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- [00:00]
A
Hey.
- [00:01]
B
Welcome to the season two finale of the corporate gossip Podcast. Before I get started, let me do my favorite thing. Shout out all the folks who brought us coffees this week. We have Jeremy, P. Ann R. And Sheila in tc and friend of the pod, Meredith her. Thank you all. You're all awesome. So, guys, this episode is going to be a little bit different. We. We are going to finally do the Kings of Kirkland Costco, and it's going to be an uplifting, good, funny episode. But before we do that, Adam and I reflect on season two. We crown our 2023 corporate cuties and we answer some listener questions. If you want to skip ahead to Costco, check the show notes, but I think it's around 20 minutes where we get started on that. I hope you guys enjoy the episode and we'll see you next season. Speed. That means go. Welcome back to another episode of the corporate gossip podcast. I'm your host, Becca Platzky. I'm here with my brother, Adam Platzky.
- [01:03]
A
Hey.
- [01:04]
B
Oh. And this is our final episode of season two of the corporate gossip podcast. This is going to be a little bit of a hodgepodge. We're going to reflect on the season. We're going to answer some listener questions. We're going to crown our corporate cutie, corporate cupcake, corporate comrade. I'm not sure what we're going to call it. The corporate hero of the season. And then we're going to wrap up this episode by talking about Costco. Don't worry. Okay? We wanted to end this season on a lighter note, so we're not going to be talking shit about Costco. Costco is one of those companies that's not terrible. I think, you know, sometimes being in this space talking about this kind of stuff, I think it can get you down and make you feel like, oh, my God, how could I possibly consume in this world when every single company is terrible? But I think Costco is a great example of a company that conscious consuming. Conscious. You can conscious consume. And there are some funny stories that goes along with that. So are you ready to get started?
- [02:05]
A
Let's do it.
- [02:06]
B
All right. So I think the universe told us it was time to take a break because we flew really close to the sun last week. We made contact with two icons. John Flannery, the former CEO of ge, and Andy Cohen. And in the case of John Flannery, I owe him an apology. I accidentally, in passing, maybe started a rumor that he was dead. He's not dead. He reached out to us by email, sent us A really nice note that he liked our podcast, which was amazing. And, you know, he is going to be nominated for corporate Hero.
- [02:43]
A
Corporate Cutie.
- [02:44]
B
Corporate cutie for sure. He would win that prize.
- [02:47]
A
He's running for December.
- [02:48]
B
In our. In our calendar, we should do Corporate cuties and. Yeah, calendar.
- [02:55]
A
So, John, if you're listening, we know you're a friend of the show. If you want to contact coming soon. No, but it'd be tasteful.
- [03:04]
B
But thank you, John, for reaching out. John is not dead. He's thriving. Podcast post. GE and, you know, we really just appreciate. We appreciate all of our fans, but in particular, we appreciate fans that have been CEOs of multinational corporations. And we also made contact with Andy Cohen.
- [03:25]
A
Yes. Yes, I did. I had the opportunity to go to watch what happens live last week, unaffiliated with this podcast. Unaffiliated with this podcast. Andy Cohen is not a listener that we know of. Um, it was fantastic. It was everything that you could ever dream of. And that's all I have to say about that.
- [03:41]
B
We thought you were going to see our queen, Kristen Doty, but we. You timed it wrong. Right. The tip is basically if you want to see somebody on a specific night. So you went on Wednesday night thinking it was going to be a Vanderpump rules.
- [03:55]
A
Yeah. It's live in the sense that it's in front of a live studio audience. It doesn't happen that day. So if you have the opportunity and you get to choose what show you want to go to, just know that taping is at least a day in advance of when the show goes live.
- [04:12]
B
So there you go. Okay. Because we know a lot of our listeners, there's a heavy contingent of Bravo fans that listen to our podcast. So there's your little tid. All right. But like I said, the universe brought us very close to the sun last week, and it was time to take a break. We need to take a break. We need to wrap season two because we need to hit the books. We need to get back to research this podcast just to give you guys some. Some sense. It takes about 40 hours per episode just in preparation. And then also there's the filming of the episode and the editing of the episode, etc. So it takes a lot of time. And I don't know how many people know this, but we both have day jobs, so we really need to take some time and, you know, build up our research catalog.
- [04:56]
A
I'm excited. I'm super excited. I was just talking about the books. I'm excited to read about I'm reading a book about PG&E, Pacific Gas and Electric, which will hit on some of our Enron stuff. I'm going to read about Carlos Ghosn, the former CEO of Renault and Nissan who is now Japanese fugitive. So, yeah, exciting reading coming up.
- [05:20]
B
McKinsey.
- [05:21]
A
We're going to read about McKinsey. Yes, I finished that. Coming up. Lots of beach reads. Lots of dry beach reads about business, which is my. That's pretty much what I do. I'm like a. I don't need Colleen Hoover. Just give me, like, a dry business book written by a New York Times columnist. Yeah, that's me.
- [05:38]
B
I also want next season to be a little bit for the girls, for the ladies. I want to do an episode on Charlie Javis and Jamie Dimon. Charlie Javis is the one who did who basically defrauded Jamie dimon out of $175 million for her bogus ed tech company. And the way I say it, the enemy of my enemy is my friend. And so if you defraud Jamie Dimon, I feel like I'm a fan. So I want to do some more. I want to focus on women's wrongs. I want to focus on women in the fraud space.
- [06:11]
A
I love women in the fraud space. Yeah, let's. Let's. Let's shift the attention.
- [06:15]
B
All right, now we're going to move to our questions. We got so many good questions from you guys, and we are going to have Mike read them in the style of Andy Cohen.
- [06:24]
C
That's right. We're going to play question and answer with our host. Our drinking secret word is CEO. Every time you hear our host say that, they won't know it, but you should take a shot until you become the CEO of Margaritaville. Our first question is from Jackson. What company do you hope to never have to expose for corporate malfeasance? That sounds sexy.
- [06:48]
B
I don't know what Indy Cohen you're doing, but we'll take this version. So for me, I am like a girl who has a lot of bad exes. Like, I feel about corporations like many women feel about men. I just never trust any of them. So there's a little part of me that, like, even Costco, like, there's. I'm always kind of waiting for the other shoe to drop, like something bad's gonna happen. So I wouldn't say there's one that I hope to never. I mean, a small. Like Sandy's pet store. I would be really upset if that turned into, like, a front of some sort. What about You.
- [07:22]
A
Mine hits a little bit closer to home. That would be Trader Joe's.
- [07:25]
B
Oh.
- [07:26]
A
Or Aldi, actually.
- [07:28]
B
Wegmans.
- [07:29]
A
Yeah, Wegmans would be really unfortunate.
- [07:31]
B
Shoot. Yeah, you're right.
- [07:34]
C
All right, our next question's coming from Emma from Los Angeles. Are there any companies you dread doing an episode on? Like, one that, you know, behaves really
- [07:42]
B
badly but you personally love, for me is cvs. I know that there we're actually going to get into. The CEO of CVS makes a stupid amount of money, and I know one day we're going to have to do an episode on them, but I just love cvs. I love couponing at cvs. It's a very good experience for me. And so that's one that I'm kind of like, ugh, I don't want to do.
- [08:05]
A
I could see us doing Nike, but Nike's not that important to my life. But I would like to do it well. I can replace replaceable in my life.
- [08:15]
B
I don't think that we suggest that just because you listen to this podcast and you agree with us that you should never shop at whatever it is like, or you should never patron the organizations that we talk about. Right. Like, sometimes you don't have a choice, but it just helps you be more conscious and more critical of the things that you see in the news. So for what it's worth.
- [08:38]
C
All right, our next question is coming from Olivia from London, England. What's been your favorite episode you've done so far?
- [08:45]
B
This one's easy for me. I loved the Under Armour episode. I thought it was so much fun. I mean, what can we say? We love talking about executives going to strip clubs.
- [08:55]
A
Yeah, that one was. That one had a storyline like a movie.
- [08:58]
B
Yeah.
- [08:59]
C
All right, this question is coming to us from Adam from New York City. How is it working with your sibling?
- [09:07]
B
You started this one.
- [09:08]
A
It's good. I mean, this is not the first that. Rebecca and I have worked on several failed ventures together. So this is not the first thing that. That we've done together. So, yeah, I mean, yeah, it's good. It's. It's. It's good. I would say, you know what a good recommendation would be. Just so everybody knows the back end of this. The way we plan recording these is. Is just insane. It's Rebecca picking a date, then canceling a date, then canceling, then me canceling maybe once in there. But what we should do is just pick a standing weekday.
- [09:41]
B
Right. I think the hard part about working with your sibling is you don't feel any guilt. Around being professional. So I don't mind texting you and being like, hey, I don't really feel like doing it, or I didn't get sleep last night, or whatever reason. Right. And I think we probably need to hold each other to a higher standard when it comes to being respectful of each other's time. That's been our big complaint this season, is we just move things around too much. But overall, other than that, I mean, I really like working with you. I think you're one of the people who can call me out on my bullshit and who I'm not able to steamroll. And I think that our listeners appreciate that because, you know, you never want a woman to just completely be able to say whatever she wants. Right. She always needs to be checked by a man.
- [10:25]
A
Women should always be filtered.
- [10:27]
B
Exactly. So I think it's important to have you on the other end of the mic. That was a joke, by the way.
- [10:34]
C
Okay, our next question's coming from Tyler from Odessa, Texas. Are you scared of retaliation?
- [10:41]
B
Should we be? I personally am not scared of retaliation because everything that we talk about on this podcast comes from another news source. So. So we're never, like, doing first, like, original source research. And even if it comes from the New York Post, I mean, generally, we don't rely on the New York Post as, like, our sole source of information for a story. It'll be, like, our starting point, or we'll use quotes from it. But remember, the purpose of this podcast is to present business news in a way that's, like, more digestible. So I would say, like, if a CEO or a company has a problem with something that we say, we would just point them to it. The original source of where that material comes from, which is normally like Bloomberg or Financial Times or something like that.
- [11:30]
A
I mean, yeah, I don't really have any. I'm not. I'm not scared of anything.
- [11:36]
B
Try us. Yeah, but don't.
- [11:38]
A
No, we. I mean, listen, a lot of the stuff is set off the cuff, and I have faith on Rebecca, you know, editing out anything that'll get me canceled. So that, I guess that would. Was. My biggest fear is like, could I get canceled for anything I say? Reality is, no, I don't. Things I say aren't that jaw dropping.
- [11:59]
B
So I think TikTok has desensitized me from people not liking what I say. I think. I'm not really worried about retaliation from, like, CEOs. I don't think that we rise to the level of them being concerned about what we say. But I Do just like anybody does. I don't like it when people don't like me. Right. But TikTok has helped tremendously because of the number of trolls that I see. Number of, like, CEO bootlickers telling me, oh, why don't you build something great? You know, before you talk about. Before you talk shit about something else. And for the record, I think everybody has the right to be critical of a company in which you own a shareholder, are a consumer, are an employee. There is no prerequisite. There is nothing that you must do in order to earn the right to be critical of their behavior. Now, for me, like, I have a cpa. I have a background in these things that make it a little bit easier for me to get through the muck and the mire and present it to you in this way. But, yeah, I just. I'm so desensitized now to trolls telling me that I don't know what I'm talking about. And I'm also inspired by particular, the women we talked about in our last episode. Bethany McLean, Margaret Circone, and Sharon Watkins. Like, they're my hero players.
- [13:17]
C
You know, this is coming from Michael in Corning, who was the worst right now for workers slash capitalism in general.
- [13:26]
B
I mean, for me, and I know Michael gave me a caveat for this question, that it would have to be somebody alive, um, or just not Reagan. For me, it would be the PayPal mafia. So, like Peter Thiel. Peter Thiel, Elon, all of those folks that just control massive amounts of capital. I mean, I think that's an obvious. In addition to Jamie Dimon. I'm very worried about what's happening right now with JP Morgan, like, scooping up all these regional banks. I think regional banks is like, a very important mechanism in America for people to get credit. And. And also they offer generally higher interest rates on your. On the money that you keep in the bank. J.P. morgan offers, like a.01% interest rate.
- [14:11]
A
Yeah, but they're not scooping up credit unions. I know, but credit unions are tool.
- [14:15]
B
But they've just scooped up First Republic now. They have.
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A
Yes. Yeah, I hear that. I'm just saying there are tools for people to build credit.
- [14:22]
B
I understand. I'm just saying I think it's dangerous that one bank is now scooping up several smaller regional banks. So that feels very scary to me. And honestly, anyone who espouses, like, hustle culture, like, to me, people are dangerous on TikTok when they're talking about, oh, here's my five to nine. Before my nine to five and like this is the way that I hustle, blah, blah, blah. I think it really scares me that we're, I don't ever want to be, have the idea that like you need to work harder in order to be a better person or even just the idea of like working harder to make more money. Like, because the fact is right now the people who work hardest in this country make the least amount of money. So I just, I, that is very scary to me. I really don't like the, the messages that goes along with that. So let's move to our awards. So we wanted to give, I don't know what we're going to call these. It's basically like the good people that we talked about this season. We want to give them a nod and you know, write in, what do you think we should call them? Right now I just have corporate cuties, corporate comrades or corporate heroes. I don't know. Do you have any other ideas? Do you guys have any other ideas for what we could call them?
- [15:30]
A
I thought about it all week. I couldn't come up with the danger.
- [15:32]
B
Right. It's like hard. So. All right, so Adam and I are going to each give our winner. But first let me give you the nominees. So these nominees come from four companies. Enron, ge, Southwest and Boeing. Subway and SVB don't get any nominees. First, let's go with Enron. So our first nominee is Margaret Saccony. She was that whistleblower who confronted the group of Enron energy services managers at the Mia Luna tapas bar. The second one is Sharon Watkins. She was the more famous whistleblower from Enron who ended up testifying in front of Congress after the Enron bankruptcy and now is head of the Whistleblower News Network. I think or she's involved in that somehow. And then last we have Bethany McLean from Enron. She's the Fortune magazine reporter who first dared to question the entire premise of Enron's business model. Next from ge, of course we have John Flannery, the only adult in the room at ge, who ultimately did not get a fair shake. But I think history remembers him fondly even though he's still alive. Next from Southwest we have Herb Kelleher, founder and chain smoking CEO of Southwest. And then we have the Southwest pilots union who both testified in front of the Senate after Southwest meltdown and then walked out in the middle of a JoJo concert, a company sponsored JoJo concert. Then from Boeing we have Gary Eastman. He was the whistleblower who shared production and manufacturing issues from Boeing, like In the early 2000s, late 1990s, he was the one who ended up being arrested for stealing company property. But then the case was settled. He was just a major badass. And then Ed Pearson, who we met in the beginning of the Boeing episode, he blew the whistle several times about Boeing 737 factory production issues. So, Adam, who is your winner for Corporate Cutie 2023 posthumously?
- [17:31]
A
Herb Kelleher.
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B
Yeah.
- [17:33]
A
Yeah. I don't think there is another person like Herb Kelleher. I think he's very unique. He put the customer and his employee first, which we never see or we rarely see. He has character, and. And if you're not sold on him, you just go back and watch that arm wrestling thing or any interview he's done. He's just very lovable.
- [17:57]
B
Very lovable indeed. My winner is Margaret Saccony. I think that she probably should be as famous as Sharon Watkins, but for some reason isn't. I love the fact that she just went up to these guys at the top of his restaurant. I love the fact that she was one of the only people to speak up to Skilling while she was still employed at Enro. She's just a badass to me, and I. I really appreciate her. And the frustrating thing is I could not find a single picture of her online. She really has very little social media presence or any social media presence at all. I found a Margaret Saccony, but it didn't seem like the same one. So if anybody has any deets on her and so we can give her our Corporate Cutie Award, Corporate Comrade award for summer 2023, let me know. All right, so let's move to the meat of the episode. We're talking about Costco. I want to warn you guys, do not be afraid. Let this episode wash over you. It's gonna feature a lot of really good things. It's gonna feature workers being paid a fair wage, CEOs being realistic about what they're actually bringing to the company and paying themselves accordingly. It's gonna feature funny interchanges between the outgoing founder and the incoming CEO, where they actually get along and they like each other. Food and. Food and hot hot dogs. All right, so what is Costco? Costco is the fifth largest retailer in the world. So depending on where you. Where you are, maybe you have a Costco near you. They are the world's largest retailer of choice and prime beef, organic foods, rotisserie chicken, and wine. As of 2016, it is a warehouse store. So you go in there and the floors are concrete. There aren't any, like, displays. Everything's just really stacked right in the boxes they come in. It's very basic, and you're buying things in bulk. The other thing that's key to know about Costco is it's a club. You need to purchase a membership for, I think, 85amonth or 95amonth.
- [19:59]
A
Not a month.
- [20:00]
B
I'm sorry, a year. A year. 95 a year, depending on where you're living in. I don't know what year this is, but I think right now they're ranked number 11 on the Fortune 500 rankings of the largest US companies by total revenue. As of a couple months ago, they have 850 warehouses worldwide, most in the United States, 100 in Canada, 40 in Mexico, and then Japan, UK, Korea, Taiwan, Australia, and Spain. Okay, so we went to Costco last week. We did some boots on the ground. And what did you think? We got a slice of pizza, a hot dog, and a soda for, like, 350. I thought the hot dog was great. We dressed it in all the different dressings that they had. And we got a slice of pizza which was extremely hot.
- [20:44]
A
Yeah, yeah.
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B
Really bring your mouth off. But it was good. We wanted to eat it. And then the soda, it was a new type of soda. We tried. Not as much syrup as I would have.
- [20:54]
A
There was no syrup in it. I think it was just salt water.
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B
Yeah, but still, for 350, I'm not here to complain. And we checked out the famous peanut butter pie, which was like 20 pounds of peanut butter pie.
- [21:05]
A
Okay, now I've got some a game, which I'll get to later, but I've got some questions. I want to go around the room and ask what your favorite Costco product is, because Costco has kind of a cult following. I mean, there's so many Instagram accounts about this. There's so many. There's YouTube people. There are people who make their careers around Costco that don't work for Costco. So for me, I love the pesto. They have this pesto that comes in, like, a large container, and it's lovely. It's. It's divine. It really is. It's. It's delicious. I'm sure I'll get a lot of love for this because it really is one of their best products.
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B
I thought it was the kimchi.
- [21:46]
A
Well, the kimchi is not made by Costco. They have a great selection of kimchi. All right, now yours.
- [21:53]
B
Potato salad.
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A
Okay. Is that. Is it, like the Costco potato?
- [21:57]
B
Whatever. The one that dad, who you guys met gets and brings to every. Every barbecue we have.
- [22:05]
A
Okay, you're ready for the game?
- [22:06]
B
I'm ready.
- [22:06]
A
All right, here we go. One of these things is not available at Costco. Tell me what it is. Okay.
- [22:12]
B
Huh?
- [22:13]
A
A six person sauna, a Mario Andretti signed 1969 Camaro pool table, a 240 serving bucket of Mac and cheese, a three bedroom, two bathroom home, a wedding package, a 93 inch teddy bear, and a casket.
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B
The Mac and cheese is, is standing out to me only because I bet you would be like, no, it's a 200 serving bucket of Mac and cheese. So I'm gonna go with that one.
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C
It's not the casket. It's not the teddy bear. I feel like Mac and cheese is probably the move.
- [22:53]
B
Which is it, Adam?
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C
Yeah.
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A
So I tried to go a little bit obvious. It's the home. You cannot buy a home. But originally I made up wedding package, and then I was like, well, wait, let me, let me double check this. Sure enough, there's a website where you can buy a wedding package from Costco.
- [23:10]
B
That makes sense.
- [23:11]
A
Like whole thing. Whole thing.
- [23:12]
B
So all the decorations.
- [23:13]
A
Decorations. Your trip.
- [23:16]
B
Wow.
- [23:17]
A
Honeymoon. Yeah. I knew about the, the, the trips that Costco had, but yeah, it's. They've got everything.
- [23:23]
B
That's great. All right, let's get into the Costco history. That was a great game. So if you want to know the history of Costco, you have to understand this other company called fedmart. It was founded by Sol Price and it's where Jim Senegal, who would go on to found Costco, worked in addition to W. Craig Jelinek, who is the current CEO of Costco. So Sol Price founds Fedmart in the early 1950s. And it's at the time a unique concept. So it's a discount department store. It's kind of. It sounded like Philly sales.
- [23:54]
A
I'm not familiar with Philly sales.
- [23:56]
B
Well, it's basically like a big department store, but it's discount. Price is a liberal Jewish attorney from New York who embraced organized labor. And that is going to be thematic throughout this story is the way that Costco thinks about and treats its labor. So eventually fedmark closes and Price and his son create Price Club.
- [24:16]
A
And wait, fedmart. This. These stores were based in California, right?
- [24:21]
B
I think San Diego.
- [24:22]
A
San Diego is. Yeah, yeah. I just want to make sure. So California. California started this whole thing and then it moved.
- [24:28]
B
Yeah, yeah. So Price Club and Costco merges in 1993. So Saul is still involved and he's really committed to keeping prices low and keeping labor practices fair. Get this. He solicited the Teamsters to represent his employees. Can you imagine a CEO of a company being like, you know what? You guys need somebody to represent you and represent, you know, your needs as employees. I'm going to bring the Teamsters to you. That never happens. An executive from Costco who started his career working at at Price Costco said about Saul, it was about creating value, about treating your employees and your customers well and respecting your vendors and ultimately rewarding your shareholders in the process. So we're going to think about this, right, because. Because a lot of people come on my tick tock and say, you must maximize profit in order to reward the shareholders. That's the only way that business works. And I want you guys, if. If that is your. If that is your thinking, I want you to listen to the story of Costco and tell me at the end if you still believe that that is the only way. Okay, we get to the first piece of corporate gossip, which is, if you want to raise the price of a hot dog, it means that you're pro murder. And I'll tell you why. The $150 hot dog combo, which we just enjoyed last week, is considered sacrosanct from the Costco's founding. A lot of people think that it's a loss leader, that it's the thing that gets people into the stores, like the rotisserie chicken. I went to the source, and according to Costco themselves, it is not a loss leader. It's just part of their culture. So the warehouse has never raised the price of its hot dog since 1985. If the price of the hot dog combo kept up with the rate of inflation, it would cost about $4 and 13 cents today. They ended up, in order to keep cost prices down, they built their own hot dog factory in California.
- [26:28]
A
So the Costco hot dog is USDA inspected, 100% pure beef hot dog with no fillers, byproducts, or artificial colors or flavors. So, Mike, does that mean that there are no lips and assholes in that? As. As we say in the hot dog biz?
- [26:44]
C
Well, the lips and assholes usually comes from pork, but it's. I don't know if we know for sure, because if it's beef, beef lips, beef tongue, that could all be considered beef.
- [26:55]
A
Which brings me to my next point, though. According to Reddit, the dogs are not kosher because they contain pork. So for a liberal Jewish lawyer to open this and. And not have a kosher hot Dog seems odd, but you can ask for a Hebrew national hot dog. I'm not sure. It probably costs more.
- [27:16]
B
Probably, yeah.
- [27:18]
A
But important also, if you guys have some time, check out the Costco food court challenge where my guy, Matt Stoney, the 23rd, 14 or somewhere around there. Hot dog eating champion, finishes one of everything in like three minutes.
- [27:34]
B
Wow. Did he let the pizza cool down?
- [27:37]
A
Yeah, he brings it all home.
- [27:38]
B
Oh, okay, okay, okay. So why, if you raise the price of a hot dog, would it mean that you're pro murder? So here's the story. At a 2018 luncheon, the current CEO Craig Jelinek told the company's co founder, Jim Senegal that they needed to raise the price of the hot dogs. Jelinek recounts saying, jim, we can't sell these hot dogs for a buck fifty. We're losing our rear ends. And Jim Senegal said, if you raise the price of this hot dog, I will kill you. Figure it out. And Jellinek said, that's all I needed. So, you know, so listen, bosses, I know I have at least one HR lawyer who listens. Hi, Ashley. Let me know if it's okay to threaten murder if you're. If you're subordinates don't follow your instructions. So let's meet Costco founder Jim Senegal, the hot dog king. So he's the founder and CEO of Costco from its founding in 1983 until he retires in 2011. He's born on New Year's Day in 1936 to a Catholic working class family in Pittsburgh, Pennsylvania. This is crazy. His mother placed him in an orphanage because she wasn't able to take care of him. And then when he was 11, she readopted him.
- [28:49]
A
Not traumatic at all.
- [28:50]
B
I can't imagine the trauma. Wow. He met his new stepfather, Giuseppe.
- [28:57]
A
Mike. How do you. How do you say that? Sinuscali.
- [29:00]
B
Sinuscali.
- [29:02]
A
Sinskiali.
- [29:04]
B
I think it's Giuseppe Siniscali, which later changed to Senegal. He goes to San Diego city College in 1955, and then he started as a grocery bagger at Fedmart, where he met Soul Price. So why are the vibes so good at Costco? Corporate gossip number two. Like I said, this is going to be a little bit of a different episode. Happy workers and happy customers. Mind blowing. So Costco has the lowest turnover rate in retail. And the reason why is like his management is rooted in the belief that employees who are treated well will treat and serve customers well. Compensation is. Is really is much higher than industry norms. Over 90% of Costco employees qualify for employer sponsored health insurance, which in America is a big deal. The retail average in the US is just under 60% one time. So Costco told employees that they would cover 90% of their health care expenses and Senegal Find found out that they were only covering 88%. So he reimbursed employees for the extra 2% in the form of just a check. And then he added stock directly into their 401k so it wouldn't be taxed.
- [30:18]
A
What a guy. This guy is Herb Kelleher esque, I would say. Herb Kelleher also believed happy customers or happy employees make happy customers.
- [30:28]
B
Yeah.
- [30:29]
A
So we've got two great American companies that have this methodology and you know it's working really well.
- [30:38]
B
Yeah.
- [30:39]
A
Can we be teaching this at hbr? Where are you?
- [30:41]
B
I know, seriously. Whereas I want to see where in the McKinsey deck is there a case study of Costco. So I went on Glassdoor, TikTok and indeed and found this out about, you know, people working at Costco. They start out at $17 to $25 per hour. Keep in mind that the US federal minimum wage is 725. Most states it's between like 11 and 15 an hour. So that's well above the minimum wage. The ma if you're a manage of a Costco, you make about $114,000. And 70% of those managers, they don't like come from any program there. They start out as hourly employees. They're paid time and a half on Sunday. They got seven paid holiday per year. Again very rare in working in retail. They get a free turkey on Thanksgiving and they get two annual bonuses depending on the years of service. Anywhere between 2750 and $5000 two times a year. I will mention on Glassdoor that a lot of people say that employees can feel overwhelmed and under respected by customers. I mean we talked a lot about that in that episode that I did with Nathan McIntosh where like just the customers are shitty at so many of these retail stores. And unfortunately I don't know that that's something that management can help with. But who knows the kind of support that they're getting. It may not be enough.
- [32:00]
C
What about, did they get their own memberships?
- [32:02]
B
Yeah, they get four. They get obviously a free membership from themselves and then they get free membership for up to four people.
- [32:07]
C
It's a pretty good deal.
- [32:09]
A
Did you ever see that Dane Cook, Dax Shepard movie that took place in like a, a Costco?
- [32:14]
B
Oh, employee of the month.
- [32:16]
C
Employee of the funniest, most underrated movies I think of the early 2000s.
- [32:20]
A
I always, I couldn't help but think about it when, when we were do it, when I was researching this and they had like, this, like, fort set up within the shelves where they all hung out. And like, I still look up at
- [32:33]
C
those shelves going, I wonder if there's a fort under there.
- [32:35]
A
I think, I think anyone who's seen that movie probably thinks about that.
- [32:38]
C
You know, that the movie is dated only because of Dane Cook's use of the Healy shoes. He's healing throughout the whole thing. Yeah.
- [32:47]
B
All right, let's move to the next piece of gossip. So they're paying their employees a fair wage and not maximizing their profits. So short sellers must be all over the stock. Right, guys? Right. Right. Wrong. Believe it or not, you can pay employee employees well and provide shareholder value. From 1985 until Senegal's retirement in 2011, the stock value had increased by 5,000%. In an interview with the Houston Chronicle in 2005, Senegal told an analyst that he didn't care about what Wall street said about criticizing him for putting good treatments of employees and customers ahead of pleasing shareholders. Side note, I love how analysts will say that with their full chest. Like, what the hell? You're pissing off shareholders because you're not exploiting your workers like everybody else is. Senegal says, you know, investors might want higher earnings, but we want to build a company that will still be here 50, 60 years from now. He says you have to take the. With the sugar. I just love that. And here's the thing. If you bought $10,000 worth of Costco stock in 2003, it'd be worth almost $200,000 today, which is a 1700%.
- [34:06]
A
A lot of hot dogs.
- [34:07]
B
A lot of hot dogs you can have.
- [34:09]
A
That's like 17. It's like 176,000 hot dogs.
- [34:14]
B
Yeah. No. Well, yeah. And drinks. So. And honestly, the streets love him or the streets love Costco. You know, management priority. This is from an analyst at Seeking Alpha. Management prioritizes long term success over short term profits by keeping merchandise prices low rather than maintaining high gross margins. And December 2022, they were announced Yahoo Finance company of the year because they're able to keep prices low in a year of rampant inflation, while rivals are aggressively jacking up prices. Remember, we learned about inflation, I mean, partial part. Part of it was because interest rates are rising, but the other part is corporate greed. And these corporations just saying, well, it's inflation. That's why we're raising the prices so much. Costco didn't do that. I mean, it's crazy. So don't come at me with profit maximization as the only way to increase your stock price. Don't come at me on TikTok and tell me that. You need to make sure that. You know I wouldn't invest in any business who isn't trying to maximize profit. Get fucked. You have your employees that you need to take care of. You have your customers that you need to take care of. You have the communities that you serve that you need to take care of. It's. It's insane. I can't imagine anybody looking at this company and not maybe questioning shareholder primacy as their investment philosophy. Here's your next piece of corporate gossip. You ready?
- [35:50]
A
Slam me.
- [35:51]
B
Costco founder passes the reins to his successor and doesn't talk shit about him.
- [35:58]
A
Not even a little.
- [35:59]
B
Not even a little? Upon his.
- [36:01]
A
You mean they can ride in the same elevator?
- [36:03]
B
They can ride in the same elevator. He's not going around at fancy schmancy dinners in LA like Bob Iger did and talking shit about him when he retires in on New Year's Eve 2011, right before his birthday. Senegal, who is just about to turn 77, says he has complete faith in his successor, Craig Jelinek. This is a quote from him. He understands this business backwards and forwards. He understands it better than I do. He's hardworking, he's intelligent, he's well liked, he's respected, he's fair. All the things you want in a manager. Boring. I'm sorry, you guys. This doesn't have all the juicy gossip, but it's nice to hear. Although this is kind of funny, though. A lot. Like a lot of the founders that we meet on this podcast, Senegal cannot really let go. So he just will, like, show up at board meetings at the corporate HQ uninvited. And. And apparently, like, according to some people, he'll. He'll just walk in the room and they're like, senegal, what are you doing here? And he'll be like, oh, I got to come in once a month. Otherwise they'll. They'll. They'll turn my badge off. And so Jelly Nick says of. Of Senegal, he says, it's kind of like your dad is still your dad, no matter. No matter how old he is. So it's been great. He lets me run the business, and every once in a while he says, hey, have you rethought this? So I think they have a really cute relationship. Next piece of corporate gossip. Jelinek, the current CEO of Costco fits the mold perfectly as a frugal and strategic king. So analysts and investors thought that maybe when Jelinek took the reins as Costco CEO, that he would kind of like have Costco fall in line with the other big box retailers. But Jelinek did not disappoint. He stayed true to his roots. Here are some quotes, an interview he did with the New York Times. New York Times asked him, what are you going to do when Wall street asks you to cut back on employee pay and benefits? He goes, I say, we're not going to change it.
- [37:55]
A
He's not a sheep. No, he's not. Yeah.
- [37:58]
B
Here's another question. You're taking over at a precarious time economically. If Costco hadn't fared as well as it had in this economy, with annual profits topping a billion even in the recession, what were you prepared to change? And this is a really interesting answer from, from Jelinek. He says, you still have to make a profit. Of course you do. You may not make as much during the tough times. Right. He's calling on his, on his predecessor who said you had to take the shit with the sugar. Jelani says where people usually get themselves in trouble is when they try to make up for the lost sales. I'd rather have a stock drop for three or four years than be out of business in three or four years. It's like life. There's good times and there's times that are not so good, but you work your way through it. Can you imagine a CEO being like, I'm okay if the stock price drips for two or three years? Like, so be it. We'll make it up.
- [38:46]
A
They all, they all talk about, like, long term growth and long term, healthy growth, but they're all making these wild decisions, you know, to, to turn the business around as quickly as possible or to, you know, drive stock price up. Whereas, like, hey, it's tough. Let's ride through it and let's, let's kind of be, I guess, more conservative.
- [39:07]
B
When asked about his business philosophy. This is one of my favorite quotes from Jalinek. He goes, this isn't Harvard grad stuff. Suck it, McKenzie. He didn't say that second part, but he says, we sell quality stuff at the best possible price. You treat consumers with respect, you treat employees with good. Things are going to happen to you. And I love this because, like, if they had a McKinsey consultant come in, you know exactly what they'd say. They'd say, you're, you need to cut back on employee benefits. You need to raise prices, and they would destroy Costco. And Jelinek is strong in the face of probably so many investors and so many people who want him to do that. This next piece of information is presented with no comment. Jelinek eats his hot dog plane with no toppings. Do you have any thoughts on that?
- [39:55]
A
I think hot dog toppings have been too much of a conversation recently, and especially with baseball season. Everybody's got an opinion. I think as long as you're enjoying a hot dog, that's the most important thing.
- [40:08]
B
Oh, you just don't want to get canceled, do you?
- [40:10]
A
Yeah, no, right. That's. That's important. No, I mean, listen, I. I can appreciate. I've eaten a hot dog playing before.
- [40:16]
B
I think it's weird.
- [40:18]
C
I stand firm that ketchup is wildly allowed to be on a taco.
- [40:22]
A
A taco or.
- [40:23]
C
Sorry. I stand firm that ketchup should be on a hot dog, or at very least, can be.
- [40:30]
A
A lot of these New Yorkers will tell you that it's mustard. No, ketchup's not allowed. I disagree. Yeah, I think. I think a hot dog is. Is. Is an empty vessel, and you could treat it however you want.
- [40:42]
C
People who don't like ketchup on a hot dog sound like they didn't grow up eating bologna and ketchup sandwiches, so they don't know the delight of a. Of a cheap lunch.
- [40:52]
B
Yeah, okay. But I just think it's weird if you have all these toppings you can have for free. I just don't see why you wouldn't add them, but whatever. Next piece of corporate gossip is the Costco headquarters would make Jeff Emmett scream. He'd go, I hate it here. So Costco HQ is in Isaiah, Washington.
- [41:11]
A
I think it's Issaquah.
- [41:12]
B
Issaquah. Yeah. Issaquah, Washington. Did you see the pictures here?
- [41:16]
A
Yeah. Yeah.
- [41:16]
B
It looks like a high school. Like, it does not look fancy at all. And the interior is just as underwhelming. The floor of the executive wing is covered in faded blue carpet. In the boardroom, there's faux wood tables, which in this article from Bloomberg, they say would look at home in a public school teacher's lounge, All. All jammed together, which is like, typical Bloomberg be like public school teaching lounge. On the walls, there are several Van Gogh and Picasso prints, which were purchased for less than $15 at art.com along with two badly staged photographs of the company's board of directors. And they added Jelinek's head onto the frame rather than, like, they printed out a picture of Jelinek, added his and slapped it on rather than like staging another picture. And that's hanging above a Weber Grill. It's a pretty lean operations at the hq. There's no public relations staff. Jelenic conducted this interview with Bloomberg alone. And then afterwards, the CFO called Jelinek and asked, did you say anything stupid? And he's like, no, I don't think so. That was it. Okay, the next piece of corporate gossip is CEO pay is completely reasonable. While Senegal was CEO between 1985 and 2011, he's taking in an average of $350,000 a year. He says about his salary. This isn't an interview with the New York Times. I've been very well rewarded. I think that if you're going to run an organization that's very cost conscious, then you can't have those disparities. Having an individual who's making 100 or 200 or 300 times more than the average person working on the floor is wrong. Preach, girl. So moving to 2020, Jelinek is making a much more than $350,000. He's making 808.5 million. But let's compare that to their competitors. So I put a chart here. What you're seeing on this chart and I'll link it in the show notes, is Costco is the second highest in revenue compared to their competitors behind Walmart. And they have the lowest salary for their CEO. So they're making $140 billion a year and their CEO is making 8.5 million compared to, say, Albertsons, they're at the lowest and they're making 71 billion. And their CEO is making almost $30 billion.
- [43:41]
A
Oh, that's so sorry.
- [43:43]
B
And their CEO is making almost 30 million.
- [43:46]
A
Well, Albertsons Kroger is set to have a merger which is still trying to go through.
- [43:50]
B
Right.
- [43:52]
A
That is interesting.
- [43:54]
B
But then, you know, you got Walgreens incredibly high CEO salary, almost 30 million. CVS again, kind of.
- [44:01]
A
Why are these hardware stores? Why are they so high? Like both Lowe's and Home Depot.
- [44:06]
B
Well, remember Home Depot, he. That was Jack Welsh guy.
- [44:09]
A
Right.
- [44:11]
B
He's making $13 million.
- [44:13]
C
So that's because Home Depot and Lowe's, they have. Their staff at each store is five employees.
- [44:19]
A
Yeah, yeah.
- [44:19]
C
That's why you can't find anything.
- [44:22]
B
Okay, so the next piece of corporate gossip. So where does the money go? Stock buybacks. Right. Investing in an upgraded hq. Right? No, the money goes to their employees. Despite the sagging economy and challenges to the industry. Costco pays its hourly workers an average $21 an hour, not including overtime. By comparison, Walmart said its average wage for full time employees is $12.67 an hour. There was a great expose by Brookings Institute talking about all these additional profits that stores like Amazon, Walmart and Costco are raking in during the pandemic. People are shopping more, cooking more at home and a lot of these companies earned a lot more money. The frontline workers at these retailers, right, who are, in the case of Walmart on food stamps are the ones who are keeping these stores afloat. Right? While Bezos is taking joyrides to the moon, Walmart and Amazon shared barely any of this will windfall with workers. Costco, on the other hand, continued to pay hazard pay to their employees. I think it was an extra $2 per hour all the way through the pandemic. This report came out from Brookings Institute and they didn't find out that Costco was doing this until an employee called Brookings and said, hey, just so you guys know, Costco is still paying us hazard pay. And, and that's because there's no attention like Costco doesn't go out and say that they do this right. They drew so little attention to its generous hazard pay. No press releases, no information on their company website, no TV ads, that the people at Brookings didn't even know this was the thing until a Costco employee called and told them the company has quietly spent 14 million of its pandemic profits each week to compensate its workers on top of industry leading starting wages. As you can see in this chart, which again we'll link in the show notes, you can see the additional profits that they're making, Amazon and Walmart compared to the additional compensation that they're paying to their employees. So Walmart and Amazon, they're, they're bringing in four and a half times what they're paying their employees in additional profits. Costco is pretty much one to one for. So for every dollar that Costco is making an additional pandemic profits they're giving back to their employees.
- [46:45]
A
And while we just disparaged Lowe's and Home Depot, they did a pretty good job as well.
- [46:49]
B
Yes, actually Home Depot is higher. Higher. So they're, they're, they made less profits than they gave to their employees. So, you know, keep an eye out for Craig Jelinek in the Costco food court. He says, I don't ever want us to become irrelevant. I Hope when I'm 90 and this company is around 30 years from now, I can go eat a hot dog at the Costco food court and hear someone say, I remember you. And I just love that because so many of the CEOs that we talk about have like these bigger than life expectations for what their work means. And like they want this company to be an extension of themselves. Their ego is so wrapped up. But for the CEO to just say, like, I want people to remember me when I met this. When I'm at the food court, don't bother taking another picture of the executives, a stage photograph. Like, I don't need an oil painting of myself. Just print a picture of me out, pop it on the frame. That's good enough for me. Like, I really like that. And I think that maybe in CEOs we should look for people who have less ego problems. Perhaps it would be positively correlated with this company's stock price. There are of course, some points off. I can't be like completely, you know, ball washing Costco for this entire episode. Three things. The first is there's a bit of issues with their board of directors. A 2015 shareholder proposal noted that eight of the 14 Costco directors were not necessarily independent. The GMI ratings, which is an independent investment for research firm, flag the Costco board as potentially entrenched due to the high number of long serving directors. So there's an issue there. There was also a discrimination lawsuit. So Costco paid 8 million to settle a nationwide lawsuit by 700 female employees who accused Costco of discriminating against women in promotions. And lastly, there was a shareholder proposal in 2019 that talked about Costco's knowledge of prison labor used in at least one segment of the company's supply chain. I will say, like, this is a big issue in so many companies in America.
- [48:47]
A
I tried to break down the Costco walls and a majority of the stuff I found is like just general issues with the grocery supply chain. It's like a lot of the companies that they partner with just don't have the best practices generally. One thing that I did learn about is monkey labor. What? Yeah, so monkey labor is really important when it comes to getting coconut water, coconut milk. Basically they have these chained up monkeys that climb up, climb up palm trees and collect coconuts. That's all they do all day.
- [49:22]
B
Oh my God.
- [49:22]
A
And they're trained and it's very sad.
- [49:25]
B
So that's so interesting because I saw, I see this brand called Harmless Harvest, and I do notice how much more expensive it is than the other coconut waters. And I'm not like A big coconut water gal. But God, if it's a choice of not using monkey labor, then yeah, maybe, maybe go for the more expensive one if you can afford it.
- [49:42]
A
And then the other story I found was Costco was selling. They had a lawsuit with Tiffany. Oh, they were selling this ring which I have a picture of and it said Platinum Tiffany VS2 11 Carat Round Brilliant diamond salt air ring. It wasn't a Tiffany ring. They just named it Tiffany. So they had to settle a lawsuit there. Oh, also this is, this is the one thing that I think Costco hasn't had a response to. So their toilet paper is sourced from the boreal forest in Canada. Costco is not directly responsible but takes part responsibility in 28 million acres of this forest being cut down to make toilet paper. But literally this boreal forest, if you look at the continental U.S. united States and Canada above, it goes all the way across the United States, huge forest. And it's just doo doo paper now. Or not doo doo paper, but we're making doo doo paper of it.
- [50:44]
B
Okay. So maybe, you know, consider buying your toilet paper somewhere else or look at the source of where your toilet paper comes from. I don't know how you would know that.
- [50:54]
A
Yeah, you wouldn't. It's difficult. And then there was one other little piece I found which was a, a fine slash issue with Costco's pharmacy. Basically they're filling prescriptions that were incomplete. The DEA found substances beyond doctors scope of practice as well as allegations Costco failed to keep accurate records for controlled substance substances. Luckily our friends at Costco, they made $127 million investment into a new pharmacy management system. Yeah, so typically they've been on the right side of everything except the toilet paper fiasco and prison labor. Prison labor.
- [51:34]
B
Monkey labor.
- [51:35]
A
The monkey labor, it seems like that's just an issue with coconut milk. So hopefully, hopefully we've strayed away from them. Sure. Costco is not pro monkey labor.
- [51:46]
B
It is funny though as like we're rattling down all of these things. Like at the end we're just like oh yeah and this and this and that's like. It is kind of crazy that like the one company that we could find that's like not the worst is still like endeavoring in a couple of unsavory practices.
- [52:04]
A
But again, most of this in my finding is all I know.
- [52:08]
B
It's endemic.
- [52:09]
A
Yeah. And it's their supply chain. They, they can't control their supply chain. They're doing their part. They're trying to be on the Right side of everything, trying to change suppliers and make sure that everything's working properly, but you can't control everything. And like, just because Costco is not cost cutting doesn't mean their suppliers are.
- [52:27]
B
Yeah, no, it's a good point. Yeah. I am happy that we ended on a high note with Costco.
- [52:35]
A
I.
- [52:35]
B
It is a little bit defeating that it, it's hard to find companies like this one. Of course we have other companies that we're going to do in the next upcoming season, like Chobani, for example. It's not like they're, they're. They don't exist, but it is a little, it's a bit of a bummer that we have to do so many episodes on these companies that are just clusterfucks and exploitative of humans, of monkeys, and it's just, it's just really shitty. So many of the episodes that we've done reinforces the fact that the fish rots from the head down. So if you have a CEO who's a megalomaniac, you're going to have a company that is likely at least a little bit fraudulent, at least a little bit exploitative. And similarly, if you have a CEO who has a good handle on their own self, you know, is self aware, you know, maybe goes to therapy. I mean, I'm not saying I don't know that either of these men went to therapy, but at least it just seems in the way that they operate their company that they treat people fairly and that they're, you know, nice.
- [53:48]
A
I would say most of these guys, though, the two, Jelinek and Senegal Senegal, both worked at the bottom rungs of, of Costco and know the jobs very well in and out. So they know how, what, what the challenges are. They've been in places where they've been at the bottom and they've been living paycheck to paycheck. They've been in, you know, returned by their mother.
- [54:15]
B
Oh my God. I mean, well, you know what's crazy? I wonder if it's also the fact that they're not making crazy money that it doesn't. We talked about this with in the Peloton episode where like normal people can get ice cream scoops taken out of their brain from this money that they're making. When you're in the tens of millions, hundreds of millions of dollars compensation annually, there's no. It absolutely has a psychological impact on the way that you view other humans. And I think by keeping CEO pay low, you enable leaders to act like human beings and not to make themselves feel like they are better than or buy themselves out of the human condition.
- [54:56]
A
I think it's more of like a lack of empathy. And like a majority of the CEOs that we talk about have never really been at the bottom or it's been
- [55:06]
B
so long since they've been at the bottom.
- [55:07]
A
I don't even think it's that. I think it's like, you know, you started like an analyst as an analyst at an investment bank or you start as like an associate at McKinsey or whatever consulting firm. Like that's still a cushy job. Yeah, you' starting out off at six figure salary, you know, 40, 50 bonus.
- [55:22]
B
But I don't know. Look at Ken Lay. He, like we talked about, he didn't have indoor plumbing until he was 11. It's not like he never knew what that felt like. But I don't. I think, I think we really underestimate the way that a change in income can, can change your psychology. And I think we need to support these CEOs to continue to have empathy. I don't know what it is. I don't know if it's mandatory therapy. I don't know if it's mandatory community service. Like it's something because they're missing. There's antisocial behaviors that we see in so many of these CEOs that we're not seeing at Costco. And I think it's worth a deeper dive. So thank you all for being here for our second season of corporate gossip. I think the best season yet.
- [56:08]
A
Yeah. By far.
- [56:09]
B
By far. I mean.
- [56:12]
A
Yeah.
- [56:13]
B
And it's only going up from here. Thank you to our listeners. Thank you to John Flannery. We will be back before the start of season three. We have a couple of days blocked off where if there's interesting breaking news in the spaces that we cover, we're going to come back and talk about them. So you should expect one or two bonus episodes before we start season three, which will be later this summer. So keep an eye out on our Tick tock. Keep an eye out wherever you get your podcasts and as a celebration for the end of season two, rate or review this podcast and share this podcast with a friend. You can find us at TikTok @Corporate Gossip Pod. You can send us an email@becca nighttoast.com or adamanighttoast.com that's N I T E to A S T. And thank you, Adam for being here with me. Thank you, producer Mike. All right, guys, we'll see you next season. It.