Starbucks CEO says things have gone sour for young people

By Danielle Wiener-Bronner

Fifteen years ago, Howard Schultz reprised his role as Starbucks CEO, returning to the helm to help put the struggling company back on course. At the time, the coffee chain was flailing, facing growing competition, cooling customer interest and contending with the financial crisis.

Last year he returned once again, as Starbucks was in the midst of a different crisis: A growing wave of unionization among Starbucks employees, many of them young and frustrated by the status quo.

Schultz, who sat down for a far-reaching conversation with CNN’s Poppy Harlow in February, covering the union, relations with China and the US economy, said he didn’t return to Starbucks because of the union efforts. But he did see the labor movement as a sign that things had gone sour at Starbucks, and for young people in general.

“It’s my belief that the efforts of unionization in America are in many ways a manifestation of a much bigger 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 of 2021, about five months before Schultz became CEO — this time on an interim basis — for the third, and he says final, time. Even before he officially rejoined the company, Schultz was already alarmed by the union push.

In November, a month before the successful vote to unionize, he published an open letter to employees. “No partner has ever needed to have a representative seek to obtain 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 thinks that is needed now.”

Unionized workers are fighting for guaranteed schedules, protecting benefits for part-time workers and more. One priority, they say, is to have Starbucks sign fair election principles which 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 has intensified and turned ugly.

Union leadership has accused Starbucks of refusing to come to the bargaining table, threatening their benefits and employing union-busting tactics, claims that the company has denied.

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

The NLRB has 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. Starbucks said the measure was unwarranted, and, relating to the NLRB’s findings, that it endeavors 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 in an upcoming hearing on Starbucks’ compliance with labor laws. Schultz declined, and Starbucks announced that its chief public affairs officer AJ Jones II will attend instead.

As of mid-February, the National Labor Relations Board has certified 282 stores that voted to unionize, and 56 that voted against. There are about 9,300 US company-operated Starbucks stores, and a relatively small number have voted to unionize. To Schultz, this means that the vast majority of workers at Starbucks stores are happy with how things are.

The union sees its growth, in spite of Starbucks’ muscular fight against it, as a clear sign of worker interest. “The fact that Starbucks workers are continuing to organize and win shows just how much workers need and desire a union,” Starbucks Workers United said in a statement to CNN.

Over the years, Starbucks has cultivated its image as a progressive company, an image that Schultz himself helped establish by offering employees health insurance, tuition reimbursement and company stock.

But as he prepares to step down from the CEO role, that reputation is being challenged, in large part because of the company’s steadfast opposition to the union. But Schultz, who doesn’t think fighting the workers’ unionization effort will tinge the company’s legacy, is not backing down.

‘People did lose trust’

When Schultz re-joined the company last year, he spent months visiting with 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, stunned to hear the loneliness, the anxiety, the fracturing of trust in government, fracturing of trust in companies, fracturing of trust in families, the lack of hope in terms of opportunity.”

American companies are “faced with unionization because [workers are] upset, not so much with the company, but the situation.”

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

Before he became interim CEO last year Schultz served in the top spot from 1987 to 2000, and then again from 2008 to 2017. But even when he had ceded the role for the final time, he remained involved as chairman of the board — until 2018, when he retired. That four-year lapse, Schultz said, was a “mistake,” adding, “I should have probably stayed engaged.” This time, Schultz will retain his board seat after incoming CEO Laxman Narasimhan takes over.

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

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

Still, he sees the union as a relatively minor issue that represents the desires of a small group of people.

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

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

“I’m sure there’s a large number of people who are interested [in unionizing], but afraid,” she said. “We know, just from general polling data, that many, many workers are interested in organizing collectively or in being represented collectively.” This is especially true among younger workers, she said.

Collectively, workers hold more sway with employers, giving them more power to negotiate.

“If Starbucks really thought that not that many people were interested, then they could pledge neutrality,” Givan said, as Microsoft did last year. Schultz said that just as workers have the right to organize, Starbucks has “the right to defend” itself.

As a CEO, Schultz has been responding “very typically,” Givan said, in how strongly he’s opposed the union. “I think every corporate leader takes it personally and when their workers organize, even though they really shouldn’t,” she said.

‘I don’t see a recession coming’

While Starbucks deals with the union effort at home, it also faces challenges in China, its key growth market. In the three months through January, sales at Starbucks’ Chinese locations open at least 13 months plunged 29% due in part to Covid restrictions.

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

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

As it forges ahead in China, Starbucks is steering clear of Russia, he said.

Starbucks exited the country last year because of Russia’s attack on Ukraine, and Schultz doesn’t see the company ever going back. “I think Starbucks is gone from Russia for good,” he said.

Back in the United States, Schultz is anticipating a “soft landing” for the economy. “I have great confidence in the US economy,” he said. “I don’t see a recession coming.” Inflation, he thinks, has peaked.

That goes for Starbucks pricing, as well. “I don’t think our prices are going up,” he said.

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