Wall Street Forcing Costco To Join Greed Club
Dolores M. Bernal
07 Apr 2004 15:36 GMT
If you thought that corporate greed couldn’t get worse, think again. We are now witnessing the third phase of corporate greed. Whereas the first phase was American workers losing their jobs to sweat shop labor overseas, and the second one was of companies outsourcing technical jobs, the third, is even scarier. Now, “good” companies are under the scrutiny of investors and investing firms for providing employees with health benefits and a living wage.
Costco Under Wall Street Attack
WASHINGTON - If you thought that corporate greed couldn’t get worse, think again. We are now witnessing the third phase of corporate greed. Whereas the first phase was American workers losing their jobs to sweat shop labor overseas, and the second one was of companies outsourcing technical jobs, the third, is even scarier. Now, “good” companies are under the scrutiny of investors and investing firms for providing employees with health benefits and a living wage.
In a recent a March 16th article of the Wall Street Journal, Ann Zimmerman reported that Costco Wholesale Inc. is being criticized not only by its investors, but also by investing firms and banks, for its “generous” and “unusual” compensation of employees. The article compared compensation practices by the monster chain, Wal-Mart to Costco’s.
Zimmerman reported that Wal-Mart pays an average hourly wage of $7.65 an hour compared to Costco’s average of $10.50. Investor’s have also found it disturbing that 82% of Costco employees are covered by health insurance, compared to Wal-Mart’s 42%.
Investors and investing firms are seeing Costco’s “generosity” as a threat to their profits. If a company is spending too much money in its employees, then it needs to make adjustments. Costco just recently raised health insurance premiums to its employees by 8%; a move the company had been reluctant to make for several years. Still, raising the premiums is not enough. Investors want Costco to adopt a Wal-Mart like model, which pays people the minimum wage, or something close to it. The irony of all this is that no matter how much employees are getting paid, companies are still making big profits. According to recent Department of Commerce numbers, corporate profits have raised 29% this year; the biggest jump in twenty years.
So what options would employees have to leave a low paying job if all companies adopt the Wal-Mart model? Wal-Mart’s turn over rate is already at 50%, which means that 5 in 10 employees leave or quit- evidence that the giant chains fails to provide a wage that people can live on and the health coverage they need. Costco’s turnover rate is only 24%.
“If you go to Wal-Mart you’re not going find friendly customer service like you will here,” explained a Costco employee, “This is the only place where I can work and be able to afford to pay for college.” A woman who called herself a frequent Costco customer reacted by saying that it was ridiculous to have a group of hard working people earning low wages. “The executives and investors are making millions, there is no shame,” she explained.
Because the government has no way to regulate how companies can compensate their employees besides only establishing and enforcing a minimum wage, there is little to stop this Wal-Mart like model. Just as the government is trying to offer incentives to companies to stay in the U.S., some believe that it should also give incentives to companies who pay 30% over the minimum wage, and that cover at least 80% of their employees with health insurance.
The most realistic solution is for Wal-Mart and Costco employees to form unions and stand up against the company and the investors. Unionizing is very important and the last resource workers have to secure a living wage and benefits. Speaking out is also very important in stopping and exposing the Wall Street’s “greed club” from walking away with pockets full of money and while leaving behind half empty stomachs.
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