Costco Ethics

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Costco Warehouse|
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Ethics|

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Costco Warehouse|
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Ethics|

June 5, 2011
Authored by: Barbara Esslinger
MGT 430
Professor Lindauer

June 5, 2011
Authored by: Barbara Esslinger
MGT 430
Professor Lindauer

Overview:
Today ethics has become such a controversial topic. It would seem as though corporate fraud and breaches of fiduciary responsibility, coupled with greed and selfishness plague every aspect of our corporate environment; therefore, a simplified model of ethics which implies choices are either right or wrong, or that ethical decision making depends solely on personal character or values is too simple. Ethics in a broader sense, is a matter of carefully and responsibility managing the things which are entrusted into our care. For Costco their code of ethics is simple: “Obey the law, take care of its members, take care of its employees, respect its suppliers and reward its shareholders.” (Cascio)

Corporate Culture:
“In Southern California, a crazed motorist recently attempted to commit suicide by driving his car onto railroad tracks. At the last moment, he thought the better of it, abandoned the car, and ran home. Unfortunately, seconds later a full commuter train crashed into the car, leading to terrible loss of life and to severe injuries to hundreds of people. The accident occurred directly in the back of a Costco Warehouse store. Almost immediately, the blue-collar Costco employees organized themselves into an emergency brigade, and, armed with forklift trucks and fire extinguishers, set out to rescue trapped passengers, and to deliver first-aid to the wounded.” (O'Toole)

It is said the ethics of an organization are displayed in the corporate culture of the organization and that the leaders have a huge influence on or actually creating the values of the company by what they believe are important. In turn, these leaders will bring on other’s who honor or value the same things. This leadership model will create and establish the cultural norm of the organization which will then define the expectations of how others should think, discover what is appropriate, and become socially accepted. The established culture will then be the model on how individuals within the organization will now be judged.

Nowhere is this more evident than in the business philosophy of Costco Corporation. Costco success is rooted in the way in which it treats its employees. Costco has “fostered a culture of inclusion” (Desjardins) where it views its employees as a fundamental resource in the success of its organization and as a primary means in differentiating itself from its competitors. If Costco, was an organization that paid low wages and put profits above people, and failed to contribute to the training of their employees; do you think they would have been able to react so appropriately on the day the commuter train crashed into that car?

Costco’s motto of “turning over inventory faster than people” has not come without its criticism from Wall Street. (Cascio) Wall Street’s consensus is that Costco treats its employees better than their shareholders. But what Wall Street fails to understand is that Costco is so firmly and strategically tied to its core beliefs and value system that Costco insist it “is not going to make money at the expense of doing what is right” and that while they as a company are extremely interested in margins they won’t jeopardize their philosophy to get there.

Social Responsibility:
In Costco’s business model not only does it place an inherent responsibility in taking care of its employees but also in the communities in which it operates. While Costco maintains a strong sense of social responsibility it would seem its competitor, Wal-Mart destroys it. Wal-marts competition not only lowers prices, it weakens wages and eliminates jobs. By squeezing margins from manufacturers it forces jobs into overseas and further displaces American workers....
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