Starbucks CEO says ‘things went wrong’ for young people

Howard Schultz, CEO of Starbucks, has returned to the helm of the company after 15 years to put the struggling business back on track.

At the time, the coffee chain was struggling, facing increasing competition, cooling customer interest and facing the financial crisis.

Last year, it returned yet again, as Starbucks was in the midst of a different crisis: a rising tide of unionization among Starbucks employees, many of them young and frustrated with the status quo.

Schultz, who sat down for a long-range conversation with Poppy Harlow from CNN in February, covering union, China relations and the US economy, he said he did not return to Starbucks because of union efforts.

But he saw the labor movement as a sign that things were not looking good at Starbucks and for young people in general.

“I believe that unionization efforts in America are, in many ways, the manifestation of a much larger problem,” he told Harlow. “There is a macro issue here that is much, much bigger than Starbucks.”

The first Starbucks store voted to unionize in December 2021, about five months before Schultz becomes CEO — this time on an interim basis — for a third, and he says, last time. Even before officially returning to the company, Schultz was already alarmed by union pressure.

In November, a month before the unionization vote, he published an open letter to employees.

“No partner has ever needed a representative to get things we all have as partners at Starbucks,” he wrote, using the word “partner” to refer to employees, as Starbucks does. “I am saddened and concerned to hear anyone think this is necessary now.”

Union workers are fighting for guaranteed hours, protecting benefits for part-time workers and more.

One priority, they say, is getting Starbucks to subscribe to fair election principles that protect workers’ rights to organize without retaliation.

In the months since returning as CEO, Schultz has doubled down on his opposition to the union. And during his tenure, the battle raged and he got ugly.

Union leadership accused Starbucks of refusing to negotiate, threatening its benefits and employing anti-union tactics, allegations the company has denied.

The union has filed hundreds of allegations of unfair labor practices against the company, and Starbucks has filed some of its own unfair labor allegations against the union, saying it is the union that is holding up negotiations.

The NLRB found, in some cases, that the company illegally threatened and fired workers involved in the union effort.

A judge recently ruled that Starbucks must stop firing employees who are involved in the union. The company said the measure was unwarranted and, in relation to the NLRB’s findings, that it strives to comply with the law.

And recently, Vermont Senator Bernie Sanders and the rest of the Senate Health, Education, Labor and Pensions Committee asked Schultz to testify at an upcoming hearing on Starbucks compliance with labor laws. Schultz declined, and Starbucks announced that its director of public relations, AJ Jones II, will attend.

By mid-February, the National Labor Relations Council had certified 282 stores that voted for unionization and 56 that voted against it.

There are about 9,300 Starbucks stores operated by US companies, and a relatively small number have voted to unionize.

For Schultz, that means the vast majority of employees at Starbucks stores are happy with the way things are.

“People have lost confidence”

When Schultz returned to the company last year, he spent months visiting employees as part of a listening tour that helped him develop a new roadmap for the company, which he said had “lost its way.”

“I’ve talked to thousands of our Starbucks partners,” he told Harlow. “I was shocked, surprised to hear the loneliness, the anxiety, the breakdown of trust in government, the breakdown of trust in companies, the breakdown of trust in families, the lack of hope in terms of opportunity.”

American companies “face unionization because [os trabalhadores estão] upset, not so much with the company, but with the situation”.

Still, Starbucks made some specific mistakes, he said, during his absence.

Before becoming interim CEO last year, Schultz held the top spot from 1987 to 2000 and again from 2008 to 2017.

But even when he last relinquished office, he remained involved as chairman of the board – until 2018, when he retired.

That four-year lapse, Schultz said, was a “mistake,” adding, “I probably should have stayed engaged.”

This time, Schultz will retain his seat on the board after new CEO Laxman Narasimhan takes over.

Especially during the pandemic, “some decisions were made that I would not have taken,” he said, without specifying which ones. Asked for more details, a spokesperson pointed to the resumption of training programs in 2022.

“As a result of that, I think people have lost confidence in the leadership of the company.” Efforts to unionize, he said, were spurred “because Starbucks was not leading in a way consistent with its history.”

Still, he sees the union as a relatively minor issue representing the wishes of a small group of people.

“I don’t think a union has a place at Starbucks,” he said. “If a de minimis group of people… petition to be unionized, they have the right to do so. But we as a company are also entitled to say that we have a different view that is better.”

But that’s probably not the case, said Rebecca Givan, an associate professor of labor studies and labor relations at the Rutgers School of Management and Labor Relations.

“I’m sure there are a lot of people interested [em se sindicalizar]but afraid,” he said.

“We know just from general survey data that many, many workers are interested in organizing collectively or being represented collectively.” This is especially true among younger workers, he pointed out.

Collectively, workers have more leverage over employers, giving them more bargaining power.

“If Starbucks really thought that few people were interested, then they could promise neutrality,” Givan said, as Microsoft did last year. Schultz said that just as workers have a right to organize, Starbucks has “a right to defend itself.”

As CEO, Schultz has responded “in a very typical way,” Givan said, with how strongly he opposes the union. “I think every corporate leader takes it personally and when their employees organize, even though they shouldn’t,” he said.

“I don’t see a recession coming”

As Starbucks grapples with the union effort at home, it also faces challenges in China, its top growth market.

In the three months to January, sales at Chinese Starbucks stores open at least 13 months fell 29% due in part to Covid restrictions.

Despite these setbacks, Starbucks remains bullish on China, even as tensions rise between the country and the United States.

“I don’t believe China is America’s enemy,” Schultz told Harlow, describing China as a “fierce adversary, especially economically.” In his opinion, there needs to be “good and solid geopolitical relations between the Chinese government and the US government”.

As it moves into China, Starbucks is moving away from Russia, he said.

Starbucks pulled out of the country last year because of Russia’s attack on Ukraine, and Schultz doesn’t see the company coming back. “I think Starbucks left Russia for good.”

Back in the United States, the CEO anticipates a “soft landing” for the economy. “I have great confidence in the US economy,” he points out. “I don’t see a recession coming.” Inflation, he thinks, has peaked.

This goes for Starbucks prices as well. “I don’t think our prices are going up.”

Source: CNN Brasil

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