Costco CEO Pay / by kevin murray

There is no better way to lead than by example.  Way too many CEOs of publically held corporations make way too much money despite the fact that they are beholden to a Board of Directors and that their salaries and their compensation package are for the most part, quite transparent.  Many articles have come out in recent years in which it is stated that CEO pay in ratio to worker pay has exploded and in fact according to the Huffington Post: "today Fortune 500 CEOs make 204 times regular workers on average, Bloomberg found. The ratio is up from 120-to-1 in 2000, 42-to-1 in 1980 and 20-to-1 in 1950."  Are CEOs 204 times more valuable than the average worker, which is an increase of over 1000% since 1950?  That answer is absolutely not.  What has increased 1000% over the ensuing years is the CEOs rapacious greed, which has been rubberstamped by their dereliction-of-duty Board of Directors.


Fortunately, not every public company follows this footprint.  For instance, there is Costco which ranks as #22 on the Fortune 500 list with yearly revenues in 2013 of nearly $100 billion dollars.  Their current CEO is Craig Jelinek, who replaced former CEO James Sinegal (co-founder) in 2012.  Jelinek's salary is $650,000 annually with a bonus of up to $200,000, and stock compensation based upon company performance which can add a couple more million dollars in compensation to him.  According to Costco the average worker makes $20.89/hour, before overtime and benefits, or about $43,451/year.  Additionally, the annual turnover rate is less than 6%, which is incredibly low for a retailer, with nearly 88% of all Costco employees receiving health insurance.


This Costco philosophy of being fair to their employees is also part and parcel of their business model to their customers in which Costco is known as marking up their products no more than 14-15 percent over cost.  The reason behind this belief is that Costco feels that they only offer a limited amount of value by providing products to customers and therefore they pass those savings onto their consumers. 


Additionally, one of the things that Wall Street seems incapable of understanding and comprehending is that the worth of a company, the value of a company, cannot always be determined simply by stating that if we lowered that cost our profit would rise, or if we increased that selling price our margin would increase.  There are intangibles in any business model that don't easily translate into numbers, and some of those intangibles involve doing the right thing for your customers, for your employees, and for your collective moral climate.  I do believe that customers take more pleasure and satisfaction out of shopping at a store in which the pricing is fair to them and in which the employees are paid a fair wage. Henry Ford put it best one hundred years ago, when he raised the compensation rates for his employees not only to improve employee productivity, retention, and well-being, but also to put more money into their pockets so that they too could afford to buy the very automobiles that they were assembling.