Akst: We need more businesses like Costco

Daniel Akst is a member of the Newsday editorial board.

If you're barbecuing some burgers or even a nice leg of lamb for your family this Labor Day, you might well have bought everything at the local Costco, from potato chips right on up to a giant gas grill. Everyone knows they have good meat and great prices.

What you may not know is that the company's remarkable chief executive, James Sinegal, just announced he's finally stepping down. At 75, Sinegal has earned a rest. Starting as a supermarket bagger in 1954, he eventually built a single Costco store in Seattle into a global retailing powerhouse that today has 592 outlets, 66 million cardholders -- and a staggering $78 billion in annual revenue.

Sinegal is a business legend who obsessively cuts costs, visits stores and charms reporters with his straight talk. He's a principled believer in free enterprise, too. A proposal in a California community to block a Wal-Mart but allow a Costco might have seemed like good news, yet Sinegal opposed it.

And he's a risk-taker. Who'd have thought to sell diamonds and coffins (prices to die for!) in the same place as shampoo and sweat socks?

So there's a lot to like. But his accomplishments are especially noteworthy on Labor Day, because Sinegal built a highly profitable business empire while paying employees well above the competition, holding his own salary way below that of his CEO peers, and giving almost everyone in the company health insurance.

Sinegal has resisted Wall Street pressure to deviate from a long-standing policy not to mark up any item more than 15 percent, arguing that the whole basis of the company's long-term success is the value it delivers to customers. "It's like heroin," he said in a published interview, of the temptation to raise prices. "You do a little and you want a little bit more. Raising prices is the easy way."

The long-term is what Sinegal's tenure has been all about. He's acutely conscious that, with 155,000 employees, a lot of families are counting on the company to put food on the table. That's to say nothing of suppliers, who might have to cut staff if Costco somehow went off the rails.

Shareholders haven't suffered. Since the company first issued stock to the public, in 1985, its share price has risen 47-fold. Investors have also been rewarded with dividends since 2004.

Sinegal has been rewarded too. As a stockholder, he's profited along with fellow investors. And as chief executive, he was paid $3.5 million in the company's most recent fiscal year. While that's a large number, it's vastly less than other CEOs make -- and it would be larger, except Sinegal wouldn't take more. Holding down his own pay did the same for his management team. Yet the chain is thriving, making a mockery of the idea that outsize pay is the only way to motivate the executive suite.

Let's not get carried away. It's easier to enrich shareholders while treating workers well when your customers are affluent. Costco is great if you can afford giant packages of pecorino romano or wild smoked salmon, however well-priced. Poor people go to Wal-Mart.

No firm can insulate itself from the vagaries of the marketplace. The day may yet come when Costco's culture must change, or employees must be laid off. Meanwhile, there's reason to admire a company that treats workers like human beings who are a part of something enduring, and deserve a decent life. Said Sinegal: "We believe that we have established something meaningful."

In keeping with Costco's style, Sinegal's successor isn't an all-star free agent recruited for millions, but a Costco veteran who worked his way up from store manager. On Labor Day of 2011, this country needs many things. Foremost among them: more Jim Sinegals.