SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrant    x

Filed by a Party other than the Registrant    ¨

Check the appropriate box:

Costco Wholesale Corporation

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

999 Lake Drive

Issaquah, Washington 98027

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO OUR SHAREHOLDERS:

The Annual Meeting of the Shareholders of Costco Wholesale Corporation (the “Company”) will be held at the Meydenbauer Center, Center Hall, 11100 N.E. 6^th Street, Bellevue, Washington 98004, on Thursday, January 26, 2012,24, 2013, at 4:00 p.m., for the following purposes:

1.    To elect the five Class III directors nominated by the Board of Directors to hold office until the 20152016 Annual Meeting of Shareholders and until their successors are elected and qualified;

2.    To ratify the selection of KPMG LLP as the Company’s independent auditors for fiscal year 2012;2013;

3.    To approve an amendment to the Company’s Fifth Restated 2002 Stock Incentive Plan to increase the number of shares available to be granted under the plan;

4.    To approve, on a non-binding basis, the compensation of the Company’s named executive officers for fiscal year 20112012 as disclosed in these materials;

4.    To consider a shareholder proposal as described in the accompanying Proxy Statement, if properly presented at the meeting;

5.    To transact such other business as may properly come before the meeting or any adjournments thereof.

Only shareholders of record at the close of business on November 21, 2011,23, 2012, are entitled to notice of, and to vote at, the meeting. All shareholders are requested to be present in person or by proxy. Any shareholder who later finds that he or she can be present at the meeting, or for any reason desires to do so, may revoke the proxy at any time before it is voted.

Important Notice Regarding the Availability of Proxy Materials for the 20122013 Annual Meeting.We are mailing to many of our shareholders a notice of availability over the Internet of the proxy materials, rather than mailing a full paper set of the materials. The notice of availability contains instructions on how to access our proxy materials on the Internet, as well as instructions on obtaining a paper copy. All shareholders who do not receive such a notice of availability, including shareholders who have previously requested to receive a paper copy of the materials, will receive a full set of paper proxy materials by U.S. mail. This process will reduce our costs to print and distribute our proxy materials.

Voting by the Internet or telephone is fast and convenient, and your vote is immediately confirmed and tabulated. If you receive a paper copy of the proxy materials, you may also vote by completing, signing, dating and returning the accompanying proxy card in the enclosed return envelope furnished for that purpose. By using the Internet or telephone you help the Company reduce postage and proxy tabulation costs.

Please do not return the enclosed paper ballot if you are voting over the Internet or by telephone.

Your cooperation is appreciated, because a majority of the common stock must be represented, either in person or by proxy, to constitute a quorum for the conduct of business.

December 13, 20112012

Important Notice Regarding the Availability of Proxy Materials for

the Meeting of Shareholders to be Held on January 26, 201224, 2013

The Proxy Statement and Annual Report to Shareholders are available at

http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-irhome

PARKING FACILITY AND DRIVING DIRECTIONS

MEYDENBAUER CENTER

11100 NE 6^th Street

Bellevue, Washington

TABLE OF CONTENTS

PROXY STATEMENT

FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD

January 26, 201224, 2013

SOLICITATION AND REVOCATION OF PROXY

Proxies in the form furnished are solicited by the Board of Directors of the Company to be voted at the Annual Meeting of Shareholders to be held on January 26, 2012,24, 2013, or any adjournments (the “Annual Meeting”). The individuals named as proxies are Jeffrey H. Brotman and W. Craig Jelinek. A Notice of Internet Availability of Proxy Materials was first sent to shareholders and the accompanying notice of meeting, this Proxy Statement and the form of proxy are first being made available to shareholders on or about December 13, 2011.2012.

All shares represented by proxies received will be voted in accordance with instructions contained in the proxies. The Board of Directors unanimously recommends a vote:

In the absence of voting instructions to the contrary, shares represented by validly executed proxies will be voted in accordance with the foregoing recommendations. A shareholder giving a proxy has the power to revoke it any time before it is voted by providing written notice to the Secretary of the Company, by delivering a later-dated proxy, or by voting in person at the Annual Meeting.

Only shareholders of record at the close of business on November 21, 201123, 2012 (the “Record Date”) will be entitled to vote at the Annual Meeting. At the close of business on the Record Date, there were 435,204,455434,824,153 shares of common stock outstanding, which represent all of the voting securities of the Company. Each share of common stock is entitled to one vote. Shareholders do not have cumulative voting rights in the election of directors.

A majority of the common stock entitled to vote at the Annual Meeting, present either in person or by proxy, will constitute a quorum. Shareholders who abstain from voting on any or all proposals will be included in the number of shareholders present at the meeting for purposes of determining the presence of a quorum. Abstentions and broker non-votes will not be included in the total of votes cast and will not affect the outcome of the vote.

With respect to proposal 1, the election of directors, the five directors receiving the highest number of votes will be elected. The Company’s bylaws provide that if in an uncontested election for directors a nominee receives a greater number of “withhold” votes than votes “for”

the nominee shall offer his or her resignation. A committee of independent directors whose election is not at issue will determine and publicly report the action to be taken with respect to the resignation offer.

With respect to proposalall other proposals (proposals 2 the ratification of the selection of the Company’s independent auditors,through 4), to approve the votes that shareholders cast “for” must exceed the votes that shareholders cast “against.”

With respect toeach proposal 3, the amendment of the Company’s 2002 Stock Incentive Plan, to approve the votes that shareholders cast “for” must exceed the votes that shareholders cast “against.”

With respect to proposal 4, the advisory vote on executive compensation, to approve the votes that shareholders cast “for” must exceed the votes that shareholders cast “against.”

If your shares are held by a broker or other financial institution on your behalf (that is, in “street name”), and you do not instruct the brokerthat firm as to how to vote these shares, on proposals 1, 3 or 4,Nasdaq rules allow the broker may not exercise discretionfirm to vote for or against those proposals. This would be a “broker non-vote” and theseyour shares will not be counted as having been votedonly on the proposal. With respect to proposalroutine matters. Proposal 2, the broker may exercise its discretionratification of the selection of the Company’s independent auditors for fiscal 2013, is the only matter for consideration at the meeting that Nasdaq rules deem to be routine. For all other proposals, you must submit voting instructions to the firm that holds your shares if you want your vote for or against that proposal into count. When a firm votes a client’s shares on some but not all of the absence of your instructionproposals, the missing votes are referred to as “broker non-votes.”. Please instruct your bankbroker or brokerother financial institution so your vote can be counted.

In addition to mailing the Notice of Internet Availability of Proxy Materials to shareholders, the Company has asked banks and brokers to forward copies of the Notice of Internet Availability of Proxy Materials, and upon request paper copies of the proxy materials, to persons for whom they hold stock of the Company and to request authority for execution of the proxies. The Company will reimburse the banks and brokers for their reasonable out-of-pocket expenses in doing so. Officers and employees of the Company may, without being additionally compensated, solicit proxies by mail, telephone, facsimile or personal contact. All proxy-soliciting expenses will be paid by the Company in connection with the solicitation of votes for the Annual Meeting.

PROPOSAL 1: ELECTION OF DIRECTORS

The Board of Directors is divided into three classes. Directors are elected by class, for three-year terms. Successors to the class of directors whose term expires at any annual meeting are elected for three-year terms. Each of W. Craig Jelinek, Benjamin S. Carson, Sr., M.D., William H. Gates, Hamilton E. James D. Sinegal, Jeffrey H. Brotman, Richard A. Galanti, Daniel J. Evans and JeffreyJill S. RaikesRuckelshaus is nominated as a member of Class I,II, to serve for a three-year term until the annual meeting of shareholders in 20152016 and until his or her successor is elected and qualified. All nominees are current directors.

Each nominee has indicated a willingness and ability to serve as a director. If any nominee becomes unable or unwilling to serve, the accompanying proxy may be voted for the election of such other person as will be designated by the Board of Directors. The proxies being solicited will be voted for no more than five nominees at the Annual Meeting. Each director will be elected by a plurality of the votes cast, in person or by proxy, at the Annual Meeting, assuming a quorum is present.

The following candidates for election have been nominated by the Board based on the recommendation of the Nominating and Governance Committee. In addition to the information presented below regarding each nominee’s specific experience, qualifications, attributes and skills that led the Board to conclude that he or she should serve as a director, the Board believes that each nominee has demonstrated: outstanding achievement in his or her professional career; relevant experience; personal and professional integrity; ability to make independent, analytical inquiries; experience with and understanding of the business environment; and willingness and ability to devote adequate time to Board duties. We also believe that our directors collectively have the skills and experience that make them well-suited to oversee the Company. They are established leaders in important areas of business, academia, government

service, and other public and non-profit service. In addition, members of our Board have had a great diversity of experiences and bring a wide variety of views that strengthen their ability to guide our Company.

The Board of Directors unanimously recommends that you vote FOR Proposal 1.

Directors

The following table sets forth information regarding each nominee for election as a director and each director whose term of office will continue after the Annual Meeting.

Set forth below is information with respect to each director of the Company, which as used below means Costco Wholesale Corporation and includes its predecessor company, Costco Wholesale Corporation, as it existed prior to the 1993 merger with The Price Company.

James D. Sinegal is Chief Executive Officer of the Company; he was also President until February 2010. He will retire as Chief Executive Officer on January 1, 2012. Mr. Sinegal is a co-founder of the Company and has been a director since its inception. Mr. Sinegal’s qualifications to serve on the Board include his roles as a co-founder of the Company and Chief Executive Officer, his extensive career in the retail industry, and his extensive knowledge of our Company’s business developed over the course of his long career here.

Jeffrey H. Brotman is the Chairman of the Board of the Company. Mr. Brotman is a co-founder of the Company and has been Chairman of the Board since the Company’s

inception, except from October 1993 to December 1994, when he was Vice Chairman. Mr. Brotman’s qualifications to serve on the Board include his roles as a co-founder of the Company and Chairman of the Board, his extensive knowledge of our Company’s business developed over the course of his long career here, and his previous service on the boards of other public companies.

Benjamin S. Carson, Sr., M.D. has been a director of the Company since May 1999. Since 1984 he has been a Professor and Director of Pediatric Neurosurgery at Johns Hopkins Medicine. Dr. Carson has also served as a director of Kellogg Company since 1997. Dr. Carson has written extensively and is a frequent speaker on a variety of topics, including pediatric neurology, motivation and self-help for children, and community involvement. Dr. Carson’s qualifications to serve on the Board include the knowledge and experience he has gained, and contributions he has made, during his tenure as a director of our Company, his service on the board of another public company, and his important role in one of the nation’s leading institutions of higher learning.

Susan L. Decker has been a director of the Company since October 2004. She currently serves on various for-profit and non-profit boards of directors. Previously, she served as

Entrepreneur-in-Residence at Harvard Business School during the 2009-10 school year. Ms. Decker was President of Yahoo! Inc. from June 2007 to April 2009. Prior to becoming President, she served as the head of one of Yahoo!’s two major business units, the Advertiser and Publisher Group, and as Executive Vice President and Chief Financial Officer from June 2000 to June 2007. She is a director of Berkshire Hathaway Inc., Intel Corporation, and LegalZoom.com and was previously a director of Pixar. Ms. Decker’s qualifications to serve on the Board include the knowledge and experience she has gained, and contributions she has made, during her tenure as a director of our Company, her service on the boards of other public companies, and her broad-ranging experiences, including senior leadership positions, in the areas of finance, technology and marketing.

Daniel J. Evans has been a director of the Company since January 2003. He has been the chairman of Daniel J. Evans Associates, a consulting firm, since 1989. From 1983 through 1989, he served as a U.S. Senator for the State of Washington, and he was the President of The Evergreen State College from 1977 through 1983. From 1965 through 1977, he served as Governor of the State of Washington. Mr. Evans serves on the boards of NIC Inc. and Archimedes Technology Group. Mr. Evans’ qualifications to serve on the Board include the knowledge and experience he has gained, and contributions he has made, during his tenure as a director of our Company, his service on the boards of other public companies, and his broad-ranging experiences in government and public service.

Richard A. Galanti has been a director of the Company since January 1995, and Executive Vice President and Chief Financial Officer of the Company since October 1993. Mr. Galanti’s qualifications to serve on the Board include his extensive knowledge of the Company’s business developed over the course of his long career here, particularly in the areas of finance and financial reporting.

William H. Gates has been a director of the Company since January 2003. He has been the Co-Chair of the Bill & Melinda Gates Foundation since its inception. Mr. Gates serves on the Board of Regents of the University of Washington. He has served as trustee, officer and volunteer for more than two dozen Northwest organizations, including the Greater Seattle Chamber of Commerce and King County United Way. In 1995, he founded the Technology Alliance. From 1964 until 1994 Mr. Gates was a partner in the law firm of Preston, Gates & Ellis and predecessor firms. Mr. Gates’ qualifications to serve on the Board include the knowledge

and experience he has gained, and contributions he has made, during his tenure as a director of our Company and his broad-ranging experiences in the legal profession, one of the country’s largest foundations, and other public-service positions.

Hamilton E. James has been a director of the Company since August 1988 and the lead independent director since 2005. He is President and Chief Operating Officer of The Blackstone Group, a global alternative asset manager and provider of financial advisory services, and a member of the board of directors of its general partner, Blackstone Group Management L.L.C. He was previously a director of Credit Suisse First Boston USA, Inc. Mr. James’s qualifications to serve on the Board include the knowledge and experience he has gained, and contributions he has made, during his tenure as a director of our Company and his broad-ranging experiences in the financial services industry, including senior leadership positions.

W. Craig Jelinek has been a director and President and Chief Operating Officer of the Company since February 2010. He will become2010, and Chief Executive Officer onsince January 1, 2012. Mr. Jelinek previously was President and Chief Operating Officer from February 2010 until January 2012, and was Executive Vice President in charge of merchandising sincebeginning in 2004. He spent the previous twenty years in various management positions in warehouse operations. Mr. Jelinek’s qualifications to serve on the Board include his extensive knowledge of our Company’s business developed over the course of his long career here, particularly in the areas of operations and merchandising.

Richard M. Libenson has been a director of the Company since October 1993.1993 and has served as a consultant to the Company since that time. He was a founder and director of The Price Company from its formation in 1976 until Octoberit merged with the Company in 1993, and was an executive officer of The Price Company from 1976 until October 1989. Mr. Libenson’s qualifications to serve on the Board include his roles as a long-serving consultant to the Company and his extensive knowledge of our Company’s business developed over the course of his long career here and with The Price Company.

John W. Meisenbach has been a director of the Company since its inception. He is President of MCM, A Meisenbach Company, a financial services company, which he founded in 1962. He also currently serves as a director of Expeditors International and M Financial Holdings. Mr. Meisenbach is a trustee of the Elite Fund, an investment company registered under the Investment Company Act of 1940. Mr. Meisenbach’s qualifications to serve on the Board include the knowledge and experience he has gained, and contributions he has made, during his tenure as a director of our Company, his service on the boards of other public companies, and his broad-ranging experiences in the insurance industry.

Charles T. Munger has been a director of the Company since January 1997. He is Vice Chairman of the Board of Directors of Berkshire Hathaway Inc., and Chairman of the Board of Directors of Daily Journal Corporation. Mr. Munger’s qualifications to serve on the Board include the knowledge and experience he has gained, and contributions he has made, during his tenure as a director of our Company, his service on the boards of other public companies, and his broad-ranging experiences in the areas of investments, finance, and insurance.

Jeffrey S. Raikes has been a director of the Company since December 2008. He has been the Chief Executive Officer of the Bill & Melinda Gates Foundation since September 2008. Mr. Raikes held several positions with Microsoft Corporation from 1981 to 2008, including President of the Business Division from 2005 to 2008. Mr. Raikes qualifications to serve on the Board include broad-ranging experiences, including senior leadership positions, in the areas of technology and marketing and at one of the country’s largest foundations.

Jill S. Ruckelshaus has been a director of the Company since February 1996. Ms. Ruckelshaus serves on the boards of various non-profit organizations. Previously she was a

director of Lincoln National Corporation. Her qualifications to serve on the Board include the knowledge and experience she has gained, and contributions she has made, during her tenure as a director of our Company, her service on the boards of other public companies, and her broad-ranging experiences in government and other public service.

James D. Sinegal was Chief Executive Officer of the Company until his retirement on December 31, 2011. He was also President until February 2010. He has continued to serve as a non-officer employee since January 1, 2012. Mr. Sinegal is a co-founder of the Company and has been a director since its inception. Mr. Sinegal’s qualifications to serve on the Board include his roles as a co-founder of the Company and Chief Executive Officer, his extensive career in the retail industry, and his extensive knowledge of our Company’s business developed over the course of his long career here.

No family relationship exists among any of the directors or executive officers. No arrangement or understanding exists between any director or executive officer and any other person pursuant to which any director was selected as a director or executive officer of the Company.

Committees of the Board

The Board of Directors has determined that each member of the Audit, Compensation and Nominating and Governance committees meets the NASDAQ Global Select Market listing standards regarding “independence” and that each member is free of relationships that would interfere with the individual exercise of independent judgment. Each committee has a written charter, which may be viewed at our website at http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-irhome. Directors deemed independent are Mses. Decker and Ruckelshaus and Messrs. Carson, Evans, Gates, James, Munger and Raikes, who constitute a majority of the Board of Directors. The non-executive directors of the Company meet in executive session presided over by the Lead Independent Director at no less than two meetings of the Board of Directors each year.

Audit Committee.    The functions of the Audit Committee include (among others):

The members of the committee are Messrs. Munger (chair), Evans and Ms. Decker. The Board of Directors has determined that Mr. Munger is an “audit committee financial expert” as defined by the rules of the Securities and Exchange Commission (“SEC”). The Audit Committee met eightseven times during fiscal 2011.2012. A report of the Audit Committee is set forth below.

Compensation Committee.    The Compensation Committee’s function is to review the salaries, bonuses and stock-based compensation provided to executive officers of the Company and to oversee the overall administration of the Company’s compensation and stock-based compensation programs. Except with respect to setting the compensation of the chief executive officer, the committee may delegate its authority to a subcommittee of the committee (consisting either of a subset of members of the committee or any members of the Board who would be eligible to serve on the committee). In addition, to the extent permitted by applicable law, the committee may delegate to one or more executive officers of the Company the authority to grant stock options and other stock awards to employees who are not executive officers or members of the Board. The committee has delegated certain authority to the Chief

Executive Officer and Chairman of the Board with respect to such awards not involving executive officers. See Compensation Discussion and Analysis below for a further description of the role of the committee. The members of the committee are Messrs. Carson (chair), Munger and Ms. Ruckelshaus. The committee met oncethree times during fiscal 2011.2012. A report of the committee is set forth below.

Nominating and Governance Committee.    The functions of the Nominating and Governance Committee are to identify and approve individuals qualified to serve as members of the Board of the Company, select director nominees for the annual meeting of shareholders, evaluate the Board’s performance, develop and recommend to the Board corporate governance

guidelines, and provide oversight with respect to corporate governance and ethical conduct. The members of the committee are Messrs. Evans and Gates (chair) and Ms. Ruckelshaus. The committee is authorized by its charter to engage its own advisors. The committee approved the nomination of the candidates reflected in Proposal 1. The committee met twofour times in fiscal 2011.2012. The Board is responsible for nominating members for election to the Board and for filling vacancies on the Board that may occur between annual meetings of shareholders. The committee is responsible for identifying, screening and recommending to the Board candidates for Board membership. When formulating its recommendations, the committee will also consider advice and recommendations from others as it deems appropriate.

The committee will consider shareholder recommendations for candidates to serve on the Board. In accordance with our Bylaws, the name of any recommended candidate, together with pertinent biographical information, a document indicating the candidate’s willingness to serve if elected, and evidence of the nominating shareholder’s ownership of Company stock should be sent to the Secretary of the Company. The Company may require additional information, as described in our Bylaws. Our Corporate Governance Guidelines provide that nominees for director will be selected on the basis of, among other things, knowledge, experience, skills, expertise, integrity, diversity, ability to make independent analytical inquiries, and understanding of the Company’s business environment, all in the context of an assessment of the perceived needs of the Board at the time. Nominees should also be willing to devote adequate time and effort to Board responsibilities. The Nominating and Governance Committee does not set specific, minimum qualifications that nominees must meet in order for the committee to recommend them to the Board, but rather believes that each nominee should be evaluated based on his or her individual merit, taking into account the needs of the Company and the composition of the Board.

We believe that the Company benefits from having directors with a diversity of viewpoints, backgrounds, and experiences. Currently, of the fourteen directors on the Board, two are women and one is African American. In addition, as discussed above, our directors bring a diversity of viewpoints and experiences as established leaders in important areas of business, academia, government service, and other public and non-profit service that we believe strengthens the Board’s ability to guide our Company. Pursuant to our Corporate Governance Guidelines, the Nominating and Governance Committee oversees a self-assessment of the Board’s performance every third year. The assessment seeks to identity specific areas, if any, in need of improvement or strengthening, including with respect to the diversity of our Board in terms of viewpoints, backgrounds and experiences.

Formal nomination of candidates by shareholders requires compliance with section 2.1 of the Bylaws. There is otherwise no formal process prescribed for identifying and evaluating nominees, except as described in the Corporate Governance Guidelines.

Corporate Governance Guidelines.    The Board of Directors has adopted Corporate Governance Guidelines, which may be viewed at www.costco.com through the Investor Relations page.

Board Structure.    The Corporate Governance Guidelines provide that the Board does not require the separation of the offices of the Chairman of the Board and the Chief Executive Officer and shall be free to choose its Chairman in any way that it deems best for the Company at any given point in time. Currently the positions of Chairman and Chief Executive Officer are filled separately. The Board believes that this structure is appropriate for the Company at this time. As a co-founder of the Company, Mr. Brotman has played a critical role in the growth of the Company, and his role as Chairman will be complemented by the role of Mr. Jelinek as

president and chief executive officer and a more active participant in day to day management of the Company. In addition, the Board believes that it obtains effective additional board leadership through the role of the Lead Independent Director, currently filled by Hamilton E. James. The Lead Independent Director presides over executive sessions of the Board and otherwise facilitates communication among senior management and the non-employee directors.

The Role of the Board in Risk Oversight.    One of the Board’s functions is to oversee the ways in which management deals with risk. The Board seeks to ensure that management has in place processes for dealing appropriately with risk. It is the responsibility of the Company’s senior management to develop and implement the Company’s short- and long-term objectives and to identify, evaluate, manage and mitigate the risks inherent in seeking to achieve those objectives.

Management is responsible for identifying risk and risk controls related to significant business activities and Company objectives, and developing programs to determine the sufficiency of risk identification, the balance of potential risk to potential reward, the appropriate manner in which to control risk, and the support of the risk-controlling behavior and the risk to Company strategy. The Board implements its risk oversight responsibilities primarily through the Audit Committee, which receives management briefing on the potentially significant risks that the Company faces and how the Company is seeking to control risk where appropriate. The Audit Committee also oversees issues related to internal control over financial reporting. In more limited cases, such as with risks of significant new business concepts and substantial entry into new markets, risk oversight is addressed as part of the full Board’s engagement with the chief executive officer and management. Board members also often discuss risk as a part of their review of the ongoing business, financial, and other activities of the Company. The Board also has overall responsibility for executive-officer succession planning and reviews succession plans each year. The Nominating and Governance Committee also exercises oversight regarding risks associated with corporate governance matters and certain issues relating to the Company’s ethics and compliance programs.

Compensation of Directors

The following table summarizes information regarding director compensation for the non-employee directors of the Company for fiscal 2011.2012.

the RSUs granted to each non-employee director in 2011.2012. The grant-date fair value is calculated as the market value of the common stock on the grant date less the present value of the expected dividends forgone during the vesting period. These amounts thus do not reflect the amount of compensation actually received by the non-employee directors during the fiscal year. For a description of the assumptions used in calculating the fair value of equity awards, see Note 1 of our financial statements in our Form 10-K for the year ended August 28, 2011.September 2, 2012.

Each non-employee director earns $30,000 per year for serving on the Board and $1,000 for each Board and committee meeting attended. Directors are reimbursed for travel expenses incurred in connection with their duties.

Each non-employee director receives an annual grant of 3,000 restricted stock units (“RSUs”) near the beginning of the fiscal year. These RSUs vest one-third annually, beginning on the first anniversary of the date of grant. RSUs granted after September 29, 2006, are subject to accelerated vesting upon the director’s retirement: 50% after five years of service and 100% after ten years of service. In 2006 the equity portion of the director compensation program was revised to replace stock options with RSUs, consistent with the change made for employees. The compensation for non-executive directors was last adjusted in fiscal 2006 and was not reevaluated this fiscal year. In fiscal 2009, the Board adopted guidelines requiring non-executive directors to own and maintain at least 6,000 shares of Company stock by April 2014 or within five years of joining the Board.

As of the end of fiscal 2011,2012, non-employee directors held the following shares and outstanding equity awards:

Pursuant to indemnification agreements previously approved by the Company’s shareholders, in connection with the derivative actions relating to stock options and with the approval of the Board, the Company in fiscal 2011 paid on behalf of non-executive directors and executive officers approximately $133,000 and $44,000 respectively, in attorneys’ fees and costs.

Shareholder Communications to the Board

Shareholders may contact an individual director, the Board as a group, or a specified Board committee or group, including the non-employee directors as a group, at the following address: Corporate Secretary, Costco Wholesale Corporation, 999 Lake Drive, Issaquah, WA 98027 Attn: Board of Directors. The Company will receive and process communications before forwarding them to the addressee. Directors generally will not be forwarded shareholder communications that are primarily commercial in nature, relate to improper or irrelevant topics, or request general information about the Company.

Meeting Attendance

During the Company’s last fiscal year, the Company’s Board of Directors met fourfive times. Each member of the Board attended 100% of the Board meetings and meetings of the committees on which he or she served, with the exception of Mr. Jelinek,Messrs. James, Raikes, and Meisenbach, who each missed one Board meeting. As set forth in our Corporate Governance Guidelines, directors are invited and encouraged to attend meetings of shareholders. NineAll directors except one attended the Annual Meeting of Shareholders in 2011.2012.

PRINCIPAL SHAREHOLDERS

The following table sets forth information regarding ownership of the common stock by each person known to the Company to own more than 5% of the outstanding shares of the common stock on November 21, 2011.23, 2012.

The following table sets forth the shares of the common stock owned by each director of the Company, each nominee for election as a director of the Company, the executive officers named in the Summary Compensation Table, and all directors and executive officers as a group on November 21, 2011.23, 2012.

(7)(6)

Includes 9,6001,979 shares held by a trust of which Mr. Evans is a trustee.

Equity Compensation Plan Information

(at Fiscal Year-End)

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Following is a discussion and analysis of our compensation programs as they apply to our Chief Executive Officer, the Chairman of the Board of Directors, the Chief Financial Officer, and the three other most highly compensated individuals who were serving as executive officers at the end of fiscal 20112012 and our former Chief Executive Officer (the “Named Executive Officers”). Our Named Executive Officers for fiscal 20112012 were: W. Craig Jelinek, President and Chief Executive Officer;

James D. Sinegal, Former Chief Executive Officer; Jeffrey H. Brotman, Chairman of the Board; W. Craig Jelinek, President and Chief Operating Officer; Richard A. Galanti, Executive Vice President, Chief Financial Officer; Joseph P. Portera, Executive Vice President, COO-Eastern and Canadian Divisions; and Dennis R. Zook, Executive Vice President, COO-Southwest and Mexico Divisions.

Compensation Philosophy and Objectives

Our compensation programs are designed to motivate our executives and employees to continue to feel part of the Company and to participate in the growth of our business. Historically, the Company believes it has been very successful in attracting and retaining quality employees, achieving low turnover in our executive, staff and warehouse management ranks. In addition, in the judgment of the Compensation Committee (the “Committee”), the Company’s compensation programs have historically contributed to the financial and competitive success of the Company. Accordingly, the Committee believes that it has been desirable to continue compensation programs that have been persistent features at the Company for a number of years.

At the 2012 Annual Meeting, the advisory shareholder vote on executive compensation was 98% in favor. The Committee considered the results of the 2012 advisory shareholder vote and determined not to make any changes to our compensation programs in response to the vote. The compensation levels approved by the Committee for the Named Executive Officers for fiscal 20112012 are not materially changed from those approved for the prior year, except for the increase in RSUs granted to Mr. Jelinek in connectionchanges associated with his promotion tothe Chief OperatingExecutive Officer and the decrease in RSUs granted to Mr. Sinegal at his request. The Committee established the elements of executive compensation for fiscal 2011 in the fall of 2010, before the advisory shareholder vote on executive compensation in January 2011. The Committee gave final approval to the actual fiscal 2011 compensation levels in October 2011. At that time, the Committee noted the results of the advisory shareholder vote, with over 98% of votes cast in favor, and that vote has not caused the Committee to recommend any changes to our compensation policies.transition.

Role of the Compensation Committee

The Committee determines the amounts and elements of compensation for our Chief Executive Officer and Chairman. For other executive officers, it reviews the recommendations of the Chief Executive Officer, with which it generally agrees. The Committee’s function is more fully described above, under “Committees of the Board — Compensation Committee.”

During fiscal 2011,2012, the Committee consisted of Dr. Carson (chair), Mr. Munger and Ms. Ruckelshaus. The Committee has authority under its charter to engage compensation consultants but has not used consultants of any kind.any. The Committee’s primary activity occurs in the fall, following the close of the fiscal year, when the Committee: (i) approves grants of RSUs, including performance targets for RSUs granted to executive officers; (ii) determines whether performance targets have been satisfied for RSUs granted during the prior fiscal year; (iii) approves total compensation levels for executive officers for the fiscal year just concluded, including any salary increases and cash bonuses, and (iv) approves the executive officer cash bonus plan for the current fiscal year.

Elements of Compensation

The components of our executive compensation programs are equity compensation (since fiscal 2006 consisting solely of RSUs), base salary, a discretionary cash bonus program, and other benefits (primarily consisting of health plans, a 401(k) plan and a deferred compensation plan) and modest perquisites. The Committee believes that these components are appropriate and are consistent with the Company’s long-standing approach to executive compensation, which has made equity awards the dominant form of compensation.

The Committee did not extensively reevaluate this year whether there is an optimal mix of equity, salary, bonus and other compensation components for each executive officer. Rather, it relied upon the fact that the current structure has been utilized successfully in years past and gave

more particular attention to the incremental changes in the components of the mix and the value of the total compensation packages.

RSUs.    RSU grants represent the largest component of compensation, based on their fair value at the time they are granted. The Committee believes that emphasizing this form of compensation above others helps to align the interests of employee-grantees with those of shareholders, both in the short term (with the performance conditions) and in the longer term (with time-vesting of up to five years, subject to earlier vesting for long service, as described below). To a lesser extent, the Committee also takes into account that longer-term vesting requirements can help promote executive retention.

Base salary.    Base salary is the second largest compensation component. Payment of fixed cashThis compensation is consistent with the need for executive officers to have a predictable level

of cash compensation, which has been subject generally to modest annual adjustments (with the exception of Messrs. Sinegal andMr. Brotman, whose salaries havesalary has remained at the same level since 1999)1999, and Mr. Sinegal, whose salary remained the same from 1999 until he stepped down from the role of CEO in 2012, at which point his salary was reduced; in both cases they received slightly higher amounts in fiscal years with 53 weeks, including fiscal year 2012).

Cash bonus.    Discretionary cash bonuses are and have been a relatively small component of compensation. They address short-term incentives and are linked to performance during the fiscal year. Historically, at least some portion of the cash bonuses has been paid each year. The Committee believes that maintaining cash bonuses as a modest element of compensation is consistent with preferring long-term equity incentives as being in the greater interest of the Company and its shareholders.

Executive base salaries and cash bonuses are, in the Committee’s view, low compared to the other companies in our peer group, described below under “Peer Companies.”

Other elements and perquisites.    Consistent with its position as a low-overhead operator, the Company has traditionally sought to have modest perquisites and “other compensation.” A significant component of this compensation is related to helping executives fund their retirement needs (through the 401(k) plan and the deferred compensation plan), recognizing that the Company does not have a traditional retirement plan and that no executive has any agreement to receive severance compensation.

The foregoing components of compensation combine a mix of incentives that are intended to create rewards for shorter-term (twelve months) and longer-term performance (five years and beyond). Shorter-term incentives come primarily from the initial award of RSUs being subject to achievement of at least one one-year performance metric and, to a significantly lesser extent, discretionary cash bonuses that are subject to a mix of one-year performance metrics. Longer-term incentives come primarily from the vesting over five years of RSU awards, and, to a lesser extent, share ownership requirements for executive officers, and vesting elements in certain benefit plans (such as the deferred compensation plan and 401(k) retirement plan matches).

The Committee believes that the executive compensation programsthese elements do not promote unreasonableness in risk-taking behavior. The value of short-term incentives (including cash bonus awards with caps and performance conditions for awards of RSUs) is substantially exceeded by long-term incentives (including equity awards that vest over up to five years) and share ownership guidelines, which the Committee believes reward sustained performance that is aligned with shareholder interests.

Peer Companies

For fiscal 2011,2012, the Committee considered executive compensation data obtained from proxy statements for the following peer companies: Wal-Mart Stores, Inc., The Home Depot, Inc., Target Corporation, The Kroger Company, and Lowe’s Companies. This peer group is the same group as was used for fiscal 2011, except that The Kroger Company was added to replace BJ’s Wholesale Club, Inc., and Lowe’s Companies (BJ’s Wholesale Club was taken privatewhich ceased to be a publicly traded company in September 2011 so public data concerning it were more limited).2011. These companies were selected because they all are recognized as successful retailers and twoone of them representrepresents the two other major membership warehouse operators.operator. In utilizing the comparative data, the Committee took into account that one of the companies is substantially larger than the Company. The Committee doesdid not use the comparable company data to set mid-points or other specific quantitative comparisons of executive compensation — it has used them only for general reference.

Equity Compensation

If fully earned based upon the achievement of performance targets and when fully vested, equity compensation is the largest component of compensation for executive officers. During fiscalIn 2006, the Board of Directors determined to replace allthe stock option awardsaward program with awards of RSUs. Since fiscal 2009, RSU grants to all executive officers have been performance based,performance-based, with performance-vesting over a one-year period, time-vesting over five years, and vesting for long service contingent upon the executive’s maintaining employment status at the vest date. The Board and the Committee believe that the five-year vesting requirement helps to foster motivation on the part of employees to improve the operations of the Company over the longer term. Following satisfaction of performance targets, RSUs become time-vested RSUs that, in the absence of accelerated vesting for long service (described below) vest 20% upon the first anniversary of the grant date (following the determination by the Committee that the performance criteria have been satisfied) and 20% vest over each of the ensuing four years. (Vesting of RSUs awarded to non-executive officers and employees is not performance based.) To the extent time vestingtime-vesting requirements are met, RSUs are settled and paid in shares of common stock (net of shares withheld for tax purposes). Recipients are not entitled to vote or receive dividends on unvested and undelivered RSUs.

Beginning in fiscal 2009, all officers and employees who receive RSU grants are eligible forreceive accelerated vesting prior to termination if they have achieved long service with the Company (33% vesting credited on the first anniversary of the date of grant after 25 years of service, 66% vesting after 30 years of service, and 100% vesting after 35 years of service, with any remainder vesting ratably over the remaining vesting period). Interim vesting for long-servicelong service can occur in the case of certain terminations for RSU grants prior to 2009.

The Board adopted in July 2008 a fixed date of October 22 for RSU grants.The policy allows for exceptions as approved in advance by the Committee. For fiscal 2011, RSU grants were made on October 22, 2010, and the performance criteria for the performance-based grants were established in November 2010. The criteria were a 2%4% increase (versus fiscal 2010)2011) of total sales or pretax income (with both measures based on local currency). For Mr. Sinegal, the criteria were a 3% increase (versus fiscal 2010) in total sales or pretax income (with both measures based on local currency). After the end of fiscal 2011,2012, the Committee determined that both goals were achieved. Accordingly, the executive officers earned all of the RSUs granted, subject to time-based and long-service vesting. All executive officers received accelerated vesting for long service for a portion of these RSUs, with a further time-based vesting occurring on the first anniversary of the grant.

The Board adopted in July 2008 a fixed date of October 22 for RSU grants.The policy allows for exceptions as approved in advance by the Committee. For fiscal 2012, RSU grants were made on October 22, 2011 (with the exception of the grant to Mr. Liebenson in April 2012, see note 3 on page 9), and the performance criteria for the grants were established in November 2011.

All RSU awards in fiscal 20112012 were made under the Company’s Fifth Restated 2002 Stock Incentive Compensation Plan, approved by the Company’s shareholders and the only equity plan maintained by the Company.

Other Compensation

The Company provides the Named Executive Officers with the benefits offered to all other employees in most respects. The cost of these benefits constitutes a small percentage of each executive’s total compensation. Key benefits include paid vacation, premiums paid for long-term disability insurance, a matching contribution and a discretionary 401(k) plan contribution, and the payment of premiums for health insurance and basic life insurance. In addition, the Company has a nonqualified deferred-compensation plan for the benefit of certain highly compensated employees, including the Named Executive Officers. The plan provides that a certain percentage of an employee’s contributions may be matched by the Company, subject to certain limitations. This match will vest over a specified period of time. The Company does not maintain a pension plan or post-retirement medical plan for any Named Executive Officer. The Company also provides the Named Executive Officers with certain perquisites, including a car allowance. The Committee believes the benefits and perquisites are modest and consistent with its overall objective of attracting and retaining highly qualified executive officers.

Compensation of the Chief Executive Officer and the Chairman of the Board

In addition to considering the Company’s compensation policies generally, the Committee reviews executive compensation and concentrates on the compensation packages for the Chief Executive Officer and the Chairman, believing that these roles are particularly critical to the continued success of the Company. Near the beginning of fiscal 2011,2012, the Committee approved a written employment contractcontracts for Mr. Sinegal whichand Mr. Jelinek, related to their service during fiscal 2012 as Chief Executive Officer. The contract term for Mr. Sinegal was the same as his contract for the priorperiod of time from the beginning of the fiscal year through December 31, 2011. The contract term for Mr. Jelinek was for January 1, 2012 through the end of the fiscal year. The contract term was for the fiscal year, unless otherwise terminated earlier in accordance with its terms. Itagreements provided for Mr. Sinegal to get a pro rata portion of his annual base salary of $350,000. It$350,000, and Mr. Jelinek to receive a pro rata portion of his annual base salary of $650,000 based on their months of service as chief executive officer during fiscal 2012. The agreements further provided for both Mr. Sinegal and Mr. Jelinek to get a ratable share of a cash bonus of up to $200,000, determined by the Board or the Committee, and an RSU award determined by the Board or the Committee. The Company had the right to terminate Mr. Sinegal for cause, and he had the right to terminate the agreement on 60 days’ notice. Mr. Brotman, who is an executive chairman, does not have an employment agreement with the Company. Generally, the Committee has withtreated Mr. Brotman similarly to the agreement of Messrs. Brotman and Sinegal, treated them similarlyChief Executive Officer for compensation purposes, owing to the similarities in their historical and current contributions to the success of the Company, except that this year Mr. Sinegal, at his request, received a smaller RSU grant.purposes. Apart from the change-in-control provision in the Company’s equity plan applicable to all grantees (described below under “Potential Payments Upon Termination or Change-in-Control”), neither Mr. none of Messrs.��Brotman, nor Mr. Sinegal, or Jelinek has any severance or change-in-control arrangement with the Company (nor does any other employee).

For fiscal 2011,2012, the Committee granted 50,000 performance-based RSUs to Mr. Brotman, the same number granted for the prior fiscal year. Mr. Jelinek was granted 50,000 performance-based RSUs, consistent with the amount granted to Mr. Sinegal requested thatin his award be reducedrole as CEO, prior to fiscal 2011, when Mr. Sinegal, at his own request, received a smaller grant of 25,000 performance-based RSUs. For fiscal 2012, Mr. Sinegal was awarded 8,333 RSUs (one-third of his prior year grant of 25,000 shares, andin proportion to the committee acceded to that request.amount of time during fiscal 2012 which he served as CEO). The Committee determined after the end of the fiscal year that the performance criteria were met, and all of the RSUs were earned, subject to further time vestingtime-vesting and accelerated vestingaccelerated-vesting for long service.

The base salaries of Messrs.Mr. Brotman and Mr. Sinegal have been $350,000 since fiscal 1999. For fiscal 2012, Mr. Sinegal received a lower salary than in prior years as a result of stepping down as Chief Executive officer on December 31, 2011. Mr. Jelinek received a base salary of $650,000 for fiscal 2012. Cash bonuses have generally been capped at no more than $200,000 since fiscal 1997. Mr. Brotman was awarded a cash bonus of $198,820 in fiscal 2012, while Mr. Jelinek

received a cash bonus of $168,233, and Mr. Sinegal received $65,022, amounts that were determined in part according to their length of service in their respective roles during the year. The bonus amounts for Messrs. Brotman, Jelinek, and Sinegal each were awarded cash bonuses of $198,400 in fiscal 2011. There are no fixed criteria applieddetermined by the Committee as follows: (1) half of bonus eligibility was determined by whether the Company had achieved its pre-tax income goal, which was achieved in consideringfiscal 2012; (2) eligibility for the remaining half was determined by applying a percentage representing the amount of these bonuses. Generally, Mr. Sinegal recommends to the Committee the bonus he believes is appropriate. Historically, he has recommended modest amounts, seeking to link his bonus (as a percentage of that eligible amount stated in his employment contract) to bonuses earnedreceived by employees generally eligible for the bonuses. This year, the Company attained its internal net income goal and employees were eligible to receive the bonus award component associated with this goal (roughly 50% of the bonus potential). Mr. Sinegal recommended to the Committee bonus amounts for other

executive officers that were approximatelyin comparison to their bonus eligibility (approximately 99% of target amounts, inclusive of the net income goal; he requested a bonus for himself of approximately 99% of his eligible amount. Accordingly, Mr. Sinegal requested a bonus of $198,400 of the $200,000 eligible amount in his employment agreement.). The Committee approved this request and approved an equal award for Mr. Brotman.

The Committee observed that cashcriteria governing bonuses paid to chiefthese executive officers at some peer companies are substantially higher. The Committee, however, wishes to respect Mr. Sinegal’s desire to receive modest compensation, in part because it believes that higher amounts would not change Mr. Sinegal’s motivation and performance. The Committee has indicated in the past and continues to believe that Messrs. Brotman and Sinegal are underpaid. The Committee has also noted that Messrs. Brotman and Sinegal have for many years had direct and indirect economic interests in shareholdings of the Company, which further align their interests with the Company’s shareholders.described below.

Compensation of Other Named Executive Officers

As noted above, the most significant component of the compensation of the Named Executive Officersin fiscal 2012 is the award in fiscal 2011 of performance-based RSUs. RSU amounts awarded to Messrs. Galanti, Jelinek, Portera and Zook were 25,000 40,000, 25,000 and 25,000, respectively.each. The amounts awarded were based on the recommendations of Mr. Sinegal and were the same amounts as awarded in fiscal 2010, except for Mr. Jelinek. The award for Mr. Jelinek was increased as a result of his new role as Chief Operating Officer.2011. As noted above, the performance criteria were attained and the Named Executive Officers earned all of the RSUs granted, subject to further time vestingtime-vesting and accelerated vestingaccelerated-vesting for long service as described above.

Salaries for other Named Executive Officers were based upon the recommendation of Mr. Sinegal,Jelinek, who focused on the amount of increase deserved over the prior year’s salary level. SalaryBase salary levels increased up to 7.5%3.8% over fiscal 2010.2011 after adjusting for the length of the fiscal years (fiscal 2012 salaries actually increased up to 5.8% vs. fiscal 2011 as a result of the 53-week fiscal 2012 as compared to the normal 52-week fiscal year).

The Named Executive Officers (other than Messrs. Brotman, Sinegal and Sinegal)Jelinek) received discretionary cash bonuses ranging from approximately $79,000 to approximately $99,000, increased from$89,000, relatively flat as compared to the prior year. Bonus criteria were approved by the Committee in early fiscal 2011,2012, based upon the recommendation of Mr. Sinegal. After the close of the fiscal year, Mr. SinegalJelinek recommended bonus amounts to the Committee of approximately 99%95-110% of target amounts (which ranged from $80,000 to $100,000)the targeted amount ($80,000). The Committee maintains the discretion to vary from Mr. Sinegal’sthe Chief Executive Officer’s recommendation but historically has deferred to it, as it did this fiscal year. As with all other employees, roughly 50% of the bonus potential was achieved due to the Company’s attainment of its internal netpre-tax income target. For fiscal 2011,2012, eligibility for the bonus portion not associated with the Company’s netpre-tax income target was determined based on goals relevant to the executive officer’s area of responsibility: for those whose responsibilities are operational, the goals related to sales, controllable expenses, inventory shrinkage, and pretax profit in their areas of responsibility; for those whose responsibilities are primarily buying, the goals related to sales, gross margin, inventory shrinkage, and inventory turns in their areas of responsibility; for those whose responsibilities combine operational and buying functions, the goals related to a combination of those described above; and for those whose responsibilities are staff functions, the goals related to a combination of Company-wide operational and buying goals, in addition to qualitative factors relevant to their areas of responsibilities.responsibility. For each officer there is also a component not linked to any objective measure. Neither Mr. Sinegal nor Mr. Jelinek is not bound to recommend any specific bonus amount based on these factors; hethey can and doesdo consider what he believesthey believe to be the appropriate bonus in view of all the circumstances. To be eligible for the annual bonus, the individual must be employed by the Company and in the same or similar executive-level position at the time bonus checks are issued (historically in November).

Stock Ownership Guidelines

In fiscal 2009, the Company adopted stock ownership requirements for executive officers. By January 2010, all executive officers were required to own and maintain at least 12,000 shares of common stock. All executive officers are in compliance with this requirement.

Impact of Tax Considerations

The Committee examined the equity compensation in light of the impact of Section 162(m) of the Internal Revenue Code, which generally prohibits any publicly held corporation from taking a federal income tax deduction for compensation paid in excess of $1 million in any taxable year to the Named Executive Officers (other than the Chief Financial Officer), subject to certain exceptions for performance-based compensation (i.e., compensation paid only if an individual satisfies objective performance goals that the Committee has established in advance based on performance criteria approved by shareholders). RSUs granted to our Named Executive Officers are intended to satisfy the performance-based exception. In approving compensation types and levels, the Committee considers whether particular elements of that compensation will be deductible for federal income tax purposes. It retainsreserves the ability to approve what it believes to be appropriate compensation, even if the Company may not be able to deduct all of that compensation under federal tax laws.

Conclusion

The Committee believes that each element of compensation and the total compensation provided to each of the Named Executive Officers is reasonable and appropriate. The value of the compensation payable to the Named Executive Officers is significantly tied to the Company’s performance and the return to its shareholders. The Committee believes that its compensation programs will allow the Company to continue to attract and retain a top-performing management team.

Report of the Compensation Committee of the Board of Directors

The Compensation Committee of the Company’s Board of Directors has submitted the following report for inclusion in this Proxy Statement:

The Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based on the review and discussions with management, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended August 28, 2011,September 2, 2012, for filing with the SEC.

The foregoing report is provided by the following directors, who constituted the Committee during fiscal 2011.2012.

Benjamin S. Carson, Sr., M.D., Chair

Charles T. Munger

Jill S. Ruckelshaus

Summary of Compensation

The following table sets forth information regarding compensation for each of the Named Executive Officers for fiscal 2012, 2011, 2010, and 2009.2010.

SUMMARY COMPENSATION TABLE

FISCAL 20112012 ALL OTHER COMPENSATION

The following table provides information regarding grants of performance-based RSUs during fiscal 20112012 to each of the Named Executive Officers.

FISCAL 20112012 GRANTS OF PLAN-BASED AWARDS

The following table sets forth information regarding outstanding stock options and unvested stock awards held by each of the Named Executive Officers as of August 28, 2011.September 2, 2012.

OUTSTANDING EQUITY AWARDS AT FISCAL 20112012 YEAR-END