Starbucks shareholders to vote on employment relationship and succession proposals

Laxman Narasimhan, new CEO of Starbucks, September 7, 2022


Starbucks On Thursday, investors will vote on whether the coffee giant respects the rights of its workers and whether its board is doing enough to plan a change in leadership.

The shareholders’ meeting is the first under new CEO Laxman Narasimhan, who took over the reins from Howard Schultz on Monday, nearly two weeks earlier than expected. Narasimhan’s ascension comes at a time when Starbucks is under scrutiny from all sides.

Schultz is due to be questioned by Senator Bernie Sanders next week before a US Senate panel about the company’s alleged crackdown on unions. Baristas from more than 100 cafes went on strike Wednesday and picketed in front of the Starbucks headquarters in Seattle. Even animal rights group PETA said it plans to “beat up” the company during a meeting on Thursday over premium prices for milk substitutes.

Shareholder votes are non-binding, so the board can reject proposals even if a majority of investors vote in favor. In 2021, for example, shareholders dismissed the Starbucks executive compensation plan as a rare warning to the S&P 500. But a public show of support for the proposal could put pressure on the board and the company as a whole.

Workers’ rights

The eighth shareholder ballot proposal will push the company to agree to an independent assessment of its commitment to workers’ rights, including freedom of collective bargaining.

More than 190 company-owned Starbucks locations voted to unionize under the auspices of Starbucks Workers United, according to data from the National Labor Relations Council as of Friday. The union has filed over 500 allegations of unfair labor practices against the company, alleging union busting, including retaliatory layoffs and store closures. Starbucks has filed over 100 of its own complaints against the union.

Members of the newly formed Starbucks Workers’ Union hold a rally to celebrate their first founding anniversary on December 9, 2022 in New York City.

Andrew Lichtenstein | Corbis News | Getty Images

Improved succession planning

SOC Investment Group, which represents union-sponsored pension funds, developed Proposition 6 on investor ballots. This proposal pushes the Starbucks board of directors to improve succession planning, including requiring a plan to be completed three years in advance of the expected transition.

“Ultimately, we think the board of directors cannot continue to rely on Schultz to return to the helm,” Emma Bayes, director of ESG engagement at SOC Investment, told CNBC.

This follows last year’s rocky succession, when former CEO Kevin Johnson shocked investors with his resignation. Johnson said he told the board about a year earlier that he wanted to retire, but left the company before a long-term successor could be chosen. Instead, Schultz returned for a third time at the helm as interim CEO.

“It’s one of those things that only really becomes apparent when you have a bumpy succession… Overall, it’s something the board needs to focus on and dedicate a significant amount of time to,” Bayes said.

Starbucks’ board accepted several of SOC Investment’s recommendations but asked shareholders to vote against the proposal due to a three-year time limit, which it says artificially limits the process.

However, Glass Lewis recommended that the proposal be voted on, and according to Bayes, several shareholders, including Neuberger Berman, Calvert Investments and CalSTRS, have already voted in favor of the proposal.

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