7/18/2005

THE COSTCO ALTERNATIVE

In yesterday's New York Times, Steven Greenhouse profiles Costco, its Chief Executive Jim Sinegal, and the model he's providing as an alternative to the Wal-Mart economy:
Costco's average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam's Club. And Costco's health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco "it's better to be an employee or a customer than a shareholder." Mr. Sinegal begs to differ. He rejects Wall Street's assumption that to succeed in discount retailing, companies must pay poorly and skimp on benefits, or must ratchet up prices to meet Wall Street's profit demands. Good wages and benefits are why Costco has extremely low rates of turnover and theft by employees, he said...If shareholders mind Mr. Sinegal's philosophy, it is not obvious: Costco's stock price has risen more than 10 percent in the last 12 months, while Wal-Mart's has slipped 5 percent... Despite Costco's impressive record, Mr. Sinegal's salary is just $350,000, although he also received a $200,000 bonus last year. That puts him at less than 10 percent of many other chief executives, though Costco ranks 29th in revenue among all American companies. "I've been very well rewarded," said Mr. Sinegal, who is worth more than $150 million thanks to his Costco stock holdings. "I just think that if you're going to try to run an organization that's very cost-conscious, then you can't have those disparities. Having an individual who is making 100 or 200 or 300 times more than the average person working on the floor is wrong."...Costco also has not shut out unions, as some of its rivals have. The Teamsters union, for example, represents 14,000 of Costco's 113,000 employees. "They gave us the best agreement of any retailer in the country," said Rome Aloise, the union's chief negotiator with Costco. The contract guarantees employees at least 25 hours of work a week, he said, and requires that at least half of a store's workers be full time.
CostCo continues to prove, as I wrote here last year, that the choice Americans face isn't between policies that are "friendly" or "hostile" to business, or between "big government" and "economic freedom." Government policies can force a race to the bottom of ever-worsening standards and quality of life for the working Americans who make prosperity possible. Or they can pave the high road by rewarding companies that invest in the economic security of workers and consumers. It's the latter choice which fosters and expands the real economic freedom which comes from workers' voice on the job and control over their lives, and whose expansion increases the humanity of our economy.

1 Comments:

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10/10/2005 01:56:00 AM  

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