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Sanders, investors warn Starbucks on response to unionization

Returning CEO Howard Schultz urged to change company approach

Sen. Bernie Sanders, I-Vt., urged returning Starbucks CEO Howard Schultz to "do the right thing: End the union busting and obey the law.”
Sen. Bernie Sanders, I-Vt., urged returning Starbucks CEO Howard Schultz to "do the right thing: End the union busting and obey the law.” (Tom Williams/CQ Roll Call file photo)

Coffee chain Starbucks Corp. is facing calls from Sen. Bernie Sanders and investors to refrain from infringing on employees’ efforts to unionize, as it and other companies are under increasing pressure to improve human capital management.

Sanders, I-Vt., urged former Starbucks executive Howard Schultz, who is returning to lead the company on April 6 after CEO Kevin Johnson retires, to cease “union-busting” actions amid complaints from employees and the National Labor Relations Board.

The Seattle-based company has been hit with allegations that it has intimidated and retaliated against workers by reducing their schedules and even terminating them at some locations.

“As you prepare to head back into your former role as Starbucks CEO, I am writing to you with a simple request. Please respect the Constitution of the United States and do not illegally hamper the efforts of your employees to unionize,” Sanders wrote in a March 22 letter to Schultz. “Like all workers in America, Starbucks employees have the right to form a union and collectively bargain for decent wages and benefits, safe working conditions and reliable schedules.”

Employees in more than 160 Starbucks locations have filed petitions with the NLRB to hold union elections following the successful unionization at two locations in Buffalo, N.Y., in December.

Many of the organizing employees have cited lackluster wages and benefits, short-staffing and unrealistic metrics as main drivers for unionization. As of Tuesday, workers at nine locations across the U.S. had voted to unionize.

Starbucks reported $8.1 billion in revenue in its fiscal first quarter ending Jan. 2, and its stock price has largely rebounded since the onset of the COVID-19 pandemic, from about $58 per share to $91. The company also announced last year it would spend $20 billion on stock buybacks and dividends and raised Johnson’s pay to over $20 million.

“If Starbucks can afford to spend $20 billion on stock buybacks and dividends and provide a $20 million compensation package to its [outgoing] CEO, it can afford a unionized workforce that can collectively bargain for better wages, better benefits, safer working conditions and reliable schedules,” Sanders said in the letter to Schultz. “This is a pivotal moment for Starbucks. As you return to the company, it is time to do the right thing: End the union busting and obey the law.”

NLRB complaint

This month, the NLRB issued a formal complaint against Starbucks, alleging that the company retaliated against workers in Arizona attempting to organize. The independent federal agency has received a flurry of complaints from employees over anti-union tactics.

“For a company like Starbucks, which depends on its reputation, jeopardizing its standing with powerful and everyday Americans with conduct that the NLRB claims is a violation of federal labor law is risky,” said Jonas Kron, chief advocacy officer for Trillium Asset Management, an asset management firm focused on environmental, social and governance values.

Companies’ treatment of employees has become a key focus for shareholders. Some 12 percent of the 529 resolutions filed for the 2022 proxy season were on “decent work,” according to findings from As You Sow, the Sustainable Investments Institute and Proxy Impact. In 2021, decent work-related resolutions made up 6 percent of all proposals filed.

Shareholder proposals focused on pay and working conditions “have blossomed as companies are pushed to meet the needs of all of their employees and public expectations,” said Heidi Welsh, executive director of the Sustainable Investments Institute and co-author of the findings.

Meanwhile, the Securities and Exchange Commission is considering a rule-making on human capital management disclosure. The agency in 2020 started to ask companies to list factors such as workplace safety measures and financial benefits on their Form 10-K disclosures, although companies could choose their own metrics and exclude others.

Trillium is leading an effort with more than 80 ESG investors representing over $3.4 trillion in assets under management or advisement to meet with Starbucks’ management to discuss the recent unionization movement. The investors sent a letter earlier this month to urge Starbucks to “immediately” adopt a policy of neutrality toward ongoing and future unionization efforts and end any anti-union communications with employees.

Investors and Sanders warned that the allegations stand in contrast to Starbucks’ publicly stated commitments to employees, which could turn customers off.

“With rapidly growing public support for unions, which currently stands at a high of 68 percent approval, we believe that Starbucks’ reputation may be jeopardized due to reporting of aggressive union-busting tactics,” the investors said in their letter to Johnson and Starbucks Chair Mellody Hobson.

A representative from Starbucks did not respond to a request for comment.

During Starbucks’ annual shareholders meeting, Hobson directly addressed the investors’ letter and said the company could not take a neutral stance on workers’ unionization efforts, but it understands and recognizes the right for employees to organize.

“One would say, how could you be against neutrality? But neutrality in its nuanced form limits our ability to speak to our partners in certain ways, and that goes directly against the DNA of the company,” Hobson said during the meeting March 16.

“Now, I’ll be clear about the fact that we absolutely understand and recognize the right of our partners to organize. That is the American way. We are also negotiating in good faith, and we want a constructive relationship with the union,” she added.

Kron said he is optimistic that the investors can meet soon with Hobson or Schultz to discuss the potential ramifications for the company’s reputation — and bottom line.

“Ms. Hobson’s response was disappointing, but her acknowledgement that mistakes have been made may indicate an opportunity to pivot to a more productive relationship with workers,” Kron said in an email. “Fundamentally, it is up to the workers and the company to define how they will proceed and we strongly encourage management to shift course.”

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