Costco is known as a desirable employer. This is partly because it pays an average of $21 per hour to employees in retail environments where $10.50 is the average hourly pay. Costco also covers 90% of health insurance expenses for both full-time and part-time employees, which is rare. James Sinegal, former CEO of Costco, is quoted as saying, “When employees are happy, they are your very best ambassadors.” Although HR at Costco is not directly run by its CEO, you can imagine how such a strong set of values at the executive level influences all human resource (HR) practices at Costco.
These values, together with the facts that Costco promotes from within, encourages and listens to employee suggestions, and gives managers autonomy to experiment with their departments and stores with an eye toward increasing sales and/or reducing costs (as long as products are never marked up more than 15%), and the fact that he made a modest salary as CEO, are among the reasons why Sinegal was named one of the 100 Most Influential People in Business Ethics in 2008. As a founder and CEO, he made a big profit for the company while putting people first, so it is hard to argue with his success. Although Costco pays considerably more than the industry average, including bonuses and other incentives, its revenues and stock price continue to grow. In fact, the value of Costco stock from 1985 until Sinegal’s retirement in 2012 increased by 5,000%. The next CEO, Craig Jelinek, continued this trend. In 2015, Costco’s stock rose more than 15% under his leadership, and he was named CEO of the Year by CNN.
Costco’s stock price has continued to be strong in subsequent years.

Case Discussion Questions 

1. Why do you think Costco is able to make a profit while paying their employees more than the average wages and benefits?
2. Do you think that Costco’s approach could work in other industries?
3. What do you think would happen to Costco’s sales and profits if they were to change their HR policies and not offer such attractive benefits to employees?