Bloomberg has an interesting article comparing the CEO's of Costco and Wal-Mart (particularly Sam's Club), but the comparison makes for interesting reading.
Costco Wholesale Corp. and Wal-Mart Stores Inc. both offer low-priced goods, yet when it comes to paying their employees, there is a difference in dollars and cents that starts with hourly workers and goes to the top.
Costco, the fourth-largest U.S. retailer, pays fulltime employees an average hourly wage of $17; Wal-Mart, the world's largest retailer, pays $9.68.
As for their CEOs, total 2004 pay for James Sinegal of the Issaquah, Washington-based Costco was $2.7 million; for H. Lee Scott of the Bentonville, Arkansas, Wal-Mart it was $17.9 million.
The CEO pay, which is an average of the previous three years is interesting:
Costco: $350,000, Bonus: $67,000
Wal-Mart: $1,192,000, Bonus: $3,829,000
Now, to be fair, Costco is a smaller company than Wal-Mart, so some of the disparity can be accounted for there. However, the difference is still significant.
If you compare their salaries for 500 companies with sales over $3 billion, even the Wal-Mart CEO isn't all that bad:
Wal-Mart: -35% Market Rate
Costco: -73% Market Rate
When you factor in Bonuses and other compensation, however, the disparity grows:
Total Compensation:
Wal-Mart: 0% Market Rate
Costco: -89% Market Rate
What does this all mean?
It means that the Wal-Mart CEO, H. Lee Scott, gets paid the average CEO salary, for a $3 billion company (even though Wal-Mart is much larger), and the Costco CEO gets paid significantly less than the average CEO salary.
However, Costco pays their employees nearly double than Wal-Mart.
Seeing as this is a Bloomberg article, there is an investor angle.
Return on the CEO investment.
Wal-Mart cumulative total return for the period 13 Jan 2004 (when Scott took over Wal-Mart) for what they pay their CEO, is -25.5% (S&P 500 cumulative return is -8.2% for the same period). For Costco, the same period was -5.4%.
If you look at the entire period that Sinegal has been CEO (August 1988), the return on the CEO investment was 10.6%, versus 11.7% for the S&P 500.
For comparison, if you go back to the same period for Wal-Mart, previous CEO, the return works out to 16%, but the previous CEO was paid considerably less.
So, what does this all mean.
It means that dollar for dollar, Costco, and it shareholder are getting a better investment from its CEO, James Sinegal then Wal-Mart and its shareholders are getting from H. Lee Scott.
Additionally Costco treats its employees better, so the return is also given to the employees, and ultimately the customers because the company is better off.
In Wal-Mart's case, the employees are worse off, the shareholders return on the investment in their CEO was lower, but Scott got paid significantly more.
Remember this when you choose where you do your shopping.