Escalation at Starbucks
Social meets governance as union group proposes candidates for the board
Just a quick update for everyone following the unionisation drive at Starbucks - it’s taken a significant turn, and it’s board related. In a major development it was announced overnight that director candidates are being nominated for the Starbucks board by the Strategic Organising Center.
SOC comment:
For more than two years, Starbucks has gone to historic lengths to counter its employees’ campaign to have their voices heard. This has not only cost untold millions in legal fees and other expenditures, but the constant media, policymaker and regulatory scrutiny have caused potentially irreversible damage to the value of the Company’s previously enviable brand. Regardless of one’s personal views on whether Starbucks should support or continue to resist the unionization of its store employees, the Board’s current approach likely jeopardizes its ability to fulfill its fiduciary duties to investors and has resulted in arguably one of the most glaring and destructive examples of human capital mismanagement corporate America has seen. This is why we believe change is needed at the Board level. Our nominees can bring fresh perspectives and the right expertise to help improve oversight and safeguard the best interests of Starbucks’ shareholders, customers and employees.
Since November 2021, the National Labor Relations Board (“NLRB”) – the federal agency responsible for protecting workers’ rights – has issued over 120 complaints against Starbucks, covering some 420 charges of violating federal labor law. These complaints cover a wide range of allegations of wrongdoing, including illegal discipline and firings, store closures to halt union activity, worker surveillance and the Company’s failure to bargain in good faith. In some of the most egregious cases since 2022, the NLRB has sought injunctions from federal courts. These cases involving Starbucks represent a full third of all injunctions sought by the NLRB against any employer during this time period.
At a time when Starbucks has set an ambitious goal of opening more than 17,000 new stores by 2030, it cannot waste any more resources fighting its own workers. While these missteps have not yet led to a visible strain on the Company’s financial performance, given the reputational damage and potential impact on Starbucks’ ability to execute its growth strategy, we believe it is only a matter of time until the share price reflects the cost of this failed oversight. This threat to shareholder value is why action must be taken now.
But that’s not the only governance news. Perhaps relatedly, on Monday Starbucks issued a filing announcing the establishment of an ‘Environmental, Partner, and Community Impact Committee’. The company states:
The EPCI Committee will assist the Board in fulfilling its oversight responsibilities with respect to evolving regulations and accountability standards as they apply to Starbucks stakeholders, as well as Starbucks progress against its environment, partner (employee), and community impact commitments. The EPCI Committee will also have oversight of internal and external stakeholder disclosures and assessments, including the Company's annual Global Environment and Social Impact Report. Beth Ford will serve as the chair of the EPCI Committee.
It may also not be unrelated to the company’s ongoing review of practice following the successful shareholder proposal earlier this year. Members of the existing Nomination and Governance Committee are in the mix on that one.
Given the failure of any stores that have voted to unionise to sign a contract with the company it should not be surprising that things have escalated. Now that director nominees are potentially part of the solution that will require investors to think carefully in the months ahead. Starbucks’ AGM is ahead of the main season on 13th March so this looks likely to be another high-profile meeting for the company.
Details of the proposed candidates (taken from the SOC’s release) are below.
Full Biographies of SOC’s Nominees
Maria Echaveste
Ms. Echaveste is a former senior White House official and corporate attorney with significant international relations and public company board experience that we believe would be extremely additive to Starbucks’ Board.
President and CEO of the Opportunity Institute, a non-profit working to increase economic and social mobility.
Member of the board of directors of Cadiz, Inc. (Nasdaq: CDZI), where she also serves as Chair of the Corporate Governance and Nominating Committee and as a member of the Equity, Sustainability & Environmental Justice Committee.
Previously served as Assistant to the President and Deputy White House Chief of Staff for President Clinton from 1998 to 2001, where she focused on policy and political issues, including immigration, civil rights, education and finance, among others, making her one of the highest-ranking Latinas to have served in a presidential administration.
Previously served as Administrator of the Wage and Hour Division at the U.S. Department of Labor from 1993 to 1997.
Previously served on the board of the U.S.-Mexico Foundation, where she focused on the foundation’s Mexican-American Leadership Initiative launched in 2010, and as a former special representative to Bolivia, a position she was designated by Hillary Clinton in 2009.
Previously served as vice chair of the California International Trade and Investment Advisory Committee, an appointment made by Governor Jerry Brown.
Held various roles at the University of California at Berkeley, including as a lecturer and policy director of the Law School’s Chief Justice Earl Warren Institute on Law and Social Policy, and serves on the board of directors of multiple non-profit organizations.
B.A. from Stanford University and J.D. from U.C. Berkeley.
Hon. Joshua Gotbaum
Mr. Gotbaum has broad experience in business and government – both as senior management and as a director of public and private companies and nonprofits – that we believe would be extremely additive to Starbucks’ Board.
Currently a Trustee of the Pension Reserve Trust of the Commonwealth of Puerto Rico and Chair of the Maryland Small Business Retirement Savings Board.
Significant experience serving as an independent director of PulteGroup, Inc. (NYSE: PHM), TD Bank, Safety-Kleen Systems and Thornburg Investment Management.
Previously served as CEO of the U.S. Pension Benefit Guaranty Corp.
Led the successful Chapter 11 reorganization of Hawaiian Airlines (Nasdaq: HA).
Previously served as Managing Director of Lazard, where he advised on finance, acquisitions and restructuring for businesses, governments and unions.
Previously served in influential White House roles, including the President’s Office of Management & Budget, the White House Domestic Policy Staff and other White House offices. Also served as Assistant Secretary of Treasury for Economic Policy and Assistant Secretary of Defense.
Guest scholar in Economic Studies at the Brookings Institution and an authority on economic policy, federal budget policy and process, public finance, and retirement and aging policies and programs.
J.D. from Harvard Law School, Masters in Public Policy from Harvard Kennedy School and A.B. from Stanford.
Wilma Liebman
Ms. Liebman has over 40 years of experience in labor management, employee relations, wage negotiations, public policy and law that we believe would bring extremely additive to Starbucks’ Board.
Former Chair of the NLRB, a position she was designated by President Barack Obama from January 2009 until August 2011, making her the second woman to ever lead the organization in its nearly 90-year history.
Former member of the NLRB from 1997 to 2011, where presidents including George W. Bush and William J. Clinton appointed her for multiple terms.
Previously served as Chief Operations Officer and Deputy Director of the Federal Mediation and Conciliation Service, where she oversaw arbitration, international affairs and advised on major labor disputes to support negotiations.
Previously served as Legal Counsel to the International Brotherhood of Teamsters.
Previously served as Labor Counsel for the International Union of Bricklayers and Allied Craftsmen.
Member of the Board of Directors of Ownership Works, the Economic Policy Institute, and Co-Chair of the Council of Advisors at the Institute for the Cooperative Digital Economy at the New School.
B.A. from Barnard College and J.D. from the George Washington University Law Center.