Starbucks' latest union battle is over its board

Labor activists argue that the company’s union stance has been bad for its brand and warrants new board members. The coffee shop chain is pushing back hard.
Starbucks HQ
Labor groups want three seats on the Starbucks board. | Photo: Shutterstock.

Starbucks has battled labor activists on multiple fronts over the past few years: At its coffee shops, in numerous courtrooms, in the halls of Congress and in the media.

The latest is in the boardroom. And it may be the most serious one yet.

The Strategic Organizing Center, or SOC, has nominated a trio for seats on the Starbucks board: Former senior White House official Maria Echaveste; corporate governance and public policy expert Joshua Gotbaum and former National Labor Relations Board Chair Wilma Liebman.

SOC is a coalition of labor unions, including the Service Employees International Union (SEIU) and the United Farmworkers of America. The SEIU in particular has worked with Starbucks Workers United to unionize about 4% of Starbucks locations, or just under 400.

The nomination has led to a proxy fight for three board seats that could give labor a direct say in how Starbucks operates. Shareholders are expected to vote for these seats next month. Here’s a look at the two sides.

Unions: Starbucks is damaging its reputation

SOC in its presentations argues that Starbucks’ response to the union drive has been bad for business. The group argues that its “aggressive opposition” to the union effort has cost the company $240 million in direct and indirect costs and damaged the brand’s reputation.

And the effort, they say, is not working. The SOC calls the Starbucks union effort “the fastest growing grassroots labor movement in American history.” Eighty two percent of Starbucks locations that have taken up votes ultimately voted to unionize.

Attention paid to this effort, the group says, has translated into weak performance at Starbucks. SOC notes that total shareholder return since the unionization effort began in 2021 has declined 6% at the company, while the S&P 500 Restaurant Index is up 5.2% over that same period.

The group argues that the efforts are alienating younger consumers that make up the brand’s core group, citing calls to remove Starbucks at some universities along with a Nielsen survey showing two-thirds of consumers are less likely to visit if the company broke federal labor laws. The SOC commissioned the survey.

SOC also chides Starbucks’ recent expansion of the board, in which it added the CEOs of T-Mobile (Mike Sievert), YouTube (Neal Mohan) and the Mexican food company Grupo Bimbo (Daniel Servitje). None of them, SOC says, has direct labor law or union experience.

“It may have been possible at one point to address Starbucks’ human capital management issues cheaply, quickly or efficiently,” SOC said. “But the company’s response has only made the problem worse.”

Starbucks: No union-busting

The coffee shop chain has spent the past two years working feverishly to change its business, raising pay for workers, adding technology and operational changes to make their lives easier in a world of customized, cold beverages, mobile orders and drive-thru.

Starbucks has taken the proxy fight seriously. And it argues that it has always been willing to negotiate with the union, that any mistakes were unintentional.

“There has been no union-busting playbook at Starbucks,” CEO Laxman Narasimhan told investors last month, referring to an independent assessment of the company’s union response. “We believe in a direct relationship with our partners. And in the 4% of our stores in the U.S. where our partners have chosen to be represented by a union, we are committed to finding a constructive path forward with those unions.”

Starbucks argues that its board members, including newly appointed Mohan and Servitje, have extensive experience overseeing brands with large workforces, some of whom are unionized. Many Starbucks board members, including former Domino’s CEO Ritch Allison, have overseen or oversee large companies with vast workforces.

The company also argues that its stock performance has outperformed the broader markets since it announced its “Reinvention” plan in 2022. Its shareholder returns are up 32% since May 2022, compared with 21% for its “restaurant peers.”

Starbucks also argues that its revenue and earnings last year rose faster than its peers. The company says that the “number and consistency” of worker hours has been an area of focus over the past two years.

And it argues that its staff turnover last year was 58%, compared with the industry average of 75%.

But Starbucks also argues that the company had little choice but to evolve its business to focus more on cold beverages and mobile orders. Cold beverages have increased to more than 70% of beverage sales last year, from 50% in 2018. Mobile orders now represent 31% of orders, up from 14% in 2018.

“SOC does not understand Starbucks or why our business needed to evolve,” the company said.

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