Costco Directors Say CEO is Underpaid

12/18/03
By: Emily Kaiser, Reuters

CHICAGO, Dec 18 (Reuters) - Costco Wholesale Corp. <COST.O> may pay its store employees well, but apparently there is no fat-cat salary for the top brass: Costco's directors say Chief Executive Officer James Sinegal is underpaid.

Sinegal has not had a raise and has asked to forego his bonus for the last three years. He was paid $350,000 in the fiscal year ended August 31, according to Costco's proxy statement, filed on Thursday with the U.S. Securities and Exchange Commission.

Other compensation for Sinegal, who co-founded Costco, totaled $25,460.

"The committee believes that he is underpaid," directors who serve on Costco's compensation committee wrote in the proxy statement. Those directors include legendary investor Charles Munger, vice chairman of Warren Buffett's Berkshire Hathaway Inc.

The CEO of Sears, Roebuck and Co. , which has similar annual revenue, was paid nearly three times as much in 2002, and drew a $1.8 million bonus.

A Costco spokesman declined to comment.

"I would say that he is totally underpaid," said Paul Dorf, managing director with Compensation Resources Inc., which advises companies on executive pay.

Dorf said it is unusual to see executives turn down bonuses, and also rare to hear companies say CEOs are underpaid.

Costco has been under fire from some on Wall Street who say the company is good for employees and customers but bad for investors. Costco has a reputation for paying its employees better than its competitors do, but its profit growth has not kept up with sales in recent quarters.

CEO compensation has been a hot topic as corporate America tries to recover from a rash of scandals and reports of executive excess.

Former Tyco International Ltd. Chairman Dennis Kozlowski and other former executives are accused of looting the company of $600 million. Video of a $2.1 million birthday party -- about half paid by the company -- he threw for his wife filled television news broadcasts earlier this year.

Former General Electric Co. Chairman Jack Welch renounced more than $2 million in perks after a public outcry over the benefits, which included receiving flowers, wine and laundry services at a posh, GE-owned apartment in Manhattan.