Wayne Cascio

Decency means
More than
“Always Low
Prices”
Wayne Cascio

Ethics of Low Prices
Can businesses behave ethically/responsibly
and still make a profit?
Do businesses have a moral obligation to follow
business plans that are more equitable to
workers?

Wal-Mart
vs.
Costco

Wal-Mart/Sam’s Club
“Always low prices, Always”
Wal-Mart is not predatory - does not raise
prices after putting others out of business.
Values of the Founder: “hard work, discipline,
modesty, unpretentiousness, and frugality”(26)

Wal-Mart’s Moral
troubles
Wal-Mart has not always lived up to its core
values:
Failure to pay overtime
Gender based discrimination

Bigger Problems
“There is another aspect of the Wal-Mart effect
that is more troubling, and it concerns how
Wal-Mart gets those low prices: low wages for
its employees, unrelenting pressure on
suppliers, products cheap in quality as well as
price, offshoring jobs”.(26)

The Costco
Alternative

Costco Model
Larger market share than Sam’s
Higher wages
More benefits
Code of Ethics: “taking care of customers, and
employees takes precedence over rewarding
shareholders”.(28)

Comparison Costco Wal-Mart
# of items 4,000 100,000
Sales $52.9B $315B
Avg. Hr. Wage $17 $10.11
Employee Turnover 17% 44%
Internal Promotion 98% 76%
Stock Performance +55% -10%
CEO Pay $350K+ stock $35M
% employees w/HC 85%

Defying Wall Street
Criticized as not doing enough for its
shareholders.
Stock price still outperforms Wal-Mart
Shareholders seem happy with the return on
their investment.

Why Costco’s
Strategy Works

Employee Retention
Low turnover = huge saving
Costco 17% vs. Wal-Mart 44%
Replacing a worker typically costs 1.5 to 2.5
times their annual salary

Replacement
Costs (assume it
only cost 60%)
Number Replaced
Per Year
Per Employee
Cost of
Turnovers
Costco: 35, 360 x
60% = $21,216
11,492 x $21,216 =
$243.81M
$3,628.11
Sam’s: 21,028 x
60% = $12,617
48,488 x $12,617 =
$611.77M
$5,274.41

“It’s just good business. I mean obviously anyone who is
a business person thinks about the importance of people
to their operation. You’ve got to want to get the very
best people that you can, and you want to be able to
keep them and provide some job security for them.
That’s not altruism, it’s good business.”(James Sinegal,
co-founder and former Costco CEO)

Salaries and
Benefits
Low employee turnover
More efficient employees (38% less employees
than Sam’s with higher overall sales)
Low rates of employee theft.
Less externalizing of costs onto the community

What Wal-Mart
Costs Society

Externalized Costs
1 - 200 person Wal-Mart store costs federal
taxpayers $420,750
Free and reduced lunches
Housing assistance
Federal tax credits/deductions for low-income
families
Federal health care
Low income energy assistance

You Decide. . .
Is it ethical to continue paying such low wages?
Would you be willing to pay a bit more to a
company that payed better wages/benefits to its
employees?
Is a win-win situation possible in all industries?