Wal-Mart executives raise big money for Bush while Costco execs favor Democrats
By Michael Forsythe and Rachel Katz
First published by Bloomberg News July 25, 2004
WASHINGTON — Executives at Wal-Mart Stores Inc. and Costco Wholesale Corp., competitors in the $76 billion US warehouse-club market, have taken their rivalry to a new level: national politics.
Wal-Mart, the world’s largest retailer and owner of Sam’s Club warehouse stores, gives more money to Republican candidates than any other company. Its top three managers, including chief executive H. Lee Scott, donated the individual maximum $2,000 to President George W. Bush, and Jay Allen, vice president for corporate affairs, raised at least $100,000 to reelect the president, earning him the Bush campaign’s designation of ”Pioneer.”
Wal-Mart — two-thirds of whose 3,580 stores are in the ”red states” that voted for Bush in 2000 — is backing White House policies on everything from trade to limiting overtime pay.
Costco chief executive Jim Sinegal, 68, is a Democrat who says Bush’s $1.7 trillion in tax cuts unfairly benefit the wealthy. He opposed the Iraq war and supports Democratic Senator John Kerry of Massachusetts for president. And he’s the only chief executive of a company in the Standard & Poor’s 500 index to donate money to independent political groups formed to oust Bush, Internal Revenue Service records show.
”Wal-Mart is extremely strong in Republican strongholds; they are a red-state retailer,” said Amy Bonkoski, an investment adviser at Cleveland-based National City Corp.’s private-client group, which manages about $26 billion, including Wal-Mart and Costco shares. ”Costco is stronger in Democratic states. Costco is a friend to labor. Unions hate Wal-Mart.”
The differences are based on more than ideology: Each retailer has a stake in the election’s outcome in areas from healthcare to the minimum wage to the way unions can organize workforces.
Kerry, 60, a four-term senator, pledges to induce more employers to insure workers with a $257 billion proposal calling for the government to pay most so-called catastrophic healthcare costs — only for companies that provide comprehensive coverage. He’d raise the minimum wage and make it easier for workers to join unions.
Those policies may benefit Costco and hurt Wal-Mart.
Issaquah, Wash.-based Costco offers comprehensive health insurance to most of its 78,000 US employees, making it eligible for Kerry’s plan, said Kerry’s top domestic policy adviser, Sarah Bianchi, 31. That may cut 10 percent, or $35 million, off its annual healthcare premiums.
Wal-Mart’s health plan for its 1.3 million US workers is probably not broad enough to qualify for the savings that Kerry’s proposal would bring, since it doesn’t cover enough workers, said Jason Furman, 33, the Democrat’s chief economic policy adviser. Fewer than half of Wal-Mart’s employees are enrolled in the company health plan, according to figures supplied by the retailer.
Costco wouldn’t have to raise salaries with Kerry’s proposal to increase the minimum wage to $7 an hour, from $5.15 now. It already pays hot-dog vendors as much as $16 an hour, and the lowest wage it pays is $10 an hour. That’s higher than the $9.96 average wage paid at discount stores bearing the Wal-Mart name.
Bentonville, Ark.-based Wal-Mart supports the Bush administration’s expansion of free-trade agreements and its bid to curtail the number of workers eligible for overtime pay, according to its lobby disclosure reports.
Wal-Mart has benefited from the president’s opposition to raising the minimum wage, since some employees make less than $7 an hour, and from the Republican-controlled Congress’s reluctance to make it easier for workers to unionize. Wal-Mart has no unions; about one-sixth of Costco’s workers are represented by labor groups.
Wal-Mart and Costco aren’t the only companies in the same industry whose executives are on opposing sides in the election. Google Inc. chief executive Eric Schmidt is backing Kerry, while Internet rival Yahoo Inc. chief executive Terry Semel endorsed Bush.
What makes the Wal-Mart and Costco rivalry stand out is that their political donations are so partisan and both companies are likely to gain if their party wins in November.
IRS disclosure records show that Sinegal and Costco chairman Jeffrey Brotman each gave $95,000 last December to the fund-raising arm of America Coming Together, a group organizing voters against Bush, and the Media Fund, which is running anti-Bush advertisements.
Wal-Mart’s political action committee, the biggest company PAC, gave Republicans 81 percent of its $1.3 million in donations in the past two years, a higher proportion than any of the top 25 corporate PACs, according to PoliticalMoneyLine, a nonpartisan Washington-based group.
Sixty-seven percent of Wal-Mart’s stores are in the 30 states that voted for Bush and Cheney in 2000, according to a comparison of store-location figures in the Wal-Mart 2003 annual report and election results. Costco’s stores are mostly located on either coast, with 208 of its 321 stores in the higher-wage, more union-friendly 20 states that voted for Democrat Al Gore in 2000.
Sinegal makes no apologies for Costco’s policies, saying higher wages reduce employee turnover, which lowers training costs. ”I’m not a social engineer,” he said in an interview. ”Paying good wages is simply good business.”
© 2004 Bloomberg News
Related features:
The Costco Dilemna: Is Treating Employees Well Unacceptable for Publicly Traded Corporations? (Wall St. Journal)
Wal-Mart Becomes Largest Corporate Political Investor
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