And yet, Sinegal, who no doubt has become wealthy through Costco, makes about a third the pay of an average CEO. His salary is $350,000 a year. And his total take-home pay amounted to $3.5 million in 2010 — a nice sum, to be sure, but again, less than the median $9.3 million.
It’s not just his pay that lacks showiness. His office is a tiny alcove without a door; the furnishings are as fancy as folding chairs. When a reporter visits the headquarters, which does not have any public relations handlers on staff, Sinegal comes out to the reception desk himself. He also answers his own phone (“Sinegal!”).
He could probably charge more for the goods in his store. But Sinegal holds fast to a mantra that nothing in the warehouse should be marked up more than 14 to 15 percent from cost. His discipline is legendary. “People have always asked historically, who’s your toughest competitor?” the company’s chief financial officer, Richard Galanti, told me back in 2008. “And I say it’s Jim.”
That discipline to pricing hasn’t won many praises from Wall Street analysts. Neither has Costco’s wage and benefit policies.
Consider: In 2003, Costco, which hadn’t raised its health-care premiums to employees for nine years, said it was going to miss its earnings estimate due to rising costs. Sinegal was adamantly against raising premiums. Finally, he relented. He wrote a letter to employees promising they wouldn’t pay more than 10 percent of the overall cost.
Fast forward a few years, and employees were paying a little more than the 10 percent. Most CEOs, of course, would have welcomed the cost savings, pocketing the difference. But Sinegal gave each employee an added bit of stock in their 401(k)s in 2008.
Sinegal has instilled these sensibilities in his executives, most of whom have worked with him for decades. That includes President and Chief Operating Officer Craig Jelinek, who has been named as his successor. I doubt much will change when Sinegal retires.
McGregor writes PostLeadership, about leading in a changing world.