I'd be more likely to assume that it's a really great one, where folks like and trust each other enough that they can give each other crap like this and everyone understands and appreciates it, like good friends trash-talking each other on the basketball court. I've thought for years that the way you can tell acquaintances have become friends is if they start insulting each other.
Or, as you say, it could be a really horrible environment - but I don't think you can tell from one anecdote.
Considering how many people love telling this story, both within and outside of Costco, I think it's more the former than the latter. One way you can tell is that the COO, who was cursed at in this story, later succeeded Sinegal as the CEO and, in fact, has gone on record defending that hot dog price many times.
I'm curious about how the story ends, did they cut the cost of making the hot dog, continue losing money on it, or give up and raise the price?
They manufactured their own hot dog manufacturing plant:
> "What we figured out we could do is build our own hot dog-manufacturing plant (in Los Angeles) and make our own Kirkland Signature hot dogs. Now we are doing so much hot dog business that we’ve opened up another plant in Chicago. By having the discipline to say, ‘You are not going to be able to raise your price. You have to figure it out,’ we took it over and started manufacturing our hot dogs. We keep it at $1.50 and make enough money to get a fair return."
https://www.425business.com/news/costco-ceo-craig-jelinek-on...
Ah, vertical integration.