Costco is one of a handful of retailers that has flourished despite Wal-Mart Stores' (WMT) onslaught; Wal-Mart's more downscale Sam's Club chain runs second to Costco. With its strong labor relations, low employee turnover and liberal benefits, Costco has been called an "anti-Wal-Mart." Its approach has paid dividends, because Costco, based in Issaquah, Wash., hasn't encountered the same community resistance as Wal-Mart when it has sought to open new stores. [...]
[Jim] Sinegal, 70, also is one of the biggest bargains among big-company CEOs: In an era of seven- and eight-figure pay packages for CEOs, Sinegal earned a salary of $350,000 in Costco's latest fiscal year, which ended in August. He garnered other compensation of about $100,000.
What's more, Sinegal got no bonus last year, after the company determined that it failed to measure properly the appropriate date for certain option grants from 1996 to 2002, although no evidence of fraud or falsification of records was found. "Jim wouldn't let the board give him a bonus. His view was that the option glitch happened on his watch," Munger says. "How many people behave like that? No wonder everyone loves him."
Unlike Buffett, who draws a salary of just $100,000 as CEO of Berkshire, Sinegal isn't a billionaire. He owns Costco stock worth about $135 million and has options on 1.2 million shares.
Sinegal's compensation and demeanor offer a welcome contrast to former Home Depot chief executive officer Robert Nardelli, who alienated employees with his autocratic style and whose gargantuan exit package of $210 million didn't sit well with shareholders. Costco and Home Depot were two of retailing's biggest success stories in the 1990s, but Home Depot has since lost its way while Costco's growth has continued unabated.
Sounds good, but does it pan out in the value of the stock? Five years ago your investment in Wal-Mart would have lost 20 percent, while your investment in Costco would have gained 20 percent. Quite a spread, reminiscent of the Bush deficit versus Clinton surplus, wouldn't you say?
Costco is blue; Wal-Mart is red. Compare Wal-Mart's slow decay versus Costco's healthy growth.