A coalition of unions presents its arguments against starbucks before a proxy fight at its annual meeting in March, arguing that the coffee giant has implemented a “flawed human capital management strategy” in response to a years-long union movement.
The Center for Strategic Organization says the situation has put the company at reputational risk, diminishing returns to shareholders and isolating customers, according to a survey conducted for a presentation to shareholders. The coalition is pushing to replace three current Starbucks board members with its own candidates. It plans to file the investor presentation with the U.S. Securities and Exchange Commission on Tuesday.
“The Board's anti-union strategy has resulted in one of the most egregious and destructive examples of human capital mismanagement in modern American history,” the proxy filings read, according to a copy seen by CNBC. “Starbucks' aggressive union response has not only failed to resolve the company's dispute with employees, it has made the problem worse.”
In response, Starbucks said in a statement that its board is “filled with world-class business leaders who bring the qualifications and experience directly relevant to driving our current operations and future success,” adding, “with partners at the heart of our business, We have continued to invest significantly and improve your experience, including more than 20% of profits going to salary increases, training and new equipment in the last fiscal year.
Baristas at nearly 400 Starbucks-owned coffee shops have voted to unionize since late 2021, when the first location in Buffalo successfully unionized. The company has a presence of around 16,000 cafeterias, including its own and licensed premises.
Howard Schultz returned as CEO of Starbucks as the union battle, sparked by the coffee chain's younger workers, intensified. He resigned last year when Laxman Narasimhan took the reins. Late last year, Starbucks said it wanted to resume contract negotiations in January, but the two sides have not yet reached an agreement. Baristas have staged high-profile strikes, including during Pride weekend in June and Red Cup Day in the fall.
Former employees and supporters join unionized Starbucks employees as they hold signs in support of a strike, outside a Starbucks store in Arlington, Virginia, on Nov. 16, 2023.
Saul Loeb | afp | fake images
The SOC says in its filing, titled “Brew a Better Starbucks,” that the projected response to the unionization drive has cost the company nearly a quarter of a billion dollars, by its own estimates, and “damaged the value of the company.” brand”. “.
Two-thirds of people surveyed by Nielsen who visited the coffee chain in the past 30 days said they would be less likely to visit Starbucks if the company violated federal labor laws. The SOC commissioned the survey of 2,000 customers from all 50 federal states. This figure is even higher than the 54% who said they would be less likely to visit the country in the face of price increases.
The SOC proxy filing claims the company's board has endorsed what it calls an “unnecessarily confrontational” strategy with the union. According to the National Labor Relations Board, NLRB regional offices have issued 128 complaints covering 430 counts of unfair labor practices against Starbucks Corporation and Siren Retail Corporation following an investigation.
The SOC includes the Service Employees International Union, parent of Starbucks Workers United, as well as the Communications Workers of America and the United Farm Workers of America. The group says its unions represent more than 2.3 million workers and, despite a small ownership stake of just 162 Starbucks shares, its affiliated unions have millions of members with “hundreds of billions of dollars invested.” in pension plans with substantial Starbucks holdings.
The SOC filing argues that since unionization efforts began through November, when it launched its campaign, Starbucks shares have fallen 6% compared to its peer cohort's average gains of 10.6%. chipotle, Darden Restaurants, McDonald's, International Restaurant Brands and Delicious brands. This also compares to the benchmark S&P 500 Restaurants Index's 5.2% gains over the same period.
During the period cited by the SOC, Starbucks said it has also navigated other external challenges in addition to labor organization, including macroeconomic effects and the pace of recovery in China. It maintains that its stable operating performance speaks for itself in the face of volatile markets.
The coalition has put forward three director candidates for the coffee giant's board of directors who it says have experience it currently lacks, including successful work with unions and experience in labor law. The candidates are former White House official María Echaveste; Joshua Gotbaum, Hawaiian Airlines Chapter 11 trustee and former White House official; and Wilma Liebman, former chair of the NLRB.
Starbucks added three new directors in January: Daniel Servitje, CEO of Grupo Bimbo; Neal Mohan, CEO of YouTube; and Mike Sievert, CEO of T-Mobile. Starbucks said it not only has a new CEO, but with these additions, it added five new members to the board of directors last year. Combined with other members of its board of directors, the company said they bring the necessary diversity of talent and experience.
The SOC filing states that those three new hires have no job-related regulatory experience. The proxy presentation is directed to three current members of Starbucks' board of directors: Ritch Allison, Andy Campion and Jørgen Vig Knudstorp.
Starbucks filed its own proxy filing Friday in which it said all of its current board members have work experience and argues that the SOC nominees “lack the breadth of knowledge and experience to oversee its global, consumer-facing business.” “.
Allison, Campion and Knudstorp, specifically, provide “very valuable continuity and unique perspectives,” Starbucks' presentation said.
The company further argued that it has created $92 billion in market value over the past two decades and leads its peer group in comparable store sales growth, unit growth, revenue growth and earnings per share growth for the year. past, according to the presentation.
In terms of stock returns, Starbucks maintains that it outperforms its peer group, which includes domino, international restaurant brands, Wendy's and others, by 5 percentage points in the last three years. Since the company announced its reinvention in May 2022, shares have risen 32%, outperforming both its peer group and the S&P, the company said. The SOC responded in its filing, arguing that Starbucks' peer set is “too broad and was chosen to favor the company's recent poor performance.”
Starbucks said in November and reiterated in its SEC filing that over the past three years, it has invested nearly $9 billion to improve the overall member and store experience, with “more than a third of that investment going directly to customers.” partners through salary increases”. training, new innovative equipment and technology.”
Additionally, the company said it has taken a “constructive” approach and maintains the goal of “reaching ratified contracts for every store represented in 2024.”
It touted plans, unveiled in December, that will unlock $3 billion in efficiencies to fund reinvestments in its workers. In the company's most recent earnings conference call, Narasimhan reiterated the company's position on the union movement.
“I want to make my point clear on the unionization issue at Starbucks. We believe in a direct relationship with our partners. And in the 4% of our stores in the US where our partners have chosen to be represented by a union “We are committed to finding a constructive path forward with those unions.”
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