What I Love about Costco

Here’s what I truly love about Costco – it’s not the delicious bone-in ribeye steaks, but rather the backbone Costco puts into living its corporate values.

You may have missed it over the holidays, but the beloved retailer came under fire for its DEI practices, joining a long list of companies who have been attacked — and retreated from — their DEI programs, most recently McDonald’s and...wait for it...just as we were ready to put this post to bed, Facebook, err, Meta ditched its DEI programs.

With one difference:  Costco isn’t changing its DEI programs because the retailer’s board believes they are core to the company and a competitive advantage in the marketplace.  This stand comes under threat of MAGA boycott and shareholder activists pushing for the change.

Remind anyone else of a certain Tom Petty song? 

This stand isn't the first time Costco has stood up for its belief systems and business practices, even while under withering pressure from the outside.

(One of the benefits of getting older is that you have an institutional memory for a stretch of history, in this case for Costco, that others might not possess.  And full disclosure:  I’m a Costco shareholder.  About 25 years ago I read an article in either Forbes or Fortune magazine <I forget which> about the retailer and was so impressed I immediately purchased a few shares of its stock.  It’s been very good to me.)

Case in point:  More than 20 years ago, a group of financial analysts and investors pressured Costco to reduce the wages and benefits it lavished upon its employees.  I say “lavished” because these Wall Streeters viewed people as a cost to be minimized, not an asset to be invested in.  In their estimation, Costco was being too good to its employees and should be mimicking the compensation policies of Wal-Mart at the time, which is to say skin flinty.

Well, Costco didn’t buckle and kept its compensation and benefits in place, as its strong belief was and is that its employee base is critical to its success and competitive positioning.

That’s proven hard to argue with as Costco’s stock performance has been on a tear ever since.

I expect the issue will heat up entering annual meeting season for publicly held companies.  That said, I do not anticipate Costco will budge from its position on this, as it continues to find the “value in values,” as outlined in this article from Sustainable Brands.

(It should be noted that competitor Wal-Mart is one of the companies that has backtracked on its DEI initiatives in the face of surging conservative backlash.) 

Oh, I’ll also be hungrily following along to see if MAGA’s proposed boycott causes members to stop shopping at Costco as protest.  I just don’t see the appetite to give it up with as much as people love the Costco experience.  Now THAT would require some real sacrifice.

What will be interesting to see is if Costco’s example can inject some calcium into the corporate backbones of other companies and their DEI initiatives.

While I doubt the two are related, Apple's board announced its opposition this past weekend to a proposed anti-DEI shareholder resolution, which is being contemplated by conservative think tank The National Center for Public Policy Research. The group believes Apple's DEI programs could create lawsuits against the tech company. Apple's response is that it has full compliance programs in place that should keep it on legally safe ground

"The proposal also inappropriately attempts to restrict Apple's ability to manage its own ordinary business operations, people and teams, and business strategies," it said, accusing the think tank of trying to 'micromanage' the company." Apple also stated that it works “to create a culture of belonging where everyone can do their best work.”

Interesting times for business, folks, interesting times indeed.

Godspeed, friends.

Russ

💬 Think About It

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💥 Quick Hits

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