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Costco is getting notice for how it is dealing with a vote by employees in Norfolk, Virginia, to unionize.

The vote last month means that 238 workers in Norfolk will join the Teamsters, in what the employees say is an effort to improve working conditions;  CNN writes that "the workers said their hope in becoming Teamsters is to have a voice asking for higher wages, pension contributions, bonuses and more flexible attendance policy, among other workplace improvements."

In a memo to all employees late last month, outgoing CEO Craig Jelinek and incoming CEO Ron Vachris wrote that they were “not disappointed in our employees; we’re disappointed in ourselves as managers and leaders … The fact that a majority of Norfolk employees felt that they wanted or needed a union constitutes a failure on our part."

The irony is that Costco long has been applauded "for its worker-friendly policies, such as higher starting hourly wage and affordable healthcare benefits, which kick in after 180 days of employment for new hires.  The retailer is touted as having among the lowest turnover rates in the retailing industry."

Fast Company offers this analysis:

"The two top Costco execs’ language marks a departure from how companies locked in heated union fights lately often respond. The first company that probably pops to mind - Starbucks - chose to respond by creating a website, One.Starbucks, that was so anti-union, a labor judge ruled it violated federal law. The company’s other efforts to derail the nationwide labor momentum led to a Senate hearing in which then-CEO Howard Schultz was accused of running 'the most aggressive and illegal union-busting campaign in the modern history of our country.'

"Meanwhile, REI released a podcast that tried to wield diversity, equity, and inclusion to kneecap its workers’ union efforts. Trader Joe’s 'threatened' employees after they made moves to unionize. And after workers at Amazon’s Staten Island fulfillment center voted to form a union in April 2022, they saw this official two-sentence public statement from corporate: 'We’re disappointed with the outcome of the election in Staten Island because we believe having a direct relationship with the company is best for our employees. We’re evaluating our options, including filing objections based on the inappropriate and undue influence by the NLRB that we and others . . . witnessed in this election'."

KC's View:


It's not you.  It's me.

In a relationship, that might be viewed as passive-aggressive, because it usually means that the person saying those words believes it really is you, but it is easier not to say so.  That doesn't seem to be the case here - though the proof will be in how Costco a) actually deals with the newly unionized employees, and b) adjusts its policies to deal with the perceived/actual shortcomings.

I've made this point consistently about unionization - companies can look at it as an attack on their authority values, or as an opportunity to figure out where the problems are and address them.  At Starbucks, Howard Schultz seem to take it all personally, which wasn't helpful at all.  And at Amazon, my argument has been that if it was as innovative in dealing with employees as it has been in so many other areas, it could redefine management-labor relations.

(The New York Times has a piece this morning saying that "Starbucks, which denies violating labor laws, has responded with mixed signals about its willingness to engage with the union. The company announced early last month that it was seeking to restart negotiations at unionized stores, only one of which has held bargaining sessions over the past six months. Yet the company continues to resist a union demand that some workers be allowed to take part in bargaining sessions remotely to enable more to participate."  Which means, I think, that old habits die hard.)

The Fast Company article, to be clear, make the point that the Costco issues may be deeper than just the actions of 238 employees in Virginia:

While organizers’ chief concerns didn’t specifically include wages, the widening gap between theirs and the C-suite’s over the years might serve as a marker of deeper issues. Jelinek succeeded company founder James Sinegal as CEO in 2012. Sinegal created the $1.50 hot dog (once joking he’d kill Jelinek if the price were raised), in addition to the worker-centric management model Costco operates on.

In his final year as CEO, Sinegal earned a $350,000 salary, $198,400 bonus, and $1.6 million in stock awards. That same year, as president, Jelinek earned a $649,999 salary, a $99,200 bonus, and $3.4 million in stock awards. Last year, his total compensation package was $16.8 million—336 times the average worker’s pay. Vachris also is set to make a respectable sum of $11.7 million for 2024. In the post-pandemic period, sales have surged at Costco, too, thanks to strong demand for cheap groceries. Two weeks ago, stock climbed to a record high $681.91, nearly a 50% increase on the year, giving Costco a market cap of $302 billion.

This isn't just about numbers - it is about fundamental company values.  I think that Costco employees are perfectly within their rights to ask if management compensation has risen at a higher rate than front line employee wages.  In fact, I think every front line retail employee should be asking that question.  But in the case of Costco, a widening gap actually seems antithetical to core principles.

By the way, there was an interesting passage in the CNN story:

Unionized activity in retailing is not very common, said Burt Flickinger, retail industry analyst and managing director of retail consultancy Strategic Resource Group. “It’s between 6% to 10%,” he said, adding that that compares with as much as 20% to 40% in the public sector.

At the same time, he said the Costco workers’ win in Norfolk could become the harbinger of Teamsters and UFCW unions’ push to organize more of retail.

“Their number one target by far is Amazon followed by Walmart,” Flickinger said.

That immediately grabbed my attention.  I've wondered for a while now, with all the union activity at places like Amazon and Starbucks, why there's been no apparent movement at Walmart.  It just seemed like the right time, that for once the tides might be working in favor of pro-labor forces.

The fact that Burt Flickinger - who forgot more about the industry yesterday than I ever will know - seems to feel the same way reinforces my belief that this still could be coming.