Dive Brief:

• A group of 73 shareholders wrote a letter to Starbucks Tuesday urging the coffee chain to change its approach to Starbucks Workers United's momentum, arguing the company is risking its reputation by opposing the union. The shareholders, a mix of pension funds and investment groups, represent over $3.4 trillion in assets.
• The shareholders demand that 1) Starbucks implements a global policy of neutrality that applies to current and future union efforts 2) stop all anti-union communication with workers 3) work with unions to "form consensus around employer non-interference 4) pledge to negotiate with unions in good faith 5) speak with relevant trade unions about how Starbucks can "implement its labor rights commitments."
• Shareholder pressure adds to union momentum as three more Buffalo, New York, stores joined Starbucks Workers United in the last week. The union has filed for elections in at least 129 locations, per National Labor Relations Board records and public statements by the union. 

Dive Insight:

This shareholder contingent is particularly concerned with the optics of alleged retaliatory firings of pro-union employees and "captive audience meetings" between management and staff. Starbucks has maintained it has not fired employees on the basis of their union support.

For example, Starbucks Workers United considers the firing of seven union organizing committee members in Memphis, Tennessee, as union busting. But Reggie Borges, a Starbucks spokesperson, said these employees were fired because they allowed a media team into a Starbucks store after hours for an interview, and allowing unauthorized people to enter a store after business hours is a fireable offense. 

On Tuesday, however, the National Labor Relations Board issued a formal complaint against Starbucks, alleging the company retaliated against two pro-union baristas in Phoenix. The complaint will be reviewed by agency judges, and the ruling can be appealed to NLRB members in Washington, D.C., before moving to federal court. The labor organization can mandate policy changes or the reinstatement of terminated staff, but would not be able to fine Starbucks.  

The shareholders are also troubled by Starbucks' tactic to slow the spread of union elections. The coffee chain has asked the NLRB to seek regional rather than store-by-store elections, a tactic that first failed in the Buffalo, New York, region. 

"The company lost this appeal in New York, yet it continues to re-use this argument in unsuccessful responses to other petitions, seemingly in vain," the shareholders wrote. 

Dieter Waizenegger, an ESG strategy and engagement specialist with SOC Investment Group and one of the letter's authors, feels that Starbucks' response to union efforts clashes with its fundamental values. 

"As we heard at the annual meeting, it was all about partners — the partners are the foundation and everyone's a partner," Waizenegger said. "But I think not taking seriously the effort of partners to have a voice and feel empowered and to exercise their rights and having captive audience meetings and now being found by the National Labor Relations Board that the company has violated labor laws. I think it’s a missed opportunity for the company to really step into this and to strengthen the partnership. And now I think they're doing exactly the opposite."

Waizenegger also feels that Starbucks' current strategy is unproductive for the business, pointing to the company's move to close certain stores in order to host meetings with staff who want to unionize. 

"We've seen studies that [show] empowering workers actually increases productivity of the workplace. And so I think that seems like a much more straightforward effort than [the] really adversarial tactics the company has been employing so far," he said. 

Shareholders are also concerned anti-union sentiment will alienate Starbucks' consumer base. Sixty-eight percent of U.S. residents currently support unions, according to a recent Gallup Poll, and 42% report they are less likely to buy from a company that is trying to bar employees from forming a union.

Waizenegger argues a unionized workforce comes with advantages, including a stronger commitment to the workplace and better labor relations. He also pointed to unions at UPS and AT&T as success stories and reasons for optimism. 

"I think the key benefits that investors see ... include lower turnover [rates], more resilient operations, better feedback loops, and better, higher employee satisfaction and productivity. I think those are in the mutual interest of all three — the shareholders, the company's management and the workers," he said. "Hopefully the newly appointed interim CEO will really see this as an opportunity to reaffirm the company's progressive values."

Starbucks's Board Chair Melody Hobson responded to the shareholders' concerns at the company's annual shareholders meeting Wednesday, stating that "neutrality in its nuanced form limits our ability to speak to our partners in certain ways, and that goes directly against the DNA of the company." Hobson added, however, that the company is negotiating in good faith and wants "a constructive relationship with the union."