Starbucks' longtime CEO is back again. This time, things are different
Today, a homecoming of sorts at Starbucks.
Howard Schultz has returned as interim CEO, following the departure of Kevin Johnson who had served as CEO since 2017.
Schultz built Starbucks into a global powerhouse over three decades, overseeing the company as it grew from 11 stores and 100 employees to 28,000 stores worldwide. He's also responsible for Starbucks' reputation as a socially progressive and generous employer, providing health care, stock options and free college tuition to full-time and part-time employees alike.
Now high on his to-do list: saving that reputation, as Starbucks workers band together to raise grievances and demand more.
Union drives have taken off at Starbucks stores across the country
Since last year, a wave of union organizing that started in Buffalo, N.Y., has swept Starbucks stores across the country. Close to 190 have petitioned for union elections, and 10 stores — half in Buffalo, and the others in New York City; Mesa, Ariz.; Knoxville, Tenn.; and in Starbucks' hometown of Seattle — have voted to join Workers United.
Starbucks employees, referred to as partners by the company, want higher wages, changes to the scheduling system and a transformation of how the company handles tips, among other demands. Some have expressed frustration as pandemic benefits, such as hazard pay and a daily food and drink allowances, were taken away even as Starbucks' sales rebounded early in the pandemic and profits soared. Starbucks says it has replaced some COVID-19 benefits with others, such as paid COVID-19 isolation leave, as the pandemic has evolved.
At Starbucks stores that are organizing, employees say their hours have been cut and an unusual number of new hires have been made. But they say the union-busting activities on the part of the company are only fueling their campaign.
"It's happening, and we have the support we need," says Claire Picciano, a barista and barista trainer at a Starbucks store in Springfield, Va., that will be voting on a union April 13 and 14. "We have customers. We have each other. Nothing they do is going to change like the way the train's going."
Howard Schultz says Starbucks must transform
In a statement the day his return was announced, Schultz said he had not planned to return to Starbucks but knows the company is at a point where it must transform once again.
"Our success is not an entitlement," he said. "We must continue to earn the trust of our people and our customers every day."
To that end, Schultz announced Monday that Starbucks is immediately suspending its stock repurchasing program. "This decision will allow us to invest more into our people and our stores — the only way to create long-term value for all stakeholders."
In October, the company said it would spend $20 billion on dividends and stock buybacks over three years. When companies use cash to purchase shares of their own stock it normally boosts the stock price. So investors looking for short-term gains like stock buybacks. But it means less money invested in company operations.
But how Schultz responds to the union drive is still unclear.
Schultz has urged employees to reject union
In a speech delivered to Starbucks workers in Buffalo last November shortly before union elections there, Schultz appealed to workers to consider everything the company had done and will continue to do to make Starbucks a great place to work.
"No partner has ever needed to have a representative seek to obtain things we all have as partners at Starbucks," he wrote in an accompanying letter. "I am saddened and concerned to hear anyone thinks that is needed now."
But the company has fought the unionization drive on multiple fronts, from holding mandatory meetings with employees at which they're urged to vote no to attempting to delay elections or vote counts by arguing that all stores within a district or region must vote together. That argument has been rejected by the National Labor Relations Board multiple times now.
Investors are concerned about Starbucks' reputation amid union push
"This legal strategy of rehashing the same argument over and over and over again ... that's a lot of time and money and resources that is a waste," says Jonas Kron, chief advocacy officer for Trillium Asset Management who's part of a group of investors calling on Starbucks to lay off its anti-union activities.
The investors have implored Schultz to consider abandoning his long distaste for unions, telling him it is the norm in many places for companies to have positive working relationships with their unions. They've also warned him that Starbucks' reputation is on the line.
"Customers have the option to go somewhere else, and go somewhere else quite easily," Kron says.
Those who have followed Schultz over the years believe he has the experience to confront big moments like this one.
"I think this is Schultz largely in his sweet spot," says Harvard Business School historian Nancy Koehn, who wrote about Schultz's last return to Starbucks as CEO in 2008 when the company was struggling financially.
Unlike his second stint as CEO, she expects this one to last months, not years, until a new CEO is identified.
"He can step into it, do some things that I'm sure he thinks he needs to do ... quickly and effectively, much more quickly and effectively than an outside candidate could possibly do," says Koehn.
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