonly hear stories about Wal-Mart hiring illegal aliens to clean their stores (and locking them in the stores after hours, in violation of numerous fire and safety codes), you don’t hear those same stories about Costco. When you hear about the management of Sam’s Club routinely telling new employees how to augment their sub-living-wage paychecks with food stamps, you don’t hear about that going on at Costco. Costco pays their people relatively well (and provides benefits), and, as a result, they keep their employees…. OK, with all that said, I’d like to share a note from a reader named Dave in Seattle.

Here is a link to an article that I started to send you last week. It is about Costco and Dick’s Burgers, two local companies that have many traditionally low wage service industry jobs. Both companies offer higher wages than the industry standard and Costco even offers health insurance. The owner of Costco pays himself around $350k a year with no bonuses. What I find interesting about this is that the ratio of the highest paid employee to the lowest is more in line with other countries. I remember seeing a chart recently that compared this ration from country to country. I think that most were in the 12:1 ratio and as you got into the European countries it climbs up to between 20:1 and 45:1, but when you get into the US it skyrockets to something like 450:1 ! And that is the average! Anyways, it is nice to know that some companies are respectful of their employees and that not all CEO’s are self centered mavericks.

If you’re interested reading more about the growing concentration of wealth in the United States, check out Inequality.org.