Costco CEO's Compensation Package

The amazing tidbit: his employment contract is only ONE page long. You can bet that most CEO contracts are massive documents, just the amount of money a typical CEO receives when they sell their company, is outrageous:

Even as many investors assume that they've seen the end of the executive-pay excesses that flourished during the late-1990s bubble, a new Gilded Age is under way. The explosion of merger-related payouts raises the question of whether CEOs are doing deals more for their own benefit than for their shareholders, says James P. Melican, president of Proxy Governance Inc., which advises pension funds and other institutional investors. "Mergers are tarnished when it appears that managements have negotiated lucrative employment contracts for themselves with the acquiring company."
Here is the 20/20 piece on Costco CEO Jim Senegal:

Sinegal says he's also built a loyal workforce. In fact, Costco has the lowest employee turnover rate in retailing. Its turnover is five times lower than its chief rival, Wal-Mart. And Costco pays higher than average wages -- $17 an hour -- 40 percent more than Sam's Club, the warehouse chain owned by Wal-Mart. And it offers better than average benefits, including health care coverage to more than 90 percent of its workforce.

Costco doesn't have a P.R. department and it doesn't spend a dime on advertising. There's a real business advantage to treating employees well, Sinegal said. "Imagine that you have 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for you," he explained.

Many Costco workers have been with the company since it was founded in 1983. Once hired, they rarely leave.

... In an era when many CEOs are seen as greedy and sometimes corrupt, Sinegal is proving that good guys can finish first -- and without all the corporate frills. Sinegal even sends out his own faxes from his bare-bones office-without-walls at company headquarters near Seattle. But the most remarkable thing about Sinegal is his salary -- $350,000 a year, a fraction of the millions most large corporate CEOs make.

"I figured that if I was making something like 12 times more than the typical person working on the floor, that that was a fair salary," he said.

Of course, as a co-founder of the company, Sinegal owns a lot of Costco's stock -- more than $150 million worth. He's rich, but only on paper.

Nell Minow, editor and founder of the Corporate Library and an expert on corporate governance, said she was shocked to discover that Sinegal's employment contract is only a page long. "I would love to clone him," she said.

"Of the 2,000 companies in our database, he has the single shortest CEO employment contract. And the only one, which specifically says, he can be -- believe it or not -- 'terminated for cause.' If he doesn't do his job, he is out the door," Minow said.

Analysts and journalists have the habit of claiming that the Wal-Mart employment model is the only sure path to profitability. In a previous post, I pointed out that, the Costco approach is not only better for workers, its improves profitability. Hopefully, Costco takes another step, by carrying SOME Fair Trade products. As examples, I'm confident that their clientele will support Fair Trade chocolate and coffee.