Costco founder's politics at odds with members'
Costco co-founder and former CEO Jim Sinegal appeared on CNBC Wednesday morning to offer a preview of his speech tonight at the Democratic National Convention and explain why he supports the re-election of president Barack Obama.
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#1 Sep 5, 2012
I was thinking of going to Costco, but with the Obama Political love in from the ex, I will not bother. Too bad. So sad. I will keep my money and so will many more. Not smart.
#2 Sep 10, 2012
Boycott for political reasons? Costco sells Dixie products, owned by the Koch Bros. ridiculous.
#3 Sep 10, 2012
Cosatco stands in stark contrast to walmart and sam's club. While wal mart and sam'c club think of every way they can screw their workers Costco believes in paying a living wage with health insurance. Which company is setting the best example? Well David be satisfied with your mcjob! Go ahead and boycott one of the only corporations with a sense of decency left!
#4 Oct 12, 2012
I think it is important for every shopper to make informed decisions on who or what businesses to trade or shop with. Former CEO Jim Senegal seems to be in love with the Obama touting all the great things he has done. That's why gas is almost $5 a gallon. I was going to do some shopping at Costco tomorrow, now I will hold off and go to Walmart next time. The lines can't be any worse and I don't have to buy an excessive quantity of products at one time.
There are many other shopping choices that don't make you pay a membership fee. There should be no membership fees, as it is discriminatory to those who cannot afford the membership. Its beyond me how Mr. Senegal can stand in front of the American people at the DNC when he has promoted a divisionist corporation of class separation by making the "haves" buy memberships; while the "have nots" can't afford it. Then I thought, it takes one to know one. He and Obama are so much alike.
#5 Oct 13, 2012
They pay more? Show us the figures.
Since: Sep 12
#6 Nov 30, 2012
"Costco's average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam's Club. And Costco's health plan makes those at many other retailers look Scroogish."
Costco is truly a first class company. Hilarious how you can hate the man who treats his employees and customers with dignity, respect and class.
Go shop at Walmart where the disgruntled slaves are paid minimum.
#7 Dec 2, 2012
Please read WSJ: Costco's Dividend Tax Epiphany WSJ 11-30-2012
Obama's fans in the 1% vote to beat Obama's tax increase.
When President Obama needed a business executive to come to his campaign defense, Jim Sinegal was there. The Costco co-founder, director and former CEO even made a prime-time speech at the Democratic Party convention in Charlotte. So what a surprise this week to see that Mr. Sinegal and the rest of the Costco board voted to give themselves a special dividend to avoid Mr. Obama's looming tax increase. Is this what the President means by "tax fairness"?
Specifically, the giant retailer announced Wednesday that the company will pay a special dividend of $7 a share this month. That's a $3 billion Christmas gift for shareholders that will let them be taxed at the current dividend rate of 15%, rather than next year's rate of up to 43.4%—an increase to 39.6% as the Bush-era rates expire plus another 3.8% from the new ObamaCare surcharge.
More striking is that Costco also announced that it will borrow $3.5 billion to finance the special payout. Dividends are typically paid out of earnings, either current or accumulated. But so eager are the Costco executives to get out ahead of the tax man that they're taking on debt to do so.
Shareholders were happy as they bid up shares by more than 5% in two days. But the rating agencies were less thrilled, as Fitch downgraded Costco's credit to A+ from AA-. Standard & Poor's had been watching the company for a potential upgrade but pulled the watch on the borrowing news.
We think companies can do what they want with their cash, but it's certainly rare to see a public corporation weaken its balance sheet not for investment in the future but to make a one-time equity payout. It's a good illustration of the way that Federal Reserve Chairman Ben Bernanke's near-zero interest rates are combining with federal tax policy to distort business decisions.
One of the biggest dividend winners will be none other than Mr. Sinegal, who owns about two million shares, while his wife owns another 84,669. At $7 a share, the former CEO will take home roughly $14 million. At a 15% tax rate he'll get to keep nearly $12 million of that windfall, while at next year's rate of 43.4% he'd take home only about $8 million. That's a lot of extra cannoli.
This isn't exactly the tone of, er, shared sacrifice that Mr. Sinegal struck on stage in Charlotte. He described Mr. Obama as "a President making an economy built to last," adding that "for companies like Costco to invest, grow, hire and flourish, the conditions have to be right. That requires something from all of us." But apparently $4 million less from Mr. Sinegal.
By the way, the Costco board also includes at least two other prominent tub-thumpers for higher taxes— William Gates Sr. and Charles Munger. Mr. Gates, the father of Microsoft's Bill Gates, has campaigned against repealing the death tax and led the fight to impose an income tax via referendum in Washington state in 2010. It lost. Mr. Munger is Warren Buffett's longtime Sancho Panza at Berkshire Hathaway and has spoken approvingly of a value-added tax that would stick it to the middle class.
Costco's chief financial officer, Richard Galanti, confirms that every member of the board is also a shareholder. Based on the most recent publicly available data, they own more than 4.1 million shares and more than 1.3 million options to purchase additional shares. At $7 a share, the dividend will distribute roughly $29 million to the board, including Mr. Sinegal's $14 million—at a collective tax saving of about $8 million. Even more cannoli.
We emailed Mr. Sinegal for comment but didn't hear back. Mr. Galanti explained that while looming tax hikes are a factor in the December borrowing and payout, so are current low interest rates. Mr. Galanti adds that the company will still have a strong balance sheet and is increasing its capital expenditures and store openings this year.
(to be continued)
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