Analysis: Lessons for CEOs from the Schultz & Starbucks Union Avoidance Campaign

Summary: In this report, corporate executives will get a full analysis of Starbucks’ union avoidance saga since the return of Howard Schultz, detailing his strategies over the years, how he’s putting them to work now, and how the consequences of taking an aggressive stance against Starbucks Workers United have impacted the company’s brand and financials. Citing several retail and labor experts, this report will offer a pulse-check on why Schultz’s tactics are being poorly received, and will distill these reactions down into actionable strategies for leadership to more proactively engage with union campaigns. 

Table of Contents

1. What Does Starbucks Want Out Of Its CEO?
2. Schultz’s Union Avoidance History and Strategies
3. Starbucks Workers United’s Demands for Schultz
4. How Schultz is Trying to Stop a Starbucks Union This Time Around
5. Why Starbucks’ Union-Busting Tactics Aren’t Being Well-Received
6. As CEO, Who is Schultz Responsible To?
7. Should CEOs Fear Unions?
8. Final Words of Advice for CEOs

The last two months for Starbucks have been transformational ones from the top-down and the bottom-up. When its five-year CEO Kevin Johnson announced he was stepping down in mid-March, the company was already facing a labor reckoning unlike anything it’s seen in years. Starbucks workers, who since the start of the pandemic have renewed their calls for increased worker protections, better staffing and fairer wages, took matters into their own hands with a watershed movement: the creation of Starbucks Workers United and the company’s first unionized store in Buffalo, New York.

By mid-March as Johnson left the company, Starbucks had around 140 stores petitioning to the NLRB for a unionization vote, with six stores already voting in favor of a union. This was all in the span of a few months. The movement, and subsequent pressure on Starbucks, has only grown. As of May 12, there are more than 260 stores seeking a union vote, with more than 60 stores logging a majority ‘Yes’ vote according to NLRB and LAW360 data. This is reflective not only of the specific issues baristas have with Starbucks, but also issues that COVID created for the retail environment.

“All of these disruptions happened in the macro environment. Workers in retail wanted to work in a safe environment, and also not only in terms of pay, but also in terms of benefits. And so what we are seeing in Starbucks is not an isolated event,” said Venkatesh Shankar, Ph.D., Director of Research for the Center for Retailing Studies at Texas A&M University.

Like most companies of its stature, Starbucks has been resistant of a labor movement within its stores since the start of this renewed campaign. It’s no secret that Starbucks views a union as a disruptive force.

“From the beginning, we’ve been clear in our belief that we do not want a union between us as partners, and that conviction has not changed. However, we have also said that we respect the legal process,” wrote executive vice president Rossann Williams after the Buffalo union win.

The reasons for Starbucks not wanting a union will be explored more in-depth throughout this report, but for starters, let’s briefly frame the Starbucks union movements against the state of the national economy. Shankar’s analysis paints a picture that makes unionizing, and the potential operational consequences of increased labor costs, the last thing Starbucks wants to worry about right now.

One of the chief concerns of the moment for retail and food service companies is how consistently-rising inflation is going to affect sales; the most recent inflation report has the CPI 8.3% higher than April of last year, a steady climb since May 2020. A survey of almost 4000 Americans shows discretionary spending is likely to recede, if not declining already, with 52% of respondents indicating they’ll “cut back on dining out” if high prices persist, the largest share of consensus in the survey. Expensive coffee, or as Shankar calls it, “not Starbucks but four bucks,” is probably on that list.

Adapting to this moment as a unified company is critical. Starbucks sees a union as a threat to that unity, especially if short-term quarterly sales decline as workers demand more in compensation.

“There are some price points, psychological price points, beyond which if you have any item that is charged more than five bucks now people will stop buying even the things that they were buying before. And so it is important for [Starbucks] to work with their employees,” Shankar said. “And unless they do that, I see that this unionization trend will keep continuing and it will be hard for them to stop them just by their regular playbook.”

Starbucks is also a rather agile company, known for growing quickly and implementing radical shifts in company strategy.

“Companies like Starbucks, Amazon, they’re really highflyers and fast growers and not being used to a situation where they had to really go through another stakeholder to approve of all the major decisions,” Shankar said. “Once you go through the union, the decision-making slows down considerably.”

While Starbucks workers organized, the Starbucks Board debated the best course of action for engaging with a labor movement. It appeared a change in management was in order as one CEO exited the stage and another stepped in to fill old shoes, with tenured ex-CEO Howard Schultz returning to the helm of the company. In his announcement letter, Schultz made it clear that he wanted his interim period as Chief Executive to be focused on the “collective success of all our stakeholders.”

“My first work is to spend lots of time with partners. To lift up voices. To see everything that is already in play to help us become this kind of company. To invent. To face challenges — and for us each to be transparent with one another and become accountable for building the future of our company,” Schultz wrote.

Nowhere in the letter did it explicitly say the words ‘union’ or acknowledge the movement, but a promise of open communication and grassroots engagement from Schultz and Starbucks leadership hinted at where his focus as a returning CEO would lie: outreach to baristas in an attempt to get in front of a unionization campaign.

Facing a union campaign head-on is a match-up familiar to Schultz, even rather recently. On his first day back as CEO, he reiterated his stance during a town hall on one of the company’s perceived keys to success: “We didn’t get here by having a union.”

In February, the company expanded on its convictions in a more complete way with a detailed webpage dedicated to its stance on unionizing and why it thinks it isn’t a fit for Starbucks.

“Simply put – we are better side-by-side. We will build a better experience working side-by-side than by sitting across a negotiating table,” Starbucks said on its site.

Side-by-side is Schultz’s style as a leader, for better or for worse. Whether he’s embraced as Uncle Howie or critiqued for a paternalistic leadership style, there’s a common thread between how baristas and store managers describe Schultz. He’s vocal about his social and political worldview, and it gets passed down to baristas through company initiatives (some better received than others). He’s been an ever-present CEO in daily operations through frequent store visits, public showings and copies of his memoir for sale in-store (of which baristas receive a partner edition). His humble beginnings, all-smiles personality and working class come-up story are the backbone of Starbucks’ intended socially-conscious mission and a key part of the Starbucks mythos, especially internally.

“You know, I’m not putting myself in the class of Tom Brady or any other athlete that has been at the cornerstone of success on a team sport. This is a team sport. It has always been a team sport. I’ve gotten more credit that I deserve,” Schultz told CNBC in an interview as he was stepping down for the second time from Starbucks leadership in 2016.

When the union pressure increased, Starbucks turned back to Schultz for answers, direction, and strategy that would reconnect the company with its workers. But after reviewing the current state of the company’s union movement, was the Schultz Decision the right one for Starbucks? The pace of new union elections is still high, and everything from Schultz’s new benefits packages to his direct anti-union language haven’t done much to dissuade the movement. Though Schultz has curated his brand as the vocal do-gooder CEO, his vocal anti-union stance has left a coffee stain on his reputation with some baristas.

What are the learning lessons for CEOs from this entire Starbucks union saga?

The return of a familiar CEO with familiar union-busting attitudes prompted us to do some analysis for companies and leaders asking themselves how they’d handle being in Starbucks’ shoes. Chatting with labor and retail experts, reviewing Schultz’s words and actions during the campaign, reading through perspectives from both sides of the labor aisle (from unionizing Starbucks workers to The Heritage Foundation), and consulting studies from various academic sources, this analysis offers some perspectives on how a modern company and a modern CEO should approach a unionizing campaign in the current social climate. Based on how Schultz’s commentary and action has manifested during the current Starbucks Workers United movement, it’s become clear that companies shouldn’t underestimate the weight and appeal of a reinvigorated labor movement, nor the consequences of how they respond.

“I would encourage, not just Mr. Schultz, but I would encourage any CEO right now, pay attention to what your workers are telling you about your workplace,” said Robert Bruno, Ph.D., Assistant Professor of Labor and Industrial Relations and Director of the Labor Studies Program at the University of Illinois.

What Does Starbucks Want Out Of Its CEO?

Since Starbucks workers won their first union vote, Starbucks’ stock has been on the downslope. The fragile state of today’s national economy is placing fresh pressure on CEOs like Schultz to deliver on several metrics for vested capital interests. One of those metrics includes keeping the company as profitable as possible, which usually coincides with keeping union sentiments at bay; as one unaffiliated CEO put it, seeing a union movement at his company dissolve inspired “relief.”

“At some point during training, executives learn this lesson that, if you let your company unionize, it’s dead and you personally don’t have a future because you’ve committed the greatest cardinal sin that American management could create: You’ve let your company be unionized,” said Paul Clark, Ph.D., Professor and Graduate Program Director for the School of Labor and Employment Relations at Penn State University.

Is a CEO’s job security judged on how they deal with unions? Let’s explore the Starbucks situation as an example. The leadership change and its timing surrounding a renewed Starbucks labor wave drew questions around why Johnson stepped down in the first place, including whether he faced pressure from the Starbucks Board and its shareholders due to his inability to curb unionizing energy. Some of the labor experts I spoke to seem to think so.

“What mattered to the board and why a leadership change was announced is that workers are agitating and organizing into a collective force, and nothing threatens the company’s appeal to investors and cherished progressive image more than having democracy break out in the workplace,” Bruno said.

Neither party is likely to confirm the complete reasoning behind Johnson’s exit, so we remain in a realm of speculation, though we can make some educated inferences.

When Starbucks announced Johnson’s transition, he apparently already had an exit on the mind for over a year. His goodbye statement revealed he made this known to the Board, that “as the global pandemic neared an end, [he] would be considering retirement from Starbucks.”

Mellody Hobson, the chair of Starbucks’ board, reiterated this narrative during the company’s annual meeting of shareholders, saying that Johnson “signaled to [the Board] early last year that he was starting to think about his future and possible retirement.”

“Considering” and “starting to think about” aren’t quite the same as ‘confirmed’ or ‘planned,’ but let’s take this at face value: Johnson and the Board previously arranged to have him exit the company. Hobson explained to shareholders that the company formed a working committee after hearing of Johnson’s retirement ruminations, was on top of selecting a permanent replacement by the fall, and that there were already promising candidates lined up.

This narrative has some inconsistencies. If the Starbucks Board and Johnson were already planning to have him step away as CEO, why did his exit come as such a surprise; why was this the first time all shareholders were made aware of a succession plan? If this was on the working committee’s radar for over a year, why are they still in the search process for a new CEO (consider most executive searches take around seven or eight months, and other major food brands like Dominos and Wingstop that announced CEO transitions around the same time already had a successor picked)?

If Starbucks was confident in its permanent replacement candidates, why pull the plug on Johnson early and bother with an interim leadership period? This isn’t to say there was a grand conspiracy to keep his exit hush-hush, but rather that it puts a magnifying glass on the specific timing of Johnson’s retirement. As more time passes and Schultz’s leadership tactics manifest, Johnson’s move reads more like an unanticipated early exit spurred by growing union sentiment that he wasn’t cut out to quell.

The biggest clue to back up that take is also the most straightforward one. As Schultz was publicly welcomed back by the company, Hobson did a round of interviews with business news media. In her CNBC sit down, she was asked about the current union movement and the company’s strategies for engaging with workers. In her answer was a revealing perspective on why the company turned to Schultz during this unprecedented labor wave.

“When you think about, again, why we’re leaning on Howard in this moment, it’s that connection with our people and where we think he is singularly capable of engaging with our people in a way that will make a difference,” Hobson said.

If Starbucks’ actions are to speak for themselves, ‘making a difference’ doesn’t mean more unions; Hobson and the Board desired a change in organizing results with Schultz as the company’s leader. She made this clear when explaining why the company didn’t want to take the path of a neutrality agreement with the union.

“On the specific issue of neutrality, this one is more nuanced. One would say, how could you be against neutrality? But neutrality in its nuanced form limits our ability to speak to our partners in certain ways,” Hobson said to shareholders in their annual meeting.

So then, if Schultz is at Starbucks to engage with baristas and “make a difference” but isn’t committing to a neutral approach with the union, a difference for whom and for what purpose? An anti-neutrality stance doesn’t mean the company won’t offer some material improvements to workers, but it won’t be in the way unionizing workers want it despite Hobson saying she wanted to build a “constructive relationship” with the union.

Based on Schultz’s actions over the last two months, it appears Starbucks sought the goal of offering enough non-union incentives and reshaping the conversation in a grassroots way to keep the union’s influence limited and put a hamper on its spread. Hobson and the Board placed their full confidence in Schultz as being “singularly capable” of pulling this off. This backs up the notion that Schultz was brought back for the express purpose of stopping the union train in its tracks, and Schultz being singularly capable of shaping this moment in Starbucks’ favor implies that Johnson wasn’t.

Consider, too, that while Johnson was CEO and workers started organizing in Buffalo, he took a more backseat role in vocally opposing the union, letting executive vice president Rossann Williams hold the metaphorical megaphone instead. As the fervor for a union became inevitable in Buffalo, who did the company send to talk to workers face-to-face? Not its CEO, Johnson, but its legacy leader, Schultz.

Under Johnson’s tenure, Starbucks achieved several milestones that gave it strong footing in a digital era and expanded its international footprint. Though, as Schultz explained earlier, this is a team sport and more than just the CEO deserves credit for these wins, some of the successes under Johnson include…

1. maintaining profitability for the company through the pandemic and rebounding to bring back lost revenue, consistently beating quarterly year-over-year revenue records every quarter since Q2 2021
2. using machine learning to grow the brand’s loyalty program, Starbucks Rewards, from 13 million active users in 2016 to 26.7 million in Q2 2022, a 17% increase from the year before
3. leveraging the complete disruption of COVID to Starbucks’ advantage by leaning into the company’s digital intersections, including mobile-focused brick & mortar stores for pick-up only and pushing its already strong loyalty program presence to the point where 53% of spend in stores happened on Starbucks Rewards in Q1 2022
4. moving the brand closer to full penetration of the Chinese market (6000 stores by 2022) through a strategy of opening a new store “every 15 hours for the next five years,” reaching 5,654 stores in Q2 2022 despite consistent COVID lockdowns slowing international sales
5. expanding Starbucks more confidently into the CPG market through a Nestlé partnership, allowing the company to “market, sell and distribute” Starbucks’ various coffee and tea products

“During his tenure, Kevin expanded the company’s reach through the Global Coffee Alliance with Nestlé, which now operates in nearly 80 markets,” Hobson said.

Johnson’s leadership and strategic vision for Starbucks’ modern competitive edge played a role in taking the company from $59 a share at the start of his CEO run in 2017 to a peak of $126 a share in July 2021, settling in pre-Buffalo union vote around $115 a share. All in all, it amounts to around a 50% increase in share value. This post-mortem is to say that, even if Johnson was planning an exit for more than a year, his performance on most financial KPIs was strong. It’d be hard to say that Johnson was pressured to leave because he steered the company in an unprofitable direction or dropped the ball on the Board’s metrics.

Therefore if the narrative that he had been planning all along to leave in March has some holes, and if poor company performance is hard to argue as a motivator for swapping leaders, then one of the few errors left on Johnson’s track record was failing to proactively anticipate and prevent the spread of union sentiment. Taking all of the puzzle pieces into account, a speculative conclusion comes into focus: Even if Johnson and the Board had an exit planned at some point, his retirement came a bit earlier than expected and it was the rising unionization campaign that inevitably gave him an early boot.

“Especially when you’re coming out of the pandemic and the chain wants to go back to its more profitable and growth ways, it’s very imperative for the management to have its employees on board in all its growth ventures. And it is not in their interest to see unionization trying to put a damper on that,” Shankar said.

Seeking a new (or an old) type of leader to carry the company through this saga brought Starbucks back to the feet of its most famous spokesperson. Hobson made a bold prediction as Schultz returned to the company, that he was “singularly capable” of meeting this moment head on and creating positive results for the company. Is her prediction coming true?

Schultz’s History of Opposing Unions Highlights His Go-To Strategies

The final results of Schultz’s strategies toward the SWU movement won’t bear fruit for a while, so this analysis will only be a pulse-check reflecting on the company’s tactics and Schultz’s own actions up until now. With that said, unfortunately for Schultz and Hobson, his strategies have not had their intended effect. Starbucks unionization filings remain up, with recent wins in Tallahassee, Florida and Grand Rapids, Michigan. The announcement of expanded benefits for Starbucks workers hasn’t dissuaded them from consistent call outs of their difficult working conditions as well as of Starbucks’ response to the union.

Gauging how much of this continued worker sentiment is due to Schultz’s unique missteps versus a reflection of the times is up for debate. A reinvigoration of the labor rights fight is a trend capturing the imagination of workers across retail stores, from Amazon, to Apple, to REI, to Dollar General.

“It is a movement and we are not seeing just an isolated phenomenon. This is not the last time we are going to see it,” Shankar said. “Retailing was losing a lot of workers and not only because of the pandemic, but also workers not being able to meet the challenges of their customers even if they went to the workplace.”

But just because COVID massively disrupted the retail space and shined a light on gaps in the employee-management relationship doesn’t mean those gaps weren’t there in the first place. Starbucks itself is hesitant to say the whole SWU movement is COVID-related, either.

“We’re not hanging on COVID as an excuse. We made some mistakes here. We didn’t listen,” Hobson said in her CNBC interview.

Starbucks and Schultz’s anti-union strategies come in many different forms: telling baristas in Buffalo to vote ‘No’ on unionization, new benefits and higher pay, active denouncing of the union, allegedly firing organizing baristas, sit-down collaboration sessions with workers, and more.

These are not new strategies for Schultz, and that experience is likely why he was brought back to the company. His tactics have consistently ridden the balance of dissuading organizing through material improvements to worker conditions as well as direct language and actions against the unionizing narrative.

“If Starbucks goes to the extent of doing an audit and figuring out, ‘What are the major needs of the employees and how do we keep up with that? How do we anticipate this? How do we solve that?’ Then Starbucks would be on the right path, because in the past they have tried and done that and they have been ahead of the game by giving benefits, as I said, for…even part-time employees,” Shankar said. “That’s the way to try and resolve these issues in my view.”

Now we get to the global response. How are people taking Schultz’s actions? From analysis of various news reports and financial metrics, as well as the perspectives of the experts I spoke to, it appears Schultz’s union avoidance tactics are not being well-received.

Starbucks has likely spent millions of dollars already, including in exorbitant legal fees to successful union avoidance law firm Littler Mendelson, on its campaign to end the company’s union threat. Littler is known for defending and promoting tactics from the usual union-busting playbook, including opposing legislation that would “prohibit employers from requiring employees to attend meetings regarding the employer’s views on unionization,” otherwise known as captive audience meetings. Labor experts have seen these tactics time and time again, from Nissan to McDonald’s; Littler consultants and attorneys will join the fray and guide corporations to enact familiar tried-and-true strategies.

This time around, though, things are playing out differently for Littler, Schultz and Starbucks.

“At different historical periods that tactic can be effective. The problem here is that workers have lots of choices and they have maybe better choices. And these are relatively well-educated workers who know the law, who don’t feel as if they’re captured by this employer, and so threatening them with possible job loss probably isn’t going to have the same impact it might’ve had on some low wage factory workers a couple of decades ago,” Bruno said.

Though Schultz’s salary is only costing the company $1, labor experts say his anti-union strategies are costing the company much more than that.

“He seems to be making just one misstep after another. Somebody described him as the gift that keeps giving in terms of the union organizing effort,” Clark said.

Public sentiment against Starbucks and its tactics are only growing. Take a peek at r/starbucks on Reddit, an online community of over 218,000 Starbucks fans and baristas, and you find not only a pinned how-to guide on unionizing Starbucks stores but popular posts like this one:

Headline after headline back-linked throughout this piece shine a consistent light on various anti-union sentiments from Schultz and the company, which are shaping the public narrative; now there’s a legal battle for the company on the horizon, too.

Though Rossann Williams claims “there was no union-busting going on” at the initial Buffalo store, the NLRB disagrees and is validating, on a federal regulatory level, many of Starbucks Workers United’s and organizing employees’ grievances with Starbucks’ labor response.

After fielding dozens of unfair labor practice charges from organizers, the National Labor Relations Board issued a complaint against Starbucks that includes over 200 violations of the NLRA during the Buffalo campaign.

“It just makes the story: ‘Starbucks violating its own workers’ rights.’ And I don’t know how Starbucks and its brand benefit from that,” Clark said.

Though many of those decisions were made without Schultz as CEO, the NLRB complaint makes note of the “unprecedented and repeated” visits from Starbucks management, including Howard Schultz, as examples of the company’s union busting in action.

“They haven’t been convicted of 200 unfair labor practices, but the board has said, ‘we have probable cause that these are violations of the law, we’re charging Starbucks with these violations….’ We have to be careful to be clear that Starbucks hasn’t been found guilty of these at this point, but the board doesn’t willy nilly just make these charges,” Clark said.

Starbucks unfair labor practice filings across the country also continue to increase, rising steadily since the December Buffalo vote and indicating Starbucks’ strategies are consistently rubbing workers the wrong way.

Schultz’s moves have done nothing to stop organizing momentum, either. Unionization trackers have the number of SWU wins and certifications at 62 as of May 12, and the number of new filings per month has stayed consistently above 60 since February. The most recent wins for SWU include a close call in Oklahoma and a unanimous vote in New York.

“These kinds of rates of success, although it’s one company and the numbers are still relatively modest, the win percentage is at a rate historically high for a company. We haven’t seen union win rates like this probably since the passage of the National Labor Relations Act in 1935,” Bruno said.

The public outcry from workers aligns with the win count, with many of the interviewed organizers in the last few months expressing bewilderment, anger, and a lack of trust in Schultz and Starbucks’ good will. It’s making it much harder for Starbucks to control the narrative and convince the court of public opinion that they’re not acting in bad faith. Here’s just some of what they’re saying—

1. “Since Howard took over, there’s definitely a feeling that anti-union sentiment is less covert in my store.” – Virginia Conklin
2. “It was very, very bad. He was getting very aggressive with me.” – Madison Hall
3. “Starbucks is finally being held accountable for the union-busting rampage they went on.” – Danny Rojas
4. “We can resist and thrive, even among a storm of disinformation and fear-mongering perpetrated against our best interests.” – Brennen Collins
5. “We’re doing card signing on the floor, because that’s our public space. But management is making people really nervous to talk about it.” — Casey Moore
6. “They’re rolling up expensive suits to wash dishes and do trash runs. It’s almost comical.” – Jaz Brisack

The political winds are also blowing in favor of Starbucks workers. Not only has a Biden-appointed NLRB proven helpful to the union cause and bargained for workplace conditions that are more sympathetic to workers, but the administration has gone out of its way to get behind union movements sweeping the country. Barely a week ago, Secretary of Labor Martin Walsh and Vice President Kamala Harris invited union leadership from both Amazon and Starbucks to the White House for a (albeit, relatively symbolic) round-table on recognizing organizing rights and sharing the successes of their work. Other leaders within the current administration, including progressive legislators Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez, have both cheered on the movement in person and on social media.

You’d think investments into tactics that preserve the profit ratio of the company would at least keep Wall Street bullish on the company’s convictions and future, but even they aren’t confident in the strategies Schultz and Co. are wielding. Investors and analysts are writing to clients expressing concern about Starbucks’ standing, the cost of its various legal fees and potential benefit increases depressing stock value, and the company’s losing narrative battle. They’re specifically calling attention to…

1. “deterioration in brand perception if the union battle continues to make headline news”
2. “addressable problems in the near term are probably much more expensive and time consuming to bear results”
3. “wage hikes or growing momentum behind the unionization efforts…[making them] more bearish on the stock”

The company’s own investors warned leadership that this would be the outcome of an aggressive union avoidance mission. A group of shareholders, spearheaded by Trillium Asset Management, wrote two letters to Starbucks leadership pleading with them to “publicly commit to a global policy of neutrality” with Starbucks Workers United.

“Starbucks has worked hard to create a positive brand reputation rooted in pro-partner sentiment. We believe that Starbucks’ reputation may be jeopardized due to reporting of aggressive union-busting tactics,” the letter stated.

With Schultz as the company’s leader, the company’s stock value has consistently dropped, besides a recent peak after a Q2 earnings report showed another quarter of strong revenue numbers. However, it’d be a stretch to attribute that recent spike to Schultz’s leadership specifically considering he rejoined at the end of the quarterly period. Some more recent metrics show the percentage of portfolios holding Starbucks stock is up around 3%, indicating potential rebounding confidence in investor sentiment, though it’s yet to have an impact on the stock’s overall valuation.

The reaction from consumers is a little more mixed, and whether the union campaign will impact in-store sales in the short term is still in question, trending towards ‘no.’ A BTIG survey of nearly 1000 Starbucks customers found that 68% of consumers, an overwhelming majority, would be unaffected by a union campaign in their Starbucks shopping frequency. But the more esoteric battlefield of brand perception is still at risk, as Trillium and Co. pointed out. A different survey by Blue Rose Research with a larger sample size of 2515 customers found nearly 70% of Starbucks customers believe baristas “need a union” to secure “higher pay and benefits, worker safety and fair schedules.” So even if materially customers have yet to boycott alongside workers, the union movement is still winning the narrative battle.

All in all, through opposing the union movement Schultz and Starbucks have yielded the following: A union-supportive Starbucks community. Union win after union win across the country. The NLRB legally validating worker grievances. A slew of bad headlines. Concerned investors. Under-performing stock. If Schultz’s goal in returning to the top of the company was to effectively convince not only workers but the world that Starbucks was better off without a union, he’s failing to meet the mark.

What could put more power back in the hands of Starbucks to dictate the outcome of this situation is the current macro environment, which is being littered with layoffs. Robinhood, Carvana, Netflix, Amazon, Wells Fargo, and a number of other companies have announced labor cuts or hiring freezes in even just the last several days. If Starbucks lays off a number of workers due to difficulty managing operating expenses, which increased almost 18% in Q2 2022, or if workers fear that their unionizing wins will lead to mass layoffs, it could put a pause on union energy. However, mass layoffs could read as more aggressive union-busting by Starbucks, which as we’re seeing isn’t working in Schultz’s favor.

The strategy that has been received the best is Schultz’s new benefits package for workers, and labor experts agree that these kinds of proactive moves that assuage Starbucks partners’ concerns are the company’s best path forward.

“In the current environment where unionization is actually snowballing, it needs to be really having a more proactive approach…and see how best they can have a partnership win-win where they have to compete against other food or coffee chains,” Shankar said.

Will we see these expanded benefits, and the indication that they won’t be shared with unionizing employees, “chill” union sentiment as Starbucks Workers United claimed?

“In the retail sector from my own work I can say that some of these moves can sometimes have a bit of an effect,” said Peter Ikeler, Ph.D., Associate Professor of Sociology at SUNY College at Old Westbury.

“At Target, I observed that there was some element of welfarism, some pretty low rent benefits that were provided or offered at least to employees and at least in the context of a high turnover workforce that was highly precarious and highly transient, sort of by design in terms of who they were hiring and how they were hiring, that this can have some dissuasion effect or at least mitigate the appeal of some collective organized alternative, like a union,” Ikeler said.

Unfortunately, Starbucks’ asterisk on these benefits for organized baristas backfires on an altruistic message of “[reintroducing] joy and connection back into the partner experience.”

Another surprising layer is that, even before the first store unionized, Starbucks leadership was already doubtful of its ability to wield either the carrot or the stick effectively to keep labor costs down and employees satisfied.

“Our wages and benefits programs may be insufficient to attract and retain the best talent,” the company wrote in its quarterly SEC filing in November. “Our responses to any union organizing efforts could negatively impact how our brand is perceived and have adverse effects on our business, including on our financial results.”

Workers may also note that, though benefit improvements were asked for for years and were not listened to as Starbucks admits, they finally saw significant pay and workplace improvements only after a watershed unionizing movement put pressure on the company.

“In the aggregate, I would say it’s a good thing, right? It’s a good thing that the drive to unionize is in whatever way raising the bar for workers,” Ikeler said.

To our CEO audience: What would you have done differently? If Shankar were Howard Schultz, here’s what his main strategies would be instead:

1. “use all the marketing and the PR channels, particularly social media channel, to project these proactive initiatives”
2. “highlight all of Starbucks’s initiatives in the past to be ahead of the curve”
3. “reach out to all those people in the unionized locations one-on-one and try to meet them and try to resolve very sincerely their problem”
4. “go actively and manage the public policy officials, government officials perception, and be willing to state that we are front and center keeping our employees at the front and center of our initiatives and thoughts”

As CEO, Who is Schultz Responsible To?

We’ve gone over a lot of context on Schultz’s background in keeping Starbucks union-free, his recent methods and how the current SWU movement is playing out. Let’s distill all of this down into some more actionable analysis for companies and their leaders.

It’s an understatement to say Schultz had a difficult task ahead of him when he rejoined Starbucks. By the time his third CEO saga began, it could be argued there was little the company could do to both keep a union at bay and retain its coveted progressive brand. Regardless, it was his chief duty to take on this challenge and determine how the company would respond.

“Leadership style of the CEO can be a huge factor. A very vocal and visible CEO can set the tone all the way down to the shop floor,” said Todd Vachon, Ph.D., Assistant Professor of Professional Practice in Labor Studies and Employment Relations as well as Director of the Labor Education Action Research Network at Rutgers University.

Even if a CEO and their leadership team believes wholeheartedly, as Schultz does, that a union is the wrong option for a company, labor experts argue that both black letter law and the essence of modern leadership make it a CEO’s responsibility to support and engage honestly with employee grievances.

“His role as CEO is not principally to maintain pleasant employee-management relations, as welcomed and as encouraged as those are, but to respect the will of his employees to be collectively represented in all areas that impact the employment relationship,” Bruno said.

“The right to organize a union free from interference is enshrined in the National Labor Relations Act, and CEOs have a responsibility to let the process play out and let the workers make their decision free from coercion,” Vachon said.

When analyzing the standard power dynamics of corporate America today, it’s an agreed upon duty that a corporation’s goal is to maximize profits in the interests of various stakeholders, but mostly shareholders. Such is expected in the heart of Western capitalism. Some experts even argue it is a company’s legal responsibility to prioritize profits above all else. Get Wall Street analysts and shareholders on your bad side, and a company’s growth narrative can tank.

“CEOs are of course beholden to shareholders. Unfortunately, many managers see unions and the wage and benefit increases they typically entail as a hindrance to their competitiveness in the market,” Vachon said.

Looking at the CNBC article on Wall Street’s reaction to Starbucks’ strategies, shareholders have a number of concerns with how Schultz is handling the situation, including that they think Starbucks is spending too much money to stop the campaign. This includes spending too much on improved benefits, another layer of CEO motivators at odds with workers.

“Clearly the CEO has to take into account the interest of multiple stakeholders. One would hope that the main stakeholder of concern to the company would be the employees who in expressing the desire for a union are sending signals that they’re not happy with working conditions and the situation in their workplaces. But a CEO also has to be aware of the interests of managers in the stores, of executives of the company, and shareholders of the company,” Clark said.

In an age of ESG competitive edges, the tides of corporate responsibility are shifting away from just shareholders. It’s hard to say capital performance will ever stop being the chief concern of businesses in America, but CEOs are at least signaling that it’s their duty to expand the scope of responsibility.

In 2019, 181 CEOs signed an updated Statement on the Purpose of a Corporation, where they reframed a corporate responsibility of “shareholder primacy” for a “modern standard.” The various CEOs and the Business Roundtable identified these new chief goals as…

1. “Delivering value to our customers”
2. “Investing in our employees”
3. “Dealing fairly and ethically with our suppliers”
4. “Supporting the communities in which we work”
5. “Generating long-term value for shareholders”

Scroll down to the statement’s signatures and you’ll see a familiar name standing behind these goals: “Kevin Johnson, President and Chief Executive Officer, Starbucks Corporation.” Actively opposing unionizing Starbucks workers who’ve called out issues with pay and the workplace, and potentially holding new benefits back from unionized stores, creates friction with the standards of “compensating [workers] fairly and providing important benefits” that CEOs, including ex-CEO Johnson and by association Starbucks, have set for themselves in the modern age.

Schultz is also beholden to the company’s progressive brand, a major selling point for Starbucks and one of the main areas investors and analysts are calling out as at risk. Public sentiment towards unions today is at a widely-reported 57-year high, with 68% of US citizens holding favorable views of unions. If the company continues to antagonize the union, it could very well turn paying customers off to the brand; a Harris Poll sentiment study of almost 2000 American consumers backs this up as well, with 71% of respondents saying they want to see more service-industry companies unionized and 42% of respondents saying they’re less likely to shop with a brand that’s trying to stop a unionizing campaign.

“Starbucks is not the first, but it’s certainly the most visible self-styled progressive company that has experienced unionization efforts by dissatisfied employees. The fundamental differences between labor and management still exist, even in liberally-branded green, socially progressive companies,” Vachon said.

If anything, people are asking for a return to form from Schultz, embracing the values he and the company say they hold dear. Trillium’s letter to Starbucks leadership summarized well how many of the engaged parties, from workers to investors, see Schultz’s responsibilities in this moment:

“This group of investors encourages Starbucks to pivot to a more collaborative and mutual relationship with its unions to uphold its reputation and in keeping with the spirit of the ‘empty chair’ that founder Howard Schultz imagined for partners in leadership and board meetings.”

“If you would ask anybody two years ago, ‘what are the odds of Starbucks having 50 of their stores unionized and 250 others having organizing campaigns,’ you wouldn’t find anybody who knows anything about union management relations saying that’s a possibility in the least. So, you think someone’s going to look at this situation and say, ‘we’ve taken a few embers here and we’ve turned it into an inferno and unless we want to continue to burn the good will of employees across the country, we’ve got to do something different,’” Clark said.

Unions May Reduce a CEO’s Pay and Profits, But Not Necessarily Company Productivity

Today’s CEOs are in a tricky spot as the macro environment remains unstable and labor organizing steadily rises. Based on the outpouring of criticism against Starbucks though, it’s safe to say that CEOs facing a union drive shouldn’t be taking a page out of Schultz’s playbook if they want to create positive partnerships with employees as well as get public perception on their side.

To end on a proactive note, we asked our retail and labor expert sources to offer not only Schultz, but CEOs in general, some advice in the context of learning from the current Starbucks saga, its successes, and its failures. Hopefully not only these final insights, but this report as a whole, can give today’s modern corporate leader a better roadmap for how to engage with workers while maintaining a company’s brand commitments, integrity, and responsibilities to various stakeholders.

Venkatesh Shankar: “If unionization happens, the sky is not falling down and all is not lost. You’ve seen unionization at several retail establishments, several industries and companies have done very well, grown very well. The key is again, if you are truly customer-centric and employee-centric, you will actually be very proactive, work with the union and bring the employee’s issues ahead of every other concern. So I think working with the union, with the employees at large, communicating constantly with them, would be the way to go. And I think they can considerably reduce all the angst between union and management and all of the perception problems. And studies have shown that for proactive management that actually anticipates employees issues ahead of time and the results actually makes the job of union redundant. So that’s the key, the way to view it is that, ‘How can I make unions job redundant?’ So in other words, employees should be able to say, ‘Oh, the management is doing such a great job, it doesn’t make a difference whether I’m part of the union or not, I’m still treated the best way possible and it’s a great company to work for.’ I think that’s where the companies will have to strive for.”

Paul Clark: “If you want to keep your workplace from having a union, not that that’s the advice I would necessarily give, you wouldn’t do it the way Schultz is doing it, you would give your employees greater voice. You would give them ways to communicate their ideas and their feelings about their job and their work environment, and you would listen to them very closely, and you would take their ideas and their suggestions very seriously….”

Robert Bruno: “CEOs really should recognize the significant value add that comes with partnering with their employees. But that partnering’s gotta be genuine. It cannot be top-down. It cannot be through the dictates of ownership or senior managers. It has to be genuinely predicated on the belief that the folks who do the work, the folks who do the work, whether that’s making widgets or whether that’s serving that fresh brewed favorite cup of coffee early in the morning as someone heads off to the train or is heading off to a construction site, that person is the person who’s most invested in seeing that company succeed. That person cares about their job. That person needs that job, that work is essential to their wellbeing. It’s a major contributor to their identity, and over and over again workers tell employers, ‘we want more voice, we want legitimate representation.’ And if those workers then choose to pursue unionization, they’re making a statement that they believe that that body is the best organization to help them do their work most efficiently, and it’s meant to frankly improve, really improve the work that the firm is done. It’s not contrary to the interest of the firm.”

Todd Vachon: “I would remind Schultz that the public approval rating of unions is at a record high, strikes and organizing efforts are underway across the whole economy, and the public is very supportive of these efforts. These are things to keep in mind when considering the brand image in the face of workers organizing.”

Peter Ikeler: “I think broadly there’s an ingrained managerial outlook in US corporations that, if you allow unionization to happen at your firm, you’re either doing something wrong or you’re weak – even though many successful US companies are partly or wholly unionized.”

As we look ahead at Starbucks’ future, Schultz’s traditional union avoidance strategies are being challenged almost daily. The union saga continues with the coming NLRB adjudication and there aren’t many signs indicating the tides will shift toward Starbucks’ union-free interests.

The overwhelming advice for curbing a union campaign today is being proactive with workers and putting their needs as a primary concern for the company. But as labor experts explained, curbing a union may be a dated strategy in and of itself, proving counterintuitive and counterproductive for Starbucks. Though a union can impact company profits and even CEO pay, the strategy of embracing the union can be a positive and competitive differentiator in today’s economic environment.

“That’s what American managers need to do rather than have a knee jerk reaction that, ‘we have to drop nuclear weapons on any union organizing campaign because if we don’t and it succeeds, we’re out of business,’” Clark said.

Perhaps now is the time for CEOs to put this metaphorical nuclear first strike policy behind them and write a new union response playbook.

Reporting, analysis and video edits by Daniel Litwin. Graphs and images by Amanda Herrera.