Amid skyrocketing health-insurance costs and penny-pinching, profit-maximizing businesses, you may be surprised to learn that some companies offer health insurance to even their part-time employees. This seems like the right thing to do, and it can often boost consumers' opinion of a company and its brand. But it carries a hefty set of hidden costs as well.
Firms that offer health insurance to many, if not all, of their part-time workers include Starbucks
What's wrong with doing the right thing? Well, those skyrocketing health-insurance costs I mentioned earlier can wreak havoc on a company's bottom line. If some items cost a little more at Costco than at Wal-Mart, it may be because Costco spends more on salary and benefits for its workers. If those expenses were smaller, or absent, both customers and shareholders might benefit from lower prices and higher profits.
Public companies always have to balance their treatment of customers, shareholders, and employees. A Seattle Post-Intelligencer article from late 2005 quoted Starbucks' Howard Schultz and Costco's Jim Sinegal on the topic:
Schultz's main argument . is that companies can be profitable -- even fabulously profitable -- and morally responsible. 'Businesses, if they can afford it, have a moral obligation to provide a benefit,' he said, noting that Starbucks' stock 'is up almost 4,000 percent in 13 years' and surged 80% last year.
Like Schultz, Costco CEO Jim Sinegal did not apologize for offering health care benefits that by Wall Street standards are generous -- and costly. 'If you're going to get good people. it only makes sense to pay good wages and provide good benefits.'"
Next time you hear about a company doing the right thing, ask yourself how costly it is, and whether it will hamper or help the company. If you care about socially responsible investing, learn more with these articles:
You might decide to let some smart money managers find and invest in socially responsible companies for you, via socially responsible mutual funds. Shannon Zimmerman recommended one in our Champion Funds newsletter a little more than a year ago, and it's up some 17% since, versus 8% for its corresponding index. Evaluate the newsletter with a free trial, and you'll see all of Shannon's picks and how well they've done.
Costco and Starbucks are Motley Fool Stock Advisor picks, while Wal-Mart is a Motley Fool Inside Value selection, and Pitney Bowes is a Motley Fool Income Investor pick. Try any of our Foolish newsletters free for 30 days .
Longtime Fool contributor Selena Maranjian owns shares of Costco and Wal-Mart. The Fool has a disclosure policy.
