Costco’s Management Has The Right Touch

With so much negative news about greedy CEO’s bilking companies, I want to take a look at some of the best CEO’s in business. For the next few days I will highlight a successful CEO that does things the right way. Today it’s Jim Sinegal of Costco.

Costco (COST) CEO Jim Sinegal takes home just $350,000 in base salary. His total compensation over the past 6 years including stock options and benefits has averaged $4.88 million dollars. That’s pretty low for the head of a $26 billion dollar company. He is a down to earth CEO who happily meets with customers and even answers his own phone. Sinegal’s philosophy is to focus on making employees happy. He believes that a happy employee is a productive employee.

Sinegal is quoted in US News & World Report as saying, “When you hire good people, and you provide good jobs and good wages and a career, good things are going to happen,” Sinegal says. “We try to give a message of quality in everything that we do, and we think that that starts with the people. It doesn’t do much good to have a quality image, whether it’s with the facility or whether it’s with the merchandise, if you don’t have real quality people taking care of your customers.” Sinegal is not just focused on hitting short term quarterly numbers but is trying to make Costco a better business over the long run.

It’s easy to see why Costco is so successful. Costco is generous with employees and pays a much higher wage than Walmart. Employee turnover is much lower at Costco than Walmart. Employee turnover is a remarkably low 12% at Costco. The average Costco salary is $19 per hour and 86% of workers have health benefits. Costco does not have to spend hundreds of millions in advertising. The retailer relies on word of mouth. Employees advertise for the company. In this age of greed and corruption, it’s reassuring to see that some companies are still doing things the right way.

I do own Costco shares.

Photo by: coolmikeol