Costco’s kicking a “long-standing succession plan” into action, the company announced yesterday (Oct. 19).
Craig Jelinek, who has been at the helm of the US big box retailer for 11 years, will step down and Ron Vachris, chief operating officer since February 2022, will take over on Jan. 1, 2024. Vachris, who is currently president, will continue holding on to that post as well.
The 71-year-old outgoing CEO and his 58-year-old successor “have worked hand in hand over the last twenty-one months in Ron’s role as president and for many years before that,” the Washington corporation noted. After all, Vachris, who started out as a forklift driver at Costco, has been with the company for 40-odd years—pretty much its entire history given that it was founded in 1983—and Jelinek has been there the whole time, too.
The membership warehouse retailer hired the insider owing to “a very strong culture and a deep bench of management talent,” said Jelinek. “I have total confidence in Ron and feel that we are fortunate as a company to have an executive of his caliber to succeed me.”
Vachris is likely a safe bet. The data on who fares better—an insider or an outsider—is far from conclusive. But what is clear is that the former is a smaller risk. Typically, outsider CEOs tend to exhibit more extreme results, both positive and negative, compared to hiring from within, research shows. Although that’s also because insiders, constrained by their past decisions and relations, may hesitate to make bigger and bolder moves.
People of interest: Costco’s former CEOs
Like Vachris, Jelinek was also honed and primed for his post for years before taking it on in 2012. He took the reigns from the only other CEO the company had had until then—co-founder James Sinegal.
Jelinek will stay on at Costco through April 2024 in an advisory role, and he’ll remain on the board at least until the re-election at Costco’s annual meeting in just over two months.
Of CEOs and Costco, by the digits
78%: CEO successions that were internal during the covid era, according to Forbes’ report citing Heidrick & Struggles’ Bonnie Gwin. The most popular route to the CEO job was via the COO post—like in Vachris’s case
8 years: Average tenure of CEOs
11-15 years: When peak performance under a CEO occurs, as measured by total shareholder return relative to the market
20%: CEOs that can hang on for 11-15 years to see such outperformance
Five-fold: How much Costco’s stock value increased during Jelinek’s tenure
617 to 861: Increase in the number of total Costco warehouses in the US and internationally during Jelinek’s tenure
$1.50: Cost of Costco’s unchanging hot dog and soda combo. Jelinek jokingly told the audience during an Issaquah Chamber of Commerce luncheon in 2018 that Sinegal said he would “kill” Jelinek if hot dog prices went up. Late last year, chief financial officer Richard Galanti said the hot dog meal’s price would remain the same “forever.” Only time will tell if Vachris stands Costco’s ground.