IndexSummaryIntroduction:The Problem and Why It Matters:Stakeholder Positions and Importance:EmployeesManagementConsumersShareholdersCompetitorsResponses to Stakeholder Pressure:TargetCostcoApproximate Cost of Customer Response enterprise :TargetCostcoConclusion:Executive SummaryThis report seeks to explore how Costco Wholesale Corporation and Target Corporation, two strong competitors in the retail industry, exercise their corporate social responsibility (CSR) initiatives in terms of compensation. Their large workforce size and influence within the industry requires them to prioritize employee relations. Facts regarding financial data, human resources statistics and other company information were collected from the MSCI database, company websites, news articles and employee treatment reports. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay Healthy working relationships have a direct impact on society and are an important part of a company's proposed CSR initiatives, not only developing a strong public image, but also helping to increase the company's revenue. Introduction: Costco Wholesale Corporation and Target Corporation are both major players in the retail industry. That said, Costco dominates the Warehouse Club and Supercenter sector while Target leads the department store sector. Both companies have taken different paths to delivering value, with Target prioritizing brand development and convenience, while Costco seeks to build a near-egalitarian culture and sustain a loyal consumer base. Although they differ in their business models, both dedicate time and resources to CSR initiatives. At the heart of any business model is a company's customer value proposition (CVP). Target takes pride in training and retaining well-informed and helpful employees, which they say is their competitive advantage and an important part of their shopping experience. As such, employee compensation comes heavily into play when considering their value proposition. Costco's CVP promotes value creation and provides its employees with a support system, minimizing the turnover rate. Actions taken by management highlight their commitment to team members. Costco is considered an industry leader in social initiatives by engaging in stakeholder goals. They have maintained a loyal customer base by creating a wholesome experience that largely depends on a strong relationship with their employees. In contrast, Target has succeeded in attracting and retaining customers by building a reputation on evolving value that aligns with consumer trends and expectations. Ultimately, their different business models translate into divergent labor management practices. The problem and why it matters: With an increased focus on CSR, in terms of the ethical treatment of a company's employees and relationship with management, modern companies are under pressure to provide value to society beyond simply satisfying shareholder needs . Because of their large workforces, both Target and Costco constantly face the challenge of balancing the interests of shareholders and employees. That said, the most visible aspect of employee treatment is their pay, and this is where the two companies' policies diverge. Although Target has denied the continued claimsfrom within increasing their wages, Costco's proactive compensation practices have allayed this concern. It is crucial for a company to provide solid management practices as employees are a company's most important asset and can lead to greater business success. As Paul Spiegelman, CEO of Beryl Companies, said, employees are “the most important stakeholders in a company” and “if you want employees to have a vested interest in the bigger picture, treat them as stakeholders” (Spiegelman). Good employee treatment leads workers to feel valued and respected, which in turn is believed to result in greater customer satisfaction. A study published in the Journal of Applied Psychology used meta-analysis to find a substantial correlation between employee satisfaction and significant business outcomes such as profit and employee turnover (Harter, Schmidt, Hayes). The type of healthy relationships this study describes may partly result from adequate compensation. Additionally, the supply of retail jobs has exceeded demand, creating rigidity in the market (Peterson). Therefore, companies feel greater pressure to improve employee treatment and relationships to better retain and attract them. Key Stakeholders Affected: There are many relevant stakeholders regarding the issue of employee treatment and compensation for both companies. These include stakeholders such as employees, management, consumers, shareholders and competitors. Although most stakeholders maintain similar positions and relevance between Target and Costco, there are differences between management, employees and competitors, which influence their CSR (Figures A and B). Stakeholder positions and relevance: employees The stakeholders most affected by any action taken on the issue are the employees (Market/Internal) of each respective company, as they are directly affected by the company policy (Greenspan). In several cases, both Target and Costco employees expressed concerns about fair wages, benefits and work standards. Costco boasts a worker-centric culture. The consideration that management has towards employees derives from their “3=1 rule” according to which one good employee is worth three inferior employees (Taube). Costco employees have also joined unions that Costco Wholesale Corporation is willing to work with, thus having greater relevance than Target workers (Levine-Weinberg). Target employees also want to see their wages and benefits increase, but they're playing catch-up. Due to Target's anti-union culture, employees are of less importance as their management is not entirely willing to work with them (Zillman). That said, dissatisfied employees make credible strike threats, even if their power at the bargaining table is somewhat undermined by the large number of part-time workers who have less credibility than their full-time colleagues (Bose).ManagementManagement (Market/Internal) in a company is responsible for defining guidelines and value propositions related to employee relations, making it clear that this issue is directly related to their actions. While both companies' value propositions are geared first and foremost to providing value to consumers, both clearly state in their respective mission statements that their responsibilities begin with employees and then take consumers and the community into consideration. Management may be for or against improving employee treatment and pay, depending on what it ultimately chooses to givepriority in terms of value delivery (Krogue). Management's high importance comes from its legal power and decision-making abilities, as it creates policies, manages salaries, and deals with public perception. Costco management works with unions to resolve conflicts, indicating that they realize that their company's profitability directly depends on maintaining good relationships with employees (Levine-Weinberg). While most employees are not part of a union, workers in California have unionized through the Teamsters and resolve disputes through them. Costco workers and management are generally able to come to terms, largely due to the image management wants to maintain as satisfied workers. It's worth noting that Costco's CEO makes about 20 times the pay of its average employee, while Target's CEO makes 146 times the average employee's salary (Cardenal). Costco management recognizes the importance of independent investing and is willing to take a pay cut to do so. This dichotomy shows a stark difference in corporate culture between the two companies. However, despite investing in the idea of ​​treating employees well, management is motivated to reduce some benefits due to their increasing impact on the bottom line (Levine-Weinberg). And while Costco workers have a say on issues, it is management that must consider the rising cost of current and future employee benefits. Target management, without the worker-centric mentality of Costco's decision makers, opposes wage and benefit increases. largely due to the possible impact on profits. They have a higher level of salience than employees due to their corporate mentality and discouragement towards unions (Zillman). Although their workers have not been very successful in lobbying for wage increases, their competitors' actions have caused management to raise wages. Wal-Mart's recent wage increase prompted Target to respond with raises of its own. Even if management has granted a salary increase, this may not have much impact due to the large percentage of Target employees who work part-time and are therefore not affected by this change (Bose). Consumers Consumers (Market/External) often choose to shop in places that correlate with their personal values ​​and moral standards. Externally, both Target and Costco boast stellar employee treatment practices, compared to their competitor Walmart (Cardenal). Scandals and lawsuits involving Target and Costco are often successfully disguised from the public. In terms of salience, consumers possess high economic power as they may choose to boycott the company, but they rank relatively low due to their lack of urgency. The lack of consistent and complete information has hindered their use of economic power. Shareholders Shareholders (Market/External) are relatively less involved in the issue of employee treatment and compensation, but tend to be invested in the good health of the company. According to the principles of stakeholder theory, in addition to considering the value propositions of these respective companies, companies must first focus on treating employees to achieve maximum returns. Shareholders possess some salience due to their voting power, which translates into their influence on a company's financial activities (e.g., employee compensation). Notably, Target shareholders have a say in the actions of their management. This is dueto the reasoning that Target is a more volatile company and has produced less growth, forcing shareholders to be more involved to feel they are protecting and growing their investments (Hansen). Target's stock price has grown only moderately over a five-year period, increasing 31% (Figure C). This growth, however, has come through a series of crests and troughs that could rattle investors. Shareholders may endure this volatility due in part to Costco's attractive $0.60/share quarterly dividend compared to Costco's more sedate $0.45/share (Street Insider). Costco shareholders are more confident in the company's ability to deliver consistent returns, without throwing major roadblocks at corporate policy. Over the same five-year period, Costco's stock value has steadily increased, rising by an impressive 76% (Figure D). Competitors Competitors (non-market/external) can influence the actions of both companies in terms of employee policies, compensation and treatment. Target's recent minimum wage increase was a response to competitor Walmart's (Bose) base wage increase. This is an example of how Target is directly influenced by competitors on issues related to employee pay and treatment. Unlike Target, which is driven by trends, Costco sets the pace (Taube). Although competitors hold high informational power and have demonstrated that their actions clearly impact Target and Costco's decisions, they do not have the ability to directly implement change and therefore have moderate salience. Responses to Stakeholder Pressure: TargetTarget has long believed that having happy, healthy team members will result in greater customer satisfaction, more active involvement in their communities, and overall better business success. Although Target is known for being “the best Walmart,” it continues to be heavily criticized for its labor practices, ranking in the third quartile according to MSCI's ESG rating (Target Corporation ESG Rating). Despite claiming to support employees, Target's history shows that they refuse to entertain employee complaints of poor treatment. Target has always been fiercely anti-union, forcing its employees and management to watch anti-union videos as part of their training (Wang). These videos, along with the company culture, are intended to scare employees by highlighting that unionization would threaten their jobs and Target's competitiveness in the price-based retail industry. This has been very successful in undermining unionization efforts and suppressing employee complaints. In 2011, at a Target store in Valley Stream, New York, employees made an effort to unionize to improve their wages, but were met with rejection (Greenhouse). They said they faced illegal threats of dismissal for showing union support and were banned from wearing pro-union buttons. After the National Labor Relations Board found Target guilty of violating federal labor laws, management denied these allegations and stated that Target "strongly believed that it followed all store laws and that the election was fair." (Greenhouse). In retaliation, Target allegedly offered buyouts to workers who voted “yes” and made them sign an agreement not to tell the media about the failed union drive (both). This significant event highlights Target's strong anti-union culture, which has consistently repressed workers' concernsemployees, further increasing tension between workers and management. Target has raised its minimum wage twice in the last two years; in April 2015 it increased it to $9 and most recently, in April 2016, it increased it to $10, following Walmart (Huffington Post). Target's reluctance to raise the minimum wage on its own reflects poorly on the company, as it suggests that Target cares more about keeping up with competitors than about the ongoing concerns of its own employees. Additionally, Target is currently a defendant in two class action lawsuits regarding the failure to pay overtime to operating group leaders in New York and California (Target Corporation ESG Disputes). Similar to the 2011 Valley Stream case, Target has denied these allegations, saying the group's leaders are classified as managers who do not require additional pay. As a result, the number of Target employees has decreased since 2013 (ESG rating of Target Corporation). CostcoCostco is known for treating its employees well and having a generous benefits plan. The company is proud to strictly follow its Code of Ethics, which gives priority to employees over shareholders (Code of Ethics). However, beneath the surface, things may not be as good as they seem. MSCI's ESG Ratings report places Costco in the third quartile for labor management (Costco Corporation ESG Rating). In January 2015, the company faced a major class action lawsuit alleging unpaid overtime wages, denial of breaks and other labor violations in California. The lawsuit alleged that Costco employees allegedly worked on unpaid lunch breaks and were incorrectly clocked in, despite still being on duty. Although it was determined in February 2015 that Costco owed $17 million in unpaid wages just for missed lunch breaks, they relented and moved the case to federal court. Although the case did not end, Costco showed a willingness to compromise (Chicago Overtime Law Center). Despite these controversies, Costco has maintained healthy employee relations by implementing plans and policies that benefit its workers. In March 2016, Costco raised its minimum wage for the first time in nine years to $13-$13.50 an hour, 80% higher than the current U.S. federal minimum wage (Pettypiece). Despite pressure from shareholders and investors, Costco refuses to cut wages and benefits. When asked if Costco could make more money by reducing the average wage by 20%, the CFO replied: “The answer is yes. But we won't do it” (Berman). Thus, the average Costco worker makes about $45,000 per year compared to $22,260 at Target (Glassdoor). This high compensation is reflected in the low employee turnover rate of 6%, compared to the retail industry average of 27% in 2014 (Peterson). Approximate Cost of Firm's Response: Target Target's management, on the other hand, profits from not paying its employees higher wages than Costco's in the short run. It is evident through the income of Target's board of directors and CEO that they are able to compensate themselves through a lower cost to employees. While this is a solid short-term strategy, they will likely pay the long-term costs due to possible employee instability which can ultimately lead to customer dissatisfaction and reduced sales revenue. To prevent this from happening in the future, Target must identify and realize the value of its employees. Although Target shareholders enjoy dividends and.