Best known for low prices on everything from diamond engagement rings to literal buckets of Nutella, to that famous $1.50 hot-dog-and-soda food court combo, Costco also has a reputation for being an employer with high workplace morale and low turnover because it offers above-average wages and benefits and works to promote internally. So, news in late December that Virginia workers had become the first in decades to unionize a Costco store came as something of a surprise—leading Costco CEO Craig Jelinek and president Ron Vachris to email employees a letter that took a surprise turn of its own (at least, as far as carefully crafted company memos go)—all just before New Year’s Eve.

“Last week, in a close vote, Costco employees in Norfolk voted in favor of representation by the Teamsters union,” it began. “To be honest, we’re disappointed by the result in Norfolk. We’re 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 letter followed the workers’ 111-to-92 vote to unionize. In a statement, the Teamsters, which represents over a million workers in various industries nationwide, explained that several factors had driven Costco organizers to seek union representation. Among them were increasing job safety, getting a stronger voice in the workplace, and obtaining a fairer grievance procedure. The union says it is Costco workers’ first organizing victory in two decades, though the crop of unionized stores goes back to 1993, when Costco acquired Price Club, a rival wholesaler whose workers already had Teamsters representation. The union group says it currently represents around 18,000 of Costco’s 316,000 workers.

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.” (Amazon’s complaints were dismissed in January 2023.)

A worker-centric culture

But Costco’s Jelinek has said before that being pro-worker “constitutes a significant competitive advantage for us.” Average pay there is more than double Walmart’s. He joined Costco in 1984 to manage one of the “warehouses” (Costco-speak for “stores”), and Vachris began as a forklift operator in 1982 while enrolled in community college in Arizona. Jelinek also just stepped down on January 1, making signing the letter one of his final acts as CEO—as well as making it likely that employees will see the letter, also signed by their new CEO Vachris, as representing management’s thinking on employee relations moving forward. (Pro-union employees have alluded to the fact that some workers believe Costco company culture has taken a hit in recent years.)

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.

In the letter, Jelinek and Vachris wrote that Costco is “not anti-union, but our core value of ‘taking care of our employees’ has never been the result of any union. It’s been part of Costco’s Mission Statement and the foundation of our Employee Agreement from the very beginnings of Costco’s business.” They urged employees who have any doubts or questions about that commitment to reach out, to continue to build Costco’s “culture of trust, respect, and reliance upon each other.”

Emails sent from Fast Company to Costco’s communications team, asking if the company has identified specific ways that it “failed” workers, and inquiring about concrete changes that could follow, went unanswered Tuesday. (Costco has traditionally maintained it doesn’t have a PR department, asking journalists instead to complete a form on Google Docs describing their “project.”)

Organizers still hope to build their own momentum off this victory. Unionized Costco workers—which according to the company, made up about 5% of its U.S. workforce last year—ratified their first-ever collective bargaining agreement in October 2022. This subset of workers got an hourly pay hike, an increase in Costco’s contributions to their pensions, higher semiannual bonuses, and a more flexible work attendance policy. The agreement’s terms reportedly helped inspire Norfolk workers to start organizing.

After their vote, the union group released a statement saying, “Together, as Teamsters, we’ll make sure Costco lives up to the worker-friendly image it likes to project to the public.”

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