Starbucks shareholders to vote on labor, succession proposals

Starbucks investors will vote Thursday on whether the coffee giant is respecting its workers’ rights and if its board is doing enough to plan for executive transitions.

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

Next week, Sen. Bernie Sanders is slated to grill Schultz in front of a U.S. Senate panel about the company’s alleged union busting. Baristas from more than 100 cafes spent Wednesday on strike and picketed in front of Starbucks’ Seattle headquarters. Even animal rights group PETA said it plans to “pummel” the company during Thursday’s meeting over its premium pricing for milk substitutes.

Shareholder votes aren’t binding, so the board can reject proposals even if a majority of investors vote in favor. For example, in 2021, shareholders rejected Starbucks’ executive compensation plan, in a rare admonition of an S&P 500 company. But a public show of support for proposals can put pressure on the board and the company more broadly.

The eighth proposal on shareholders’ ballots would push the company to agree to an independent assessment of its commitment to workers’ rights, including the freedom to bargain collectively.

More than 190 company-owned Starbucks locations have voted to unionize under Starbucks Workers United, according to National Labor Relations Board data as of Friday. The union has filed more than 500 unfair labor practice charges against the company, alleging union busting, including retaliatory firings and store closures. Starbucks has filed more than 100 of its own complaints against the union.

Starbucks is telling its investors to vote against the proposal but said it would have its own independent probe.

“The company has basically conceded that they need to do an assessment, that’s what they said in their opposition statement,” said Jonas Kron, chief advocacy officer of Trillium Asset Management, which led a group of investors in creating the proposal. “The issue is that they are being very hand wavy and vague about exactly what it is that they’re committing to.”

Trillium also filed the same proposal with Apple, which has seen some of its retail stores seek to unionize. Apple, unlike Starbucks, agreed to perform the assessment without waiting for a shareholder vote.

But Trillium has more than two decades of experience putting shareholder proposals before Starbucks’ board. Past wins include asking the company to report its workforce racial and gender data, which only won 34% of votes but prompted the company to start releasing some of that data.

“My feeling is that once a shareholder proposal hits 30%, the proposal has effectively won at that point,” said Kron, adding that management can’t ignore a third of its investors.

Proxy advisory companies Institutional Shareholder Services and Glass Lewis, which both have significant sway over shareholders’ ballots, recommended in favor of voting for the proposal.

Schultz owns 1.89% of Starbucks’ shares, according to FactSet.

SOC Investment Group, which represents pension funds sponsored by unions, crafted Proposal 6 on investors’ ballots. The proposal pushes Starbucks’ board to improve its succession planning, including requiring a plan three years ahead of an expected transition.

“Ultimately, we think that the board can’t keep relying on Schultz to return to the helm,” Emma Bayes, director of ESG engagement at SOC Investment, told CNBC.

It follows last year’s rocky succession, when former CEO Kevin Johnson shocked investors by stepping down. Johnson said he told the board about a year earlier that he wanted to retire, but he left the company before a long-term successor was picked. Instead, Schultz returned for a third stint at the helm as interim CEO.

“This is one of those things that only really comes into the light when you have a succession that’s bumpy … Overall, it’s something that boards need to be focused on and devote a substantial amount of time to,” Bayes said.

Starbucks’ board adopted several of SOC Investment’s recommendations but told shareholders to vote against the proposal due to the three-year timeline, which it said placed artificial constraints on the process.

However, Glass Lewis recommended voting for the proposal, and several shareholders, including Neuberger Berman, Calvert Investments and CalSTRS, have already cast their ballots in favor of the proposal, according to Bayes.