Howard Schultz is suspending Starbucks’ stock buyback program and vowing to redirect capital to its businesses and employees on the first day of his third term as CEO of the US coffee chain.
The decision came as Starbucks faced a growing union movement in its home market, rising labor and commodity costs, and potential threats to its international growth, from suspension of operations in Russia to Covid-19-related lockdowns in China.
“This decision will allow us to invest more in our people and our businesses — the only way to create long-term value for all stakeholders,” Schultz said in a letter to employees, three weeks after the company announced that Kevin Johnson is retiring after five years as CEO and Schultz is returning temporarily.
His pledge was followed within hours by news that Starbucks had fired Laila Dalton, a shift supervisor in Phoenix, Arizona, in a move Starbucks Workers United described as “blatant retaliation.” [a] union leader”.
Casey Moore, a barista at Williamsville Place Starbucks in Buffalo, New York, said the other members of the union campaign were “hopeful, but frankly, expected nothing less” after Schultz’s return.
“It is disheartening and disappointing to see what appears to be the brains of a progressive company. . . can be so anti-labor movement,” she said, adding that employees wanted to be consulted on how the buyback funds would be redirected.
“It’s great that they want to invest in partners, but we have to be decision makers in those investments,” she said.
Starbucks said Dalton included individuals without their consent, adding, “A partner’s interest in a union does not absolve them from the standards we have always held.”
Schultz said Monday in a phone call with employees that companies were “assaulted in many ways by the threat of unionization,” but added that he was “pro-Starbucks” rather than “anti-union.”
Starbucks, which underperformed the S&P 500 over the past year, ended Monday down 3.7 percent at $88.09.
Starbucks suspended share buybacks in 2020 to focus on paying down debt it incurred during the pandemic. Johnson announced plans last October to spend $20 billion on buybacks and dividends over the next three years.
The company reported in February that it spent $3.52 billion on its own shares in the three months ended Jan. 2, in line with a recent spate of buybacks by U.S. companies keen to increase their earnings per share by reducing the number of shares outstanding.
Shareholders, customers, communities and the planet would all benefit if the company were aligned to “share success with each of us and for the collective success of all our stakeholders,” Schultz said Monday.
He announced the launch of “design sessions” involving employees from across the company “to collectively create a future of shared success in a multi-stakeholder era,” he added, without giving details of what those would entail .
Schultz’s comments reflected his attempts to revitalize Starbucks when he first returned as chief executive in 2008, after warning of “the commercialization of the Starbucks experience.”
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The company faced “new realities in a changed world,” from constrained supply chains to “an emerging generation seeking new responsibilities in the business,” Schultz added Monday. “As Starbucks, we can either choose to stand up to this moment — or stand still.”
A group of shareholders who collectively hold $1.2 billion in Starbucks stock urged Schultz Monday to consider the risks of “angering” employees who want to unionize. Getting to the table with workers would lead to reduced staff turnover and long-term success, they argued.
Dieter Waizenegger, managing director of SOC Investment Group, one of the shareholders, told the Financial Times it was “a good first signal that [Schultz] speaks of long-term, not short-term price jumps”. However, he warned that the CEO’s rhetoric would be “an empty gesture” unless relations with employees improved.
In a statement accompanying Schultz’s letter, the company noted that Starbucks stock had risen 21,000 percent in the previous four decades as CEO or CEO, between its listing in 1992 and its departure in 2017.