Starbucks new CEO Laxman Narasimhan led his first shareholder annual meeting Thursday, facing investors' questions just days after he took over the role from longtime leader Howard Schultz.
Shareholders presented five proposals, including a more robust CEO succession plan and an assessment on the company's alleged anti-union practices. Seattle-based Starbucks recommended voting against all shareholder-introduced proposals. The votes will be announced within four days through a filing with the Securities and Exchange Commission.
In the meeting, Narasimhan laid out his monthslong process to acclimate to the coffee giant since he was announced CEO in September.
During the transition, Narasimhan met with teams across the world. He said at this point he understands the company well, but still has to earn his "green apron" every day.
Narasimhan also took the time to become a certified barista. He said he plans to work a half-day shift once a month in a Starbucks store.
Aside from the transition, Narasimhan steered away from topics about growing labor tensions between the coffee giant and union workers.
In response to a question about whether Starbucks would commit to a labor neutrality agreement with Workers United, the company's chief communications officer and executive vice president AJ Jones II stepped in to say that the company wouldn't do so. A labor neutrality agreement is a contract with many provisions under which the employer agrees to support a union's attempt to organize.
The agreement includes provisions such as a "card check" agreement, which means that instead of a secret ballot election, the employer recognizes the union automatically if the number of cards reaches a specific threshold.
"We believe that we must affirm our partners' ability to vote in an election and have access they need to make an informed decision," Jones said. Starbucks refers to workers as partners. Jones, previously a policy director for U.S. Rep. James Clyburn, D-S.C., is part of a three-person group in charge of labor decisions at Starbucks.
With the "card check" process, Jones said, "we would be suppressing the ability for those who didn't vote, or making a determination that may not be in line with their experience, their expectation or their choices."
Narasimhan had a taste of the labor movement in his first week in the CEO role. On Wednesday, striking baristas protested in more than 40 U.S. cities as well as outside Starbucks' Sodo headquarters. They demanded the company stop alleged union busting.
The protest came just a week before Schultz is scheduled to testify before a Senate committee about alleged anti-union activity, following a standoff with the committee's chairman Sen. Bernie Sanders. Schultz had originally declined to testify.
During the back and forth with Sanders, Starbucks presented Jones along with executive vice president and general counsel Zabrina Jenkins and vice president for partner and labor relations May Jensen as the group responsible for union-related decisions. The company also said that Schultz was not involved in making decisions regarding labor issues.
Starbucks' contentious relationship with the union, Starbucks Workers United, has led to hundreds of unfair labor practices charges filed with the National Labor Relations Board both by the union and Starbucks. NLRB regional directors have issued 80 complaints against Starbucks for illegal anti-union efforts, such as terminating union activists and closing stores. Starbucks has argued the accusations are false and that the union has failed to negotiate in good faith.
Investor concerns
The union grievances had spilled over to the investor side before the meeting. In February, a shareholder coalition including Trillium Asset Management and the Office of the New York City Comptroller introduced a proposal for Starbucks shareholders to vote on creating a commission to oversee an "independent, third-party assessment of the company's adherence to its stated commitments to workers' rights to freedom of association and collective bargaining."
In a SEC filing, Starbucks recommended that shareholders vote against the proposal. Earlier this month, the coffee giant said that an independent third party would conduct a human rights impact assessment unrelated to the proposal. The results will be available by the end of the 2023 fiscal year.
In response, the coalition wrote the statement "was issued unilaterally by the company and not following any dialogue with the proponents of the shareholder proposal."
During the meeting, Jenkins said the company's own internal assessment will include "a deeper level review of the principles of freedom of association and the right to collective bargaining," which, she argued, will make it more complete than the one proposed by the shareholders.
On behalf of the coalition, Illinois State Treasurer Michael Frerichs said in Thursday's meeting that the proposal provides the board an opportunity to prioritize Starbucks' compliance to its own guidelines.
"Starbucks has strong human rights policies," Frerichs said. "Recent events have called into question whether Starbucks is actually living up to its commitments. Specifically, its explicit commitments to the fundamental right of employees to free association and collective bargaining. This includes the right to form or join a union without management interference."
Succession plan
Other investor proposals include creating a more robust CEO succession plan, introduced by SOC Investment Group, an activist group that works with union-sponsored pension funds.
The proposal listed the abrupt announcement of former CEO Kevin Johnson's retirement, Schultz's return to the helm for a third time, the lack of any internal candidates and the rollout timing of the company's reinvention plan as "indicators of shortcomings in succession planning and the leadership pipeline."
The reinvention plan is Starbucks' $450 million strategy to grow the number of stores and focus on new consumer behavior.
SOC's Cynthia Simon said during Thursday's meeting the plan would include succession planning at least three years in advance and metrics of standards to evaluate the planning process.
Narasimhan took over the role of CEO on Monday, earlier than the previously announced date of April 1. As CEO, he also joined Starbucks' board of directors. Before Starbucks, Narasimhan was chief executive of British consumer goods giant Reckitt. Since he was named in September, Narasimhan remained mostly in the background. Starbucks described his time during the transition period as "an immersion" in the company's operations and culture.
The other proposals include creating a commission to make a report about costs to Starbucks' reputation and sales from higher plant-based milk charges, requesting that Starbucks report annually how much it relies on China, "a serial human rights violator, a geopolitical threat and an adversary to the United States," as well as creating a board committee on corporate sustainability because of "woke business practices" that hurt the company.
The way ahead
Narasimhan said in his first letter to employees after assuming the CEO role that Starbucks has limitless potential, but "we have to first address what is limiting us" and that the company's health needs to be stronger.
For long-term, sustainable growth, Narasimhan said Starbucks will have to further elevate the brand, scale digital experiences, increase the global presence, become less wasteful and faster, "and, critically, we will reinvigorate our culture around what it means to be a partner at Starbucks."
"By continuing to nurture human connection, I believe the possibilities for Starbucks are limitless," he said at the closing of the shareholder meeting.
