Strategic Organizing Center Comments on Starbucks’ Recent Efforts to Reframe its Track Record of Human Capital Mismanagement
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Insights
The recent actions by Starbucks, such as forming a new Board committee and reengaging with Workers United, signal a strategic pivot in the company's approach to labor relations. The creation of a report on labor practices and the nomination of director candidates with expertise in human capital management suggest a shift towards more proactive and potentially conciliatory labor strategies. This could lead to improved employee relations and productivity, which are critical components for maintaining a positive brand image and operational efficiency.
However, the volume of complaints issued by the NLRB indicates systemic issues within Starbucks' labor practices. Persistent legal challenges and negative public perception could result in financial repercussions due to legal costs, potential strikes, or boycotts. Investors should monitor the effectiveness of the new governance reforms in mitigating these risks.
Acknowledgement of governance shortcomings by Starbucks, as evidenced by its own report and the NLRB's actions, underscores the importance of robust oversight mechanisms. The board's composition and the expertise of its members, particularly in human capital management, are crucial for navigating labor relations and regulatory compliance. The nomination of three independent candidates by the SOC reflects a push for enhanced governance that could lead to more effective risk management and strategic decision-making.
For shareholders, the potential for improved governance practices may translate into long-term value creation. However, the immediate implications of such reforms, including their impact on the company's legal and regulatory standing, are yet to be seen. The market's response to these developments will be contingent on the tangible improvements in Starbucks' labor relations and the avoidance of further legal entanglements.
The SOC's involvement in nominating board candidates with expertise in labor issues is indicative of the increasing influence of labor unions and employee advocacy groups on corporate governance. The proactive steps taken by Starbucks, such as engaging in negotiations with Workers United and addressing shareholder proposals, are aimed at mollifying labor tensions.
From a labor relations perspective, the success of these initiatives will hinge on their ability to foster genuine dialogue and create a more collaborative environment between management and employees. This could potentially lead to a more stable and motivated workforce, which is essential for customer-facing businesses like Starbucks. However, the sheer number of NLRB complaints raises questions about the effectiveness of past practices and the challenges ahead in reforming the company's labor relations.
Believes Starbucks’ series of labor-related promises and governance reforms represent a clear acknowledgment that change is needed and that the Board’s oversight of human capital strategy must improve
SOC recently nominated three independent candidates for the Starbucks Board with relevant experience to enhance human capital management practices, facilitate constructive outcomes for labor issues and oversee engagement with policymakers and regulators
The SOC is a coalition of labor unions, including the Service Employees International Union (“SEIU”). The SOC-affiliated unions represent more than 2.3 million union members.
Today, the SOC stated:
“Since the SOC made clear its intention to nominate directors for election to Starbucks’ Board at the upcoming Annual Meeting, the Company has issued numerous announcements related to its purported commitment to improving relations with its employees. These have included the formation of a new Board committee, a public letter to Workers United seeking to reengage negotiations and a letter to shareholders regarding the proposal that received majority support at the 2023 Annual Meeting of Shareholders asking for a report on Starbucks’ labor practices.
While the optimistic view would be to see some of these steps as encouraging, the reality is that we will only be able to judge their significance based on what the current Board does, not what it says.
The timing of this flurry of activity is also not a coincidence. While we recognize some of these announcements may have been in the works prior to the Company becoming aware of the SOC’s decision to put forward directors, we believe this level of response, in the aggregate, represents a clear acknowledgment that the Board’s oversight of its human capital strategy has been severely misguided and that even Starbucks recognizes that change is needed.
Notably, Starbucks’ own report, released on December 13, 2023, states that the Company did not understand or give consideration to its labor rights commitments in the context of recent organizing. The report repeatedly references Starbucks’ weak governance during the emergence of union organizing activity in 2021 and contains myriad examples of the Company’s actions allegedly taken in opposition to workers’ organizing, which resulted in adverse Administrative Law Judge decisions. Ironically, on the same day as the report’s release, the National Labor Relations Board (“NLRB”) – the federal agency responsible for protecting workers’ rights – issued a complaint alleging that Starbucks unlawfully closed 23 union and non-union stores across the country.2 The NLRB ordered the Company to immediately reopen these stores and make workers whole, among other measures.
Since November 2021, the NLRB has issued over 120 complaints against Starbucks, covering about 420 charges of violating federal labor law. We believe the current Board’s failure to properly oversee the Company’s response to these and other human capital-related issues has directly increased operational, legal and reputational risks for Starbucks over the past several years.
If Starbucks and its Board are truly serious about repairing the relationship with the Company’s workers and beginning to undo the damage to the value of its brand, the SOC believes our candidates have the experience to help. Our nominees – Maria Echaveste, Hon. Joshua Gotbaum and Wilma Liebman – can bring fresh perspectives and the right experience enhancing human capital management practices, facilitating constructive outcomes for labor issues and successfully engaging with policymakers and regulators. These are the skillsets urgently needed on the Board to help safeguard the best interests of Starbucks’ shareholders, customers and employees. For more on our nominees, including their full biographies, see here.
Ultimately, we hope the Board is sincere about wanting to strengthen ‘Starbucks’ governance framework’ and reset its relationship with its employees.3 However, as the Company’s own actions make clear, the status quo is not working.”
DISCLAIMER
This material does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein in any state to any person. In addition, the discussions and opinions in this press release and the material contained herein are for general information only, and are not intended to provide investment advice. All statements contained in this press release that are not clearly historical in nature or that necessarily depend on future events are “forward-looking statements,” which are not guarantees of future performance or results, and the words “will,” “anticipate,” “believe,” “expect,” “potential,” “could,” “opportunity,” “estimate,” and similar expressions are generally intended to identify forward-looking statements. Any projected results and/or statements contained in this press release that are not historical facts are based on current expectations, speak only as of the date of this press release and involve risks that may cause the actual results to be materially different. Certain information included in this press release is based on data obtained from sources considered to be reliable. No representation is made with respect to the accuracy or completeness of such data, and any analyses provided to assist the recipient of this press release in evaluating the matters described herein may be based on subjective assessments and assumptions and may use one among alternative methodologies that produce different results. Accordingly, any analyses should also not be viewed as factual and also should not be relied upon as an accurate prediction of future results. Any figures are unaudited estimates and subject to revision without notice. The SOC disclaims any obligation to update the information herein and reserve the right to change any of their opinions expressed herein at any time as they deem appropriate. Past performance is not indicative of future results.
IMPORTANT INFORMATION
The SOC, the SEIU, Mary Kay Henry, Ahmer Qadeer, Michael Zucker, Maria Echaveste, Joshua Gotbaum, and Wilma B. Liebman (collectively, the “Participants”) intend to file a definitive proxy statement and accompanying proxy card (the “Proxy Statement”) with the SEC to be used to solicit proxies in connection with the 2024 annual meeting of shareholders (the “Annual Meeting”) of Starbucks Corporation (the “Company”). All shareholders of the Company are advised to read the Proxy Statement and other documents related to the solicitation of proxies, each in connection with the Annual Meeting, by the Participants when they become available, as they will contain important information, including additional information related to the Participants. The Proxy Statement and an accompanying BLUE proxy card will be furnished to some or all of the Company’s stockholders and will be, along with other relevant documents, available at no charge on the SEC website at http://www.sec.gov.
Information about the Participants and a description of their direct or indirect interests by security holdings or otherwise is contained in Exhibit 1 to the Schedule 14A filed by the Participants with the SEC on December 19, 2023. This document is available free of charge from the sources described above.
1 Relevant Company announcements and statements include: (i) press release, dated November 20, 2023, “Starbucks Announces Intention to Establish New Environmental, Partner and Community Impact Board Committee Focused on Oversight of Stakeholder Promises”; (ii) letter, dated December 8, 2023, “Message from Sara: Our Outreach to Resume Contract Bargaining with Workers United”; (iii) letter, dated December 11, 2023, “Letter from Starbucks ceo: Affirming what we stand for”; and (iv) statement, dated December 13, 2023, “Starbucks Reaffirms Its Commitment to the Principles of Freedom of Association and the Right to Collective Bargaining.”
2 NLRB complaint filed December 13, 2023 (see complaint here).
3 The Company’s “Abridged Report to Starbucks Board of Directors Concerning Starbucks’ adherence to freedom of association and collective bargaining commitments in its Global Human Rights Statement” (see full report here).
View source version on businesswire.com: https://www.businesswire.com/news/home/20231220488892/en/
Investor Contact
Okapi Partners
Bruce Goldfarb / Pat McHugh, (212) 297-0720
info@okapipartners.com
Media Contacts
Longacre Square Partners
soc-sbux@longacresquare.com
Source: The Strategic Organizing Center
FAQ
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