The Daily Sandwich

"We have to learn the lesson that intellectual honesty is fundamental for everything we cherish." -Sir Karl Popper

Location: Boston, Massachusetts, United States


Monday, July 25, 2005

Wall Street: CostCo must be destroyed!

This is mindblowing stuff-- definitely qualifies as a must-read. When I was a business major in college, I had several professors who stressed the importance of being responsible, honest, and good to employees. But there was one professor whose philosophy was 'trim the fat.' In short, fire as many people as you can to concentrate wealth in the hands of a few. What a dick. Apparently his view has become the norm, however:

But not everyone is happy with Costco's business strategy. Some Wall Street analysts assert that Mr. Sinegal is overly generous not only to Costco's customers but to its workers as well.

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. And Costco's customers, who are more affluent than other warehouse store shoppers, stay loyal because they like that low prices do not come at the workers' expense. "This is not altruistic," he said. "This is good business."

Sounds like a win-win situation to me. And they're the fifth largest retailer in the country. At a time when there's a massive backlash against Wal-Mart's newly draconian treatment of its employees (Sam Walton thought more like Sinegal-- but not his greedy heirs). Yet CostCo's stock is on the rise-- and preferred by investors to Wal-Mart these days.

They're profitable and they give Americans good jobs. I imagine what might make business execs so upset about this is that it could start balancing out that 450 to 1 ratio of CEO to worker pay....