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By Jason Stipp | 12-01-2010 01:06 PM

Our Top Three Candidates for CEO of the Year

Execs from the retail, banking, and auto industries are up for Morningstar's 2010 award.

Jason Stipp: I'm Jason Stipp for Morningstar. We are gearing up to name our Annual CEO of the Year in January, and today I've got with me Paul Larson, an Equity Strategist and Editor of Morningstar StockInvestor, to tell us a little bit about the nominees.

Thanks for joining me, Paul.

Paul Larson: Thanks for having me here.

Stipp: So we've had a tumultuous few years in the market. We've had consumer that's been in trouble for a while. We've had some government bailouts. This is a period of time when leadership at a company is very key. We have some good nominees that have really pulled their companies through on that front. The first one is from the retail sector. This is CEO of Costco. Can you tell us a little bit about why you chose him and how he's been able to lead that Company through some difficult times?

Larson: Sure. Our first nominee is James Sinegal of Costco. He was one of the founders of the Company and really came up with the entire warehouse concept. And he's really created a very efficient retailer and something that has also done very well in terms of employee loyalty. When you look at the employee turnover at Costco, it is just a fraction of what you see at the typical retailer, five times more turnover at the typical retailer than you see at Costco despite the fact that Costco is paying its employees higher salaries and higher benefits.

But this Company is highly efficient despite that higher pay that they are giving, and they also pass that efficiency along to their customers. And I think the thing that attracted us to James Sinegal is just that he's – retailing is a very tough business, in general, but he's still managed to create this organization that creates an enormous amount of value for all stakeholders.

Stipp: So retailing has been a tough business. Can you give us a quick sense of how Costco has managed through the downturn? What does their performance looks like? How they've held up?

Larson: Sure. And they've held up better than most. They have maintained their profitability and have indeed taken share from other retailers that have either struggled or not survived the downturn.

Stipp: So, it's one of those things where the strong gets stronger throughout a difficult time.

Larson: Yes, pick your metaphor. The tallest tree in the forest with the forest fire, the highest ground in the flood, yes. This Company is still standing strong.

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