Shareholder Challenges Adherence to Radical "Sustainability" Agenda Despite Higher Costs for Consumers, Lower Returns for Shareholders and Adverse Effects on Suppliers and Small Businesses
Costco's Leadership Claims Ignorance on Major Aspect of Company Business; Company Co-Founder Makes Sexist Joke in Response to Simple Question
Costco Called "Hypocritical" for Backing Obama's Push for Higher Taxes While Borrowing Money to Pay Dividends Before 2013 to Allow Executives to Avoid Tax Hike
When a free-market activist questioned Costco Chief Executive Officer Craig Jelinek about his company's costly sustainability programs at the Costco annual shareholder meeting January 24, Costco co-founder Jeff Brotman was so taken aback that he - glibly and inappropriately - blurted out to Jelinek: "why didn't he [the activist] just ask you when you stopped beating your wife?"
At Costco's annual shareholder meeting in Bellevue, Washington, at 4 PM Pacific time yesterday, National Center for Public Policy Research Free Enterprise Project DirectorJustin Danhof, Esq. was subjected to this petty display when he asked Jelinek about his company's green agenda concerning sustainability standards that have the potential to harm the company's customers, suppliers and bottom line.
"Rather than an answer my question, I was witness to an outdated and sexist joke from one of the company's co-founders, and a CEO who didn't seem to know what was going on in his own company," said Danhof. "Investors may want to take a second look at Costco's corporate leadership before purchasing this stock."
Costco is a member of the Retail Industry Leaders Association (RILA) - one of the country's largest trade organizations, representing more than 200 companies and many of the largest American retail chains. RILA is currently pressuring its membership to adhere to the association's new sustainability policy that directs retailers to reduce their "carbon footprint" through reduced "greenhouse gas" emissions. It also sets up adherence to sustainability standards that involves the possible redesign and rating of products. Not only will these programs increase the costs of goods, but they will make it difficult - if not impossible - for small businesses to compete.
To learn more about RILA's sustainability push, read here.
"Despite spending a good portion of the shareholder meeting discussing what he sees as the positive aspects of sustainability, when I asked Mr. Jelinek about his company's membership in RILA, he claimed not to know his company was a member," said Danhof. "When I asked if he would reject any RILA initiatives that could harm Costco's bottom line, he refused to answer. It is very disturbing that the CEO of one of the America's largest businesses is unaware of the company's membership in one of the country's largest trade organizations, especially one as radical as RILA. Jelinek may be new to his position, but investors have a right to be concerned about this lack of institutional knowledge."
"RILA's green agenda is not only costly, it is counterproductive. The free-market, if left alone, would dictate cost-saving environmental measures such as reducing packaging weight to lower shipping costs. However, RILA's top-down agenda removes the free market from the equation and replaces it with an extreme environmental ideology," explained Danhof.
To assess the impact of RILA's sustainability agenda on its member companies, the National Center recently commissioned a poll asking American consumers how much more they would be willing to spend on retail products so that companies could comply with these sustainability standards.
More than half (52 percent) of those surveyed indicated that they would not be willing to spend a single penny more for retail products so that retailers could meet sustainability standards. And, notably, only 3 percent of respondents were willing to spend up to ten percent more on commonly purchased retail items so they could be labeled as sustainable.
The poll was conducted January 10-13 by The Polling Company, Inc., which surveyed 1,000 adults. The poll has of margin of error of 3.1 percent.
"When I presented Mr. Jelinek with our very clear poll data and asked him the same question that we asked the American people, he simply refused to answer my question. This should be very troubling to all Costco shareholders and consumers," said Danhof. "That the CEO would ask customers to pay more in the name of sustainability but won't say how much more he is willing to spend is an outrage."
"If they pursue RILA's extreme agenda, Costco would only be catering to a very small percent of the shopping public. That isn't a winning corporate strategy," added Danhof. "The American public knows when it is getting fleeced, and that is just what RILA's green goals would accomplish."
On January 9, Danhof posed the same question to Walgreens (also a RILA member) CEO Gregory Wasson - inquiring how much more Wasson would be willing to pay for an average shopping cart containing $100 worth of retail goods so they could be labeled "sustainable." Wasson became incoherent when faced with this simple question, and refused to give a direct - or even a logical - answer. "While Wasson couldn't answer this simple question, the American public has, and they want no part of RILA's sustainability agenda," added Danhof.
Writing for the Motley Fool, Gene Koprowski praised Danhof's question at the Walgreens meeting, and warned would-be company investors saying: "I agree that that is an excellent question to ask, and suggest that investors refrain from buying shares of Walgreen until CEO Greg Wasson can provide a solid answer to the query."
"Costco's shareholders would be wise to follow the same advice. Unless the company's leadership can explain how this top-down approach is beneficial to company stakeholders, suppliers and the bottom line, Costco will remain a risky investment," said Danhof.
A copy of Justin Danhof's question at the shareholder meeting, as prepared for delivery, can be found here.
The National Center for Public Policy Research is a Costco shareholder.
The National Center for Public Policy Research, founded in 1982, is a non-partisan, free-market, independent conservative think tank. Ninety-four percent of its support comes from individuals, less than 4% from foundations, and less than 2% from corporations. It receives over 350,000 individual contributions a year from over 96,000 active recent contributors. In 2012, zero percent of its contributions came from the fossil fuel industry or related foundations.
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