No. 1

James Sinegal, Costco

Age: 71
Education: Associate in arts degree from San Diego Junior College
Previously: Fed-Mart Corporation, executive vice president of merchandising and operations; Price Company, executive vice president

James Sinegal’s employment contract includes a profoundly unusual clause: one dictating that he can be terminated for under-performance. Sure, CEOs should expect a lot from themselves, but few would willingly submit to such a harsh punishment.

Then again, Sinegal’s management style has always flown in the face of convention. Of the 100 CEOs in this survey, few generated such a warm, seemingly personal response from the professional investment community. “He’s done a tremendous job defeating formidable competition while maintaining high quality, service, customer loyalty and employee loyalty,” says Leo Isaak, a managing partner and portfolio manager at Spartan Capital. “He puts the company ahead of himself.”

Many we surveyed praised Sinegal’s famously harmonious employee-relations style. Costco offers its workers the highest wages and benefits in the warehouse-sales space and provides health-care coverage to more than 80 percent of them. Such an approach, Sinegal argues, translates into higher productivity and contributes to Costco’s remarkably low employee turnover. Costco has no PR department, relying instead on word of mouth perpetuated by its loyal employees — or “ambassadors,” as Sinegal dubs them.

The numbers back up his approach: As of late October, Costco’s stock was up about 25 percent for the year, roughly 20 percent more than the S&P 500. Sinegal cofounded the company in 1983, and has since grown it from one warehouse in Seattle to more than 450 worldwide, with a market cap of roughly $28 billion.

The profits are in the details: Sinegal has said that he spends about 200 days a year visiting and inspecting Costco’s warehouses in person. When in the office, he’s been known to answer his own phone.

The Street always appreciates successful contrarians, and Sinegal’s efforts to infuse luxury products into the warehouse mix wasn’t lost on our survey participants. “I love Costco’s innovation,” says Teresa Appleton, who runs Trade With Logic, an online trading company. “Sinegal doesn’t panic and doesn’t make drastic changes to accommodate short-term earnings requirements. He knows he’s in a cyclical industry, and he just worries about doing the right thing.”

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