Mar 23, 2023
Starbucks Faces Investor Pressure for Independent Review of Union Tactics
(Bloomberg) -- Starbucks Corp. said it won’t enter into a neutrality agreement with workers seeking to unionize, as it awaits the results of a shareholder proposal about its labor practices.
“We will not be entering into a neutrality agreement,” Starbucks Chief Communications and Public Affairs Officer AJ Jones said during Thursday’s annual investor meeting. “It would prohibit the ability for us to talk openly and freely with our partners, provide them with the information that they need about the value and importance of direct relationship with us and how it could change under union representation.”
Neutrality, Jones said, would allow baristas to unionize without a secret ballot vote and via what’s just known as a card check. “To be clear, we respect every partner's right to organize and lawfully engage in union activities.”
Following allegations of illegal anti-union tactics by Starbucks during a flurry of organizing at its stores, a group of shareholders filed the workers’ rights proposal at the Seattle-based company asking for an independent audit of their labor practices. Investors had until Thursday's meeting to vote for the proposal, but the results weren’t immediately available. Though it’s non-binding, if a proxy proposal gets more than 30% support, a company generally responds. Starbucks said it will release the results in a regulatory filing.
“What we're asking for are non-interference policies, which is similar to neutrality, but neutrality is a loaded term for the reasons they tried to argue,” Michael Garland, New York City assistant comptroller for corporate governance and responsible investment, said after the meeting referring to the comment about the card check.
An uptick in unionization efforts in the US has investors worried about the risks companies face for interfering with organizing. The National Labor Relations Board has issued over 80 complaints against Starbucks for illegal activities, including shutting down stores and firing activists. Former Chief Executive Officer Howard Schultz, who handed off the reins earlier this week, will testify in Congress next week about the company’s conduct. A vote in favor of the proposal would present one of the first challenges for the new leader, Laxman Narasimhan.
About a dozen other large US employers where workers have been organizing or formed unions, including Amazon.com Inc., Walmart Inc., CVS Health Corp., Wells Fargo & Co. and Activision Blizzard Inc., have similar proposals on the docket at annual meetings this year.
“The writing is on the wall that companies can’t keep not supporting workers’ rights to organize,” said Nadira Narine, senior director of strategic initiatives at the Interfaith Center on Corporate Responsibility, which tracks activist shareholder proposals. “It just creates more reputational risk for them.”
The Starbucks vote, the first on this issue in 2023, will test the investor labor strategy. Proxy advisors ISS and Glass Lewis both recommended that shareholders vote for the audit at Starbucks. The union representing Starbucks baristas, Workers United, sent a letter earlier this month to investors asking them to vote in favor of the proposal, too. On Wednesday, workers at about 100 stores across more than 40 cities went on strike, protesting alleged union busting.
Norges Bank, which owns more than 1% of Starbucks shares, voted in favor of the worker assessment proposal, according to a statement on its website.
Starbucks has repeatedly said that it obeys US labor laws and that any claims of anti-union activity are “categorically false.” The company is conducting its own independent human rights assessment, which it will release to the public, and doesn’t see the need for a third-party audit, the company said in a proxy response to the ballot proposal. It reiterated that position in the meeting with shareholders.
The vote follows a leadership transition at the global coffee giant. Schultz on Monday ceded control of day-to-day operations to incoming CEO Narasimhan two weeks ahead of schedule. In Schultz’s earlier tenure running the company, he positioned himself as a progressive leader, who spoke out on social issues and gave baristas generous benefits compared to competitors.
In recent years, clashes with labor organizers have put him at odds with that image and the one he wanted to cultivate of Starbucks as the “third place” — a safe and supportive space between home and work. Over the past year, Schultz refused to meet with investors to discuss concerns about the company’s workforce, said Jonas Kron, chief advocacy officer at Trillium Asset Management. In an open letter released earlier this month, a group of white-collar Starbucks employees and managers condemned the alleged union-busting, saying those actions and others “are fracturing trust in Starbucks leadership.”
Starbucks spokesperson Reggie Borges said in an email that “a number of our executives have engaged and met with top investors when it comes to the topic of labor and we continue to regularly engage to help address any questions they have on the topic.”
Read more: Starbucks Baristas Are Unionizing, and Even Howard Schultz Can’t Make Them Stop
Investors are urging the new regime to take a more engaged approach. “We hope the new CEO addresses our concerns with how the company is managing its workforce,” said Matthew Sweeney, a spokesman for New York's retirement fund.
In a letter to employees ahead of the meeting on Thursday, Narasimhan pledged to work a half day in a store each month; he didn’t mention the unionizing workers.
New York City Comptroller Brad Lander, one of a group of investors who submitted resolutions at Apple Inc. and Chipotle, has argued that a new US corporate standard is emerging in which employers “genuinely remain neutral” when workers organize. Major League Baseball and Starbucks’ Seattle-area neighbor Microsoft Corp., both last year agreed to make it easier for their employees to unionize. General Motors Co. took a hands-off approach in December when workers at the Ultium Cells LLC electric vehicle factory, which GM owns with Korean battery company LG Energy Solution, voted for UAW representation — a first for a battery plant.
The dozen or so resolutions are split into two categories, according to an assessment by the Sustainable Investments Institute. Some ask companies to adopt International Labour Organization and United Nations trade union standards, which include promises not to interfere in employee organization efforts. That’s the case at Rivian Automotive Inc., which was targeted to ensure the electric-truck maker follows a hands-off stance on the issue.
Others, like Starbucks and Wells Fargo and Co., are being asked to commission an independent study to determine if they are in compliance with those guidelines or make explicit assurances that they are.
Wells Fargo said in its proxy filing that it opposes the proposal and does not inhibit employee rights to organize or freely associate and that it prefers direct engagement with workers to discuss employment issues. An Amazon spokesperson said its employees can choose to join a union, but the company doesn’t think its the best answer for employees. Almost 40% of Amazon shareholders supported a similar resolution last year. Other companies facing the votes did not immediately respond to requests for comment or had no comment.
Some proposals may be withdrawn if investors reach agreements with management in the coming weeks. Ahead of its annual meeting this month, Apple agreed to hire a third party to assess its labor practices and release a report later this year.
“This demonstrates that it’s doable and it makes sense for a company to do it,” said Trillium’s Kron. “Apple is very much a trendsetter.”
--With assistance from Josh Eidelson, David Welch and David Hood.
(Updates with comments from Starbucks during annual meeting in the first two paragraphs and with comments from NYC’s assistant comptroller in the fourth paragraph.)
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