James Sinegal, co-founder and former CEO of Costco Wholesale, will speak at the University on Jan. 16, during the first week of classes for the Spring semester. The event will occur in the Villanova Room of the Connelly Center at 4:30 p.m.
Sinegal, 2012 recipient of an honorary degree from the University, founded international retail giant Costco with Jeff Brotman in 1983. Today, the company operates in eight countries, is the second-largest retailer in the United States—second only to Walmart— and netted $97 billion in sales during 2012 alone.
Costco is widely known for selling a wide variety of items in bulk, from chocolate truffles, to paper towels, to designer jeans. What many people don’t know about Costco is that the company is steadfastly committed to fair labor practices and aims to be a family-oriented business.
Costco flies largely under the radar in regard to these ideals, partly due to the fact that the company does not have a public relations staff, meaning there is no one whose job it is to brag publicly of Costco’s ethics. That is because Costco is more concerned with the health and happiness of its employees and customers, than it is with good PR.
A crucial element in fair labor practices is, of course, fair wages. At Costco, one could say the wages are more than fair; the average wage of a Costco employee is $20.89 per hour, excluding overtime, which is more than double the national minimum wage of $7.25 per hour.
It is also markedly higher than the average pay to full-time workers at Walmart, which stands at around $12.67 per hour. Wages this high in retail are almost unheard of, but Costco operates on the principle that a happy work environment and competitive compensation make for happy employees, and ultimately results in a more profitable company.
During his tenure as CEO, Sinegal made choices that embodied his company’s labor policies and related ideals. One such choice was to award employees a raise during the 2009 financial downturn, a major recession.
Sinegal’s reasoning for such a decision was that a bad economy meant employees would need more, not less. Sure, this cost the company an additional $20 million, but it affirmed Costco’s commitment to employee well-being and helped put more money back into the economy as additional benefit.
Sinegal and current Costco board members have been upfront regarding the reality that Costco could certainly make more money, if its wages were just a few dollars lower. But in Steven Greenhouse’s book “The Big Squeeze: Tough Times for The American Worker,” Sinegal is quoted insisting that the decision to pay a higher wage is “not altruistic. This is good business.”
This line of thought echoes Sinegal’s choice to incrementally increase worker compensation during the recession. Workers who are paid a higher wage not only feel appreciated for their effort, but they are also able to contribute more to the economy. It’s a sustainable cycle that makes sense.
More evidence of Costco’s commitment to treating workers fairly is apparent in its low turnover and opportunities for mobility within the company.
The turnover rate sits at about five percent for employees who have worked at Costco for over a year and less than one percent for company executives.
Few people who join the Costco workforce leave. While some criticize this statistic, saying it leads to lack of fresh opinions, low turnover stands as a testimony to the satisfaction of Costco workers.
Perhaps the hottest topic in fair labor practices besides wages is health care coverage, another area in which Costco outshines its peers such as Walmart. Costco provides both part-time and full-time employees with health benefits.
Sinegal, known for his outspokenness and ardent support of left-wing politics, is a great business visionary of our time. Many may disagree with his business strategy or his personal politics, but Costco’s booming success bears witness to Sinegal’s success.
He proves that simple elements of business strategy, such as treating workers fairly, paying them well, and providing opportunities for growth, can help build a multi-billion dollar business in just 20 years.
Sinegal’s speech on campus has been organized by Barbara Wall of the Office for Mission and Ministry and is being co-sponsored by Business Without Borders, a business society within the Villanova School of Business.