The world’s biggest coffee
company is increasingly speaking out on political and social issues — an
approach experts say may end up giving American capitalism a new flavor.
Schultz
acts boldly on social, political issues
By
Angel Gonzalez
Seattle
Times business reporter
March
16, 2015
When Starbucks hosted the cream of Wall
Street analysts and investors at the coffee giant’s Sodo headquarters in
December, the company did not kick off the gathering by highlighting its
growing profits or its strategy for global conquest. It chose instead a video
about the woes faced by the returning veterans of America’s Middle Eastern
wars.
“I realize that the video you just saw and
the expression and our involvement in this issue is probably an unconventional
way to begin an investor conference,” CEO Howard Schultz told the audience.
“But in fact, for all of us at Starbucks, it’s who we are and what we believe
in.”
Such displays of social and political
concerns are becoming increasingly common at Starbucks. Driving that is
Schultz, a registered Democrat whose office is decorated with photographs of
Martin Luther King Jr. and Bobby Kennedy.
Howard
Schultz speaks out
On
taking stands
“The divide between
profitability and doing the right thing is collapsing ... I also think there’s
a seismic shift in what an employee wants from a company today.”
On
Rudy Giuliani
“I find Rudy Giuliani’s
vicious comments about President Obama ‘not loving America’ to be profoundly
offensive to both the president and the office, and yet another example of the
extreme rhetoric that continues to divide our country.”
On
gay marriage
To a shareholder
critical of the company’s support for same-sex marriage: “Sell your shares.”
Source: Seattle Times
“The size and the scale of the company and
the platform that we have allows us, I think, to project a voice into the
debate, and hopefully that’s for good,” Schultz said in an interview.
“We are leading (Starbucks) to try to
redefine the role and responsibility of a public company,” he said.
While many companies talk extensively about
issues that directly affect them — some energy companies, for example, like to
dwell on the environment and global warming — Starbucks stands out because many
of the causes it’s addressing have nothing directly to do with its core
business.
In December, amid widespread angst about
racial tension in Ferguson, Mo., and New York, Schultz held an impromptu forum
with staffers in Seattle to talk about race relations and followed up with a
letter to all employees encouraging similar dialogues across the company. Since
then open forums about race have taken place at Starbucks locations in Oakland,
St. Louis, New York, Chicago and Los Angeles. On Sunday, the company took out a
full-page ad on the back of the front section of The New York Times that asked
readers “Shall we overcome?” — a reference to an emblematic song of the civil-rights
movement. Schultz is expected to devote a portion of his remarks at the annual
shareholders meeting on Wednesday to race relations in the U.S.
Similarly, in recent years the company has
come out in favor of same-sex marriage and against political gridlock in
Congress, and has dipped its toe into the red-hot gun-ownership debate by
asking people not to openly carry guns into its stores. It also has sought to
attract attention to growing income inequality.
So much for free-market economist Milton Friedman’s
maxim, embraced by corporate America in the 1980s, that a company’s sole social
responsibility is to make money for its owners without breaking the law.
Schultz acknowledged that the causes he takes
on sometimes stress Starbucks staffers.
“I can tell you the organization is not
thrilled when I walk into a room and say we’re now going to take on veterans
(issues),” just a month after decreeing that “we’re going to do something no
company has ever done before, we’re going to create college education for
people,” Schultz said.
Of course, many of those political stands are
easy to support and hard to oppose, running little risk of alienating most
customers. Republicans and Democrats alike can rally behind veterans, and most
people hate political gridlock too. The same can be said for racism.
In many cases, too, Schultz’s pleas — such as
asking politicians to set aside their differences, or asking staffers to openly
discuss race — fall short of proposing concrete solutions.
“I don’t know where this will go,” Schultz
said during the employee forum on race relations in Seattle. “But I don’t feel,
candidly, that just staying quiet as a company and staying quiet in this
building is who we are and who I want us to be.”
Starbucks’ engagement does draw considerable
attention to these issues and helps position the company in the eyes of
customers and actual or potential employees.
It also prompts questions about whether
Schultz’s ambitions go beyond the corporate sphere. In early February, Schultz
was on the cover of Time magazine, which asked whether he intends to run for
office. “I don’t think that is a solution,” Schultz told Time.
“Conscious capitalism”
Devoting considerable CEO time and company
resources to societal issues that have no direct bearing on earnings goes
against decades of American corporate history and Wall Street’s clamor for
ever-improving quarterly earnings.
Schultz, however, says Starbucks can do both.
Its size and enormous visibility make it a particularly noticeable player in
what experts say is a growing trend. Some even say it may influence others to
follow and give American capitalism a new flavor.
“At Whole Foods we call it conscious
capitalism,” says Whole Foods co-CEO Walter Robb, a friend of Schultz’s for
more than a decade. “Government has shown its limits, and its inability to act
in many cases; it’s really incumbent on business to step up to a broader view
of responsibility.”
To be sure, Starbucks’ well-developed sense
of righteousness is a double-edged sword. It creates expectations that
companies can’t always meet, says Nancy Koehn, a Harvard Business School
professor who has long studied Starbucks.
“You’re going to open the door to all kinds
of people holding you up to all kinds of different standards,” she said. “Very
small things can trigger great rage.”
Starbucks often draws fire for not meeting
various critics’ standards: not using organic milk, crowding out independent
coffee shops, not paying its baristas enough. (Starbucks recently increased
starting pay across the board for store staffers and contends that it offers
benefits that are rare in the retail industry, such as health care for
part-time employees, 401(k) plans and stock options.)
The company got a real zinger last August
when a New York Times story described the stressful life of a Starbucks barista
harried by unpredictable work schedules that were created with the help of software.
That story triggered quite a bit of
embarrassed soul-searching at Starbucks, Schultz said. “We are better than
that, and we care more.”
As the story was hitting the newsstands, the
company announced it would change its scheduling system to give workers more
advance notice of their hours. “We are not perfect, we have a lot going on, and
that was an area of weakness,” Schultz said.
A personal viewpoint
Schultz, whose father held unsteady, poorly
paying jobs, has always contended that businesses’ concerns should extend
beyond the bottom line.
But Starbucks’ political and social activism
intensified after Schultz, who had stepped down as CEO in 2000, retook the helm
of the company in 2008 in the midst of the global financial crisis.
In a few cases, the company’s activist
initiatives have shown some quantifiable results.
In 2011 the company helped launch an
initiative to create and retain jobs threatened by the financial crisis — which
yielded $105 million in loans to small businesses that saved 5,000 jobs,
according to the company.
That summer, as bipartisan bickering about
the federal budget deficit raged in Washington, D.C., Schultz urged his fellow
captains of industry to stop campaign donations in order to pressure lawmakers
into reaching a debt deal and get the American economy out of “a cycle of fear
and uncertainty.”
The move drew the support of more than 100
business leaders, according to Schultz, who listed 25 of them — including the
CEOs of AOL, Frontier Communications and J.C. Penney — in an open letter. It
didn’t redraw the political landscape — but it brought attention to the role
corporate money plays in politics, and to the frustration of businessmen with
the D.C. stalemate.
Some other initiatives undoubtedly generate
more press than pressure.
In
December 2012, as congressional bickering went on, Starbucks launched another
campaign — with baristas writing “come together” on customers’ cups in
Washington, D.C.
Sometimes a measure intended to strengthen
Starbucks’ own workforce is also a very public broadside on a charged social
issue — such as when it decided last year to subsidize college for its U.S.
baristas, in a well-publicized deal with Arizona State University.
The
move served as a vehicle for Schultz to air concerns about growing inequality
of opportunities and what he called the “fracturing of the American dream.”
ASU President Michael Crow said he worked
hard to vet Schultz in order to make sure it was not a self-serving scheme.
“In his case it comes from a very, very deep
interest in making sure every person has an equal chance of success,” Crow
said. “Most corporate leaders, they believe the path to success is the
narrowing of their calculus. Howard takes the opposite view.”
Perhaps no issue has been embraced more
tightly by Starbucks in the past two years than the well-being of the returning
U.S. veterans.
Schultz says he first began thinking about
the issue when giving a speech at West Point a few years ago, and his interest
grew as former Secretary of Defense Robert Gates joined the Starbucks board.
Last March, Schultz committed $30 million of
his personal fortune to research on post-traumatic stress and traumatic brain injury,
as well as initiatives to help veterans transition to civilian life, such as
Team Rubicon.
Starbucks has vowed to hire 10,000 veterans
and military spouses by 2018. So far, it says, it has hired 3,300.
Schultz also wrote “For Love of Country,” a
book about veterans with Washington Post journalist Rajiv Chandrasekaran,
published last year. Last month Chandrasekaran announced he would quit The
Washington Post to found a media company in Seattle that would partner with
Starbucks in order to tell stories about social issues, starting with veterans.
“If you can tell me somebody else has done
more, I don’t know who they are,” said Gen. Peter Chiarelli, the former Army
Vice Chief of Staff, who took Schultz to Walter Reed National Military Medical
Center in Bethesda, Md., last year.
Price of admission
Schultz is not the only CEO of a huge
publicly traded company to dedicate a considerable amount of personal time —
and company resources — to social responsibility. Unilever CEO Paul Polman is
also an outspoken advocate for corporations standing for something other than
profit.
Former Costco CEO Jim Sinegal, who has
weighed in on the side of Democrats on issues such as economic inequality, said
being a CEO “doesn’t mean you have to abdicate your citizenship. You still have
a right to voice your opinion on things. As a matter of fact, you have an
obligation to voice your opinion on things.”
What gives Starbucks, Costco Wholesale and
other companies the leeway to be outspoken is above-par results. Starbucks
shares have outperformed the S&P 500 index by a factor of six since early
2009.
Schultz calls that performance “the price of
admission” to be able to tackle policy issues and to pay for above-average
perks.
Wall Street so far seems to accept that a
Starbucks investment comes with a dose of political agitation.
“Everyone knows Howard Schultz has a view on
a lot of things,” says Andy Barish, an analyst with Jefferies who was present
at the investor meeting in Seattle. The company has been doing well, said
Barish, and “at the end of the day that’s the most important part.”
Ángel
González: 206-464-2250 or agonzalez@seattletimes.com