inside
costco
{
“I am proud that Costco
cares deeply about its
employees and customers
and by doing so produces
great returns for
shareholders.”
—Dan Evans
{
themselves in shorter-term time horizons than I feel
is optimal for a company to make the operating and
capital allocation decisions that may be most instrumental to long-term value creation, and this can create a conflict. Generally this conflict has no real bad
outcome as long as management is accurate in its
value-creation decisions because the value of the company will respond in kind. Sometimes, however, it can
invite interest from those seeking change of control of
the company before the value-creation scenario can
fully play out.
On judgments being made, sometimes management may have a different view of what investments
are required that seems in contrast with what is best
for shareholders. As an example, management may
feel that to retain and attract top talent, it must use
compensation levels that shareholders feel are too
high. In the long run, both are aligned in their interest
to attract the right talent to execute on the company’s
strategy, but I have seen different judgment calls on
this topic.
In general, the seeming “conflict” here creates a
good check and balance, and shareholders have been
right to point out some of the excesses that existed in
this realm historically.
John Meisenbach: By doing what is in the best interest of the customer and employees, the shareholders
and company will do well in the long run. Sure there
are times when it would be easy to take the short view
for the benefit of the market. This has not been what
Costco is about.
Bill Gates, Sr.: I do not see a distinction between what
is best for the company and what is best for the shareholder. To put it another way: what is best for the
shareholder is that which is best for the company.
He is president of MCM,
A Meisenbach Company, a
financial services company,
which he founded in 1962.
Charles T. Munger has
been a director since 1997.
For more than five years
he has been a director and
vice chairman of the board
of Berkshire Hathaway Inc.,
chairman of the Board of
Directors of Daily Journal
Corporation and chairman
of the Board of Directors and
chief executive officer of
Wesco Financial Corporation.
Jill S. Ruckelshaus, a
director since 1996, serves
on the boards of Lincoln
National Corporation and
various other organizations.
Richard M. Libenson, a
director since 1993, was
a director of The Price Com-
pany from its formation in
1976 until 1993. He served
as chief operating officer of
The Price Company.
Jeffrey H. Brotman was
a Costco co-founder and has
served on its Board from
its inception.
Richard D. DiCerchio
is chief operating officer,
Global Operations, Distribution and Construction,
at Costco. He joined the
company in 1983.
Richard A. Galanti has
been a director since
1995 and is chief financial
officer at Costco.
James D. Sinegal is
a co-founder of Costco
and serves as company
president and chief
executive officer.
voters and taxpayers. I am proud that Costco cares
deeply about its employees and customers and by
doing so produces great returns for shareholders. I
wish that all corporations understood this partnership as well as Costco.
CC: In a sentence or two, please summarize
your impressions of service on the Costco Board of
Directors.
Tony James: I love the Costco board. I think it’s an
incredibly high-quality company. It is a great business
and does great service for its members. I think the
board is filled with bright, interesting people with
wonderfully different and interesting and smart perspectives on the world.
Charlie Munger: I love serving on the Costco Board
because Costco is so admirable a firm and achieves
so much while serving the right values. I never
see any significant conflicts between management
and directors.
Dr. Ben Carson: I would say that it has been an
extreme pleasure serving on the Costco Board of
Directors because the other Directors are wonderful
people and senior management does not have hidden
agendas and are very bright and capable people who
are friendly and caring.
Bill Gates, Sr.: It is a very engaging and positive responsibility. The company is very well managed and
is conducting its business very successfully. The other
members of the board are admirable, conscientious
colleagues who are enjoyable to work with.
Susan Decker: It is an honor and a pleasure to serve
on the Costco board. I love what the company delivers in value to consumers and feel proud to represent
the company to its shareholders.
Jill Ruckelshaus: It’s a delightful experience because
it’s a very open communication with Jim and Jeff.
I don’t think there’s anything that they feel is important that they ever withhold from the board. And
the board feels absolutely emboldened by that to ask
lots of questions and get deeply involved in areas that
Jim has brought to us to consider.
John Meisenbach: Being on the board has been a
great honor and an incredible experience. It has had
a tremendous impact on me both personally and
professionally. The relationships I have with Costco
employees and directors have been invaluable. C
Dan Evans: I believe corporations have a four-part
responsibility. Corporate leaders should understand their customers, support their employees, contribute {“I love serving … because Costco … achieves{ to the community, and by doing so act in the best interests of shareholders. Too many corporate leaders so much while serving the right values. forget that the opportunity for successful existence depends on the rule of law, fair taxation, responsible I never see any significant conflicts between corporate structure and good public utilities, all of which are provided by the community through management and directors.”— Charlie Munger
