Strategic Organizing Center Submits Letter to SEC Calling on Starbucks to Properly Disclose True Cost of Anti-Union Campaign
- None.
- Starbucks faces potential financial repercussions due to undisclosed costs and liabilities estimated at $240 million related to anti-union efforts.
- Shareholders may experience negative impacts on voting decisions and financial outcomes due to Starbucks' lack of transparency regarding costs and liabilities.
- Starbucks' aggressive anti-union tactics have led to significant costs and liabilities that have not been fully disclosed to shareholders, potentially affecting shareholder value.
Insights
The disclosure by the Strategic Organizing Center (SOC) regarding Starbucks' estimated $240 million in costs related to anti-union activities presents a significant concern for shareholders. This figure encompasses not only direct legal fees and consultant costs but also the less tangible, though no less impactful, costs associated with lost employee productivity. Such expenditures, if accurate, could materially affect Starbucks' financial statements and, consequently, its stock valuation.
From a financial perspective, the magnitude of these costs—should they be required to be recognized on the financial statements—could lead to a restatement of past earnings and impact future profitability. This is particularly relevant as these costs represent a non-recurring expense that does not contribute to the company's growth but rather is a defensive measure. The ongoing rate of $815,000 per week in illegally denied wages and tips further suggests a continuous drain on resources that could otherwise be allocated towards growth initiatives or returned to shareholders through dividends or share buybacks.
Investors will need to consider the potential for increased regulatory scrutiny and the possibility of fines or mandated changes to labor practices, which could introduce further costs or disrupt operations. The SOC's call for full disclosure ahead of the 2024 Annual Meeting underlines the importance of transparency in corporate governance and the potential for reputational damage that may affect consumer sentiment and brand loyalty.
Starbucks' alleged violations of federal labor laws, as indicated by the SOC, raise substantial legal concerns. The estimated costs derived from National Labor Relations Board (NLRB) complaints and administrative law judge decisions highlight the legal risks associated with aggressive anti-unionization strategies. The legal framework governing labor relations in the United States, particularly the National Labor Relations Act, provides protections for employees seeking to unionize. Violations of these protections can result in significant legal repercussions, including but not limited to back pay for unlawfully terminated employees, reinstatement and penalties.
The rate at which illegally denied wages and tips are accruing, as noted by the SOC, indicates that Starbucks may be facing an ongoing legal issue rather than isolated incidents. This could suggest systemic challenges within the company's human capital management strategy. The potential for these issues to escalate into class-action lawsuits or further legal action by the NLRB could compound the financial impact and necessitate a comprehensive review of Starbucks' labor practices and policies.
Moreover, the call for improved oversight by the election of independent candidates to Starbucks' Board suggests a perceived need for greater checks and balances within the company's governance structure. This could have implications for how Starbucks manages labor relations moving forward, which could impact its operational approach and corporate culture.
The revelation of Starbucks' significant financial outlay in opposition to unionization efforts could have broader implications beyond the immediate financial impact. Consumer perception and brand image play critical roles in the success of retail businesses, particularly those like Starbucks, which have cultivated a progressive and socially conscious image. The public's reaction to these disclosures could influence customer loyalty and ultimately sales.
Market trends have shown an increasing consumer preference for companies with strong corporate social responsibility (CSR) practices, including fair labor practices. If Starbucks is perceived to be engaging in aggressive anti-union activities, this could alienate a segment of its customer base that values ethical treatment of employees. This shift in consumer sentiment could be reflected in sales figures and market share over time, potentially affecting long-term growth and competitiveness.
Additionally, the SOC's analysis may prompt investors to reassess the risk profile of Starbucks, considering not only the disclosed financial liabilities but also the broader reputational risks associated with the company's human capital management strategy. The call for increased transparency and oversight could resonate with socially responsible investors, who may factor such governance issues into their investment decisions.
Based on the SOC’s analysis, Starbucks’ aggressive opposition to employee organizing efforts has cost shareholders at least
Believes Starbucks needs to immediately provide full disclosure of the total costs and liabilities of its misguided human capital management strategy in order for shareholders to make fully informed voting decisions before the 2024 Annual Meeting
Encourages shareholders to support the SOC’s three independent candidates for the Starbucks Board in order to help improve oversight and safeguard the best interests of Starbucks shareholders, customers and employees
As the letter states:
Since before the Proxy Contest began, Starbucks has attempted to create a smokescreen of positivity around its conduct concerning its aggressive opposition to Starbucks workers’ efforts to unionize, in many cases by violating federal labor laws. These efforts are well documented. Moreover, the Company’s forceful tactics have led not only to increasingly problematic human capital management issues, but also substantial costs and liabilities that the Company has never acknowledged or disclosed, but that the SOC estimates to be at least
The SOC’s analysis includes the estimated total of litigation costs and expenses, other categories of expenditures (including employee lost time, communications and internal Starbucks staffing) as well as liabilities associated with labor law violations sustained by National Labor Relations Board (the “NLRB”) complaints and/or labor judge determinations.
Based on the SOC’s analysis, Starbucks’ anti-union campaign includes the following estimated costs and liabilities through February 2024:
Estimated Costs Based on Company Anti-Union Activity through February 2024: |
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Legal Fees: Litigation (State and Federal Court, NLRB),1 Campaign Advice, Expenses |
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Consultants and Internal Support: Communications, Research, Training |
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Store Employee Productivity Lost Time: Captive Audience Store and Individual Meetings, Trainings |
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Estimated Liabilities Based on NLRB General Counsel Complaints and Administrative Law Judge Decisions through February 2024:2 |
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Illegally Denied Wages and Tips (Note: This grows at a rate of |
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Illegal Firings and Store Closings |
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Total Estimated Expenditures and Liabilities |
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The letter also describes why the SOC believes that Starbucks’ proxy materials and other filings fail to provide an accurate portrayal to shareholders:
Indeed, the Company spills a fair amount of ink (in its proxy statement) on its “Reinvention Plan” and business strategy to paint a rosy—yet misleading—picture of its purported attention to its partners that acknowledges their importance while obfuscating Starbucks’ true approach to human capital management that informs the Proxy Contest.3 In doing so, the Company tactically and conveniently cherry picks what it thinks the broader investing public should know about its business and about the Proxy Contest.
In the letter, the SOC requests that the SEC require Starbucks to fully disclose to shareholders the costs and liabilities associated with its anti-union efforts.
The SOC believes Starbucks’ lack of disclosure and the exorbitant cost to shareholders represent just the latest examples of the current Board’s lack of oversight, counterproductive approach to labor issues and flawed allocation of resources. For these reasons – and to protect shareholder value – the SOC has nominated three director candidates (the “SOC Nominees”), who are ideally suited to help repair the relationship with the Company’s workers and regulators while safeguarding the best interests of all Starbucks’ stakeholders.
The SOC Nominees are:
- Maria Echaveste, a former senior White House official, senior Department of Labor appointee and corporate attorney with significant international relations and public company board experience.
- Hon. Joshua Gotbaum, who has been a director of both public and private companies with decades of experience in corporate governance and change, as well as significant public policy and government experience.
- Hon. Wilma Liebman, who possesses over 40 years of experience in labor management, employee relations, wage negotiations, public policy and law – including having served as the Chair of the NLRB under President Barack Obama.
For the nominees’ full biographies, see here.
Shareholders can be part of ensuring Starbucks returns to the right path for the future by using the BLUE proxy card to vote “FOR” each of the SOC Nominees today. Shareholders can also vote for the SOC Nominees on the Company’s White proxy card.
For more information, shareholders can visit: www.BrewABetterStarbucks.com.
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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”) filed a definitive proxy statement and accompanying proxy card (the “Proxy Statement”) with the SEC on January 25, 2024 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, as they l contain important information, including additional information related to the Participants, including a description of their direct or indirect interests by security holdings or otherwise. The Proxy Statement and an accompanying BLUE proxy card will be furnished to some or all of the Company’s stockholders and is, along with other relevant documents, available at no charge on the SEC website at http://www.sec.gov.
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1 Litigation costs were estimated based on the different types and number of NLRB charges and proceedings litigated to date in the Company’s anti-union campaign, including unfair labor practice charges, election petitions, bargaining and settlements. These cases are published on the NLRB’s website at: https://www.nlrb.gov/search/case/starbucks.
2 Liabilities were calculated for cases in which the NLRB General Counsel has issued complaints or an ALJ has issued a decision finding labor law violations regarding (1) illegally denied wages and tips, (2) illegal firings and (3) illegal store closings.
Wage liability calculations include hourly pay, tips, accrued interest and FICA payments. Wage liabilities were calculated through February 17, 2024 for all workers who (1) were illegally denied wage increases or certain benefits – like credit card tipping, (2) were illegally fired or (3) who previously worked at an illegally closed store. Wages were calculated based on the Company’s published average wage of
Estimated liabilities for store closings includes: (1) estimated wage liabilities, (2) estimated shutdown costs, (3) estimated net lost revenue and (4) estimated reopening costs.
3 The Proxy Statement explains, at page 11, that one key aspect of the Company’s latest reinvention plan is to “reinvigorate partner culture,” and at page 1, that “various initiatives to improve the partner experience” are “core” to the reinvention plan. See also 2024 Proxy Statement at page 10 (“Our partners are—and always have been—core to Starbucks overall business strategy, which is why our company, under the direction of the board, has made, and continues to make, significant investments in our partners.”).
View source version on businesswire.com: https://www.businesswire.com/news/home/20240216270911/en/
Investor Contact
Okapi Partners
Bruce Goldfarb / Pat McHugh, (877) 285-5990
info@okapipartners.com
Media Contacts
Longacre Square Partners
soc-sbux@longacresquare.com
Source: The Strategic Organizing Center
FAQ
What is the estimated total cost to date of Starbucks' aggressive anti-union efforts according to the SOC's analysis?
When is the contested Annual Meeting of Shareholders scheduled for Starbucks?
Why does the SOC believe Starbucks needs to provide full disclosure of costs and liabilities?
What does the SOC recommend shareholders do to improve oversight at Starbucks?
