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Costco Employees and "Market Analysts"

The job of a shareholder-owned company is to make money for shareholders, not to coddle its employees. But sometimes, being good to your employees can be good for the shareholders.

In “Living the Dog’s Life at Costco,” Kevin Carson takes to task Wall St analysts who are trying to run Costco’s business for them:

“He has been too benevolent,” she said. “He’s right that a happy employee is a productive long-term employee, but he could force employees to pick up a little more of the burden.”

Too benevolent? Hmmm. Are Costco’s costs out of line? Because that chart sure seems to indicate that Costco has found a model that works. If it didn’t, comparatives might be interesting. I would bet that Costco sees fewer sick days, lower shrinkage, and other measurable effects for its better health care.

Analysts who demand that Costco pay its employees less are forgetting that management gets paid, not to impoverish employees, but to reward shareholders. And Costco seems to be doing that well.


(The chart shows Costco in blue, vs S&P and Nasdaq in green and red. Click for the original at Yahoo Finance.)

2 comments on "Costco Employees and "Market Analysts""

  • beri says:

    I have a friend who worked for Wal Mart as a manager. trust me, paying employees poorly in order to make the bottom line looks good is a poor business practice. How about tieing (sp?) management rewards to company performance, instead of paying managers and exectives huge salaries, even when their policies result in disaster for the company.
    (see the airlines, for example)

  • To echo beri’s point, CostCo’s biggest competitor is Sam’s Club, owned by Walmart. The consumer experience in the former is noticably better than the latter, the prices are equivalent and the Street seems to recognize this. (WMT has other issues, of course, but many are related to how an increasingly discerning public sees the company as a community citizen.)

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