Starbucks is finally past its Howard Schultz era

Schultz didn’t start Starbucks, but he built it into the company it is today. (REUTERS)
Schultz didn’t start Starbucks, but he built it into the company it is today. (REUTERS)

Summary

  • Former CEO Schultz was against the coffee giant having an employee union, but it has reached a point where the company cannot uphold his view on the matter anymore. Starbucks may have realised that a union is good for it.

Howard Schultz officially stepped down as chief executive officer of Starbucks in March 2023. But with Schultz [whose name has so closely been associated with the Starbucks story], you’re never really sure that he’s gone. Twice before has the coffee-chain’s longtime CEO handed over the company’s reins to a hand-picked successor. And twice before has he boomeranged right back into the CEO job, claiming he had returned to fix the course of a company that had lost its way.

But this week, we got the surest sign yet that the Schultz era at Starbucks is now officially over. The company and the union representing its employees said they had agreed to start discussions about how to reach collective bargaining agreements. It’s the first real indication of any sort of thaw between the two parties, which have been locked in a bitter battle over workers’ efforts to organize.

These initial steps toward an agreement were unlikely to ever have happened with Schultz in charge. He’d been adamantly opposed to a union at Starbucks; in fact, labour organizing itself at the company was one of the factors that precipitated his 2022 return.

Things had gotten nasty back then. Last year, Schultz testified in a Senate committee meeting about the company’s alleged labour law violations, prompting Vermont Senator Bernie Sanders to describe Starbucks as waging “the most aggressive and illegal union busting campaign in the modern history of our country." Schultz said repeatedly during the hearing that the company had not broken the law.

Seeing the company used as a proxy for union busting and corporate greed was a sharp turn for Starbucks, which has long been a favourite of latte-loving liberals. But Schultz’s position on the union always seemed very much at odds with the kind of company he had tried to build—one with progressive benefits and progressive stances. The company was one of America’s first corporate giants to take a clear public stand on social issues like gun control and Black Lives Matter.

Schultz didn’t start Starbucks, but he built it into the company it is today. And in him, we saw how the best and worst parts of founders and long-time CEOs are often one in the same: Everything is personal for them. They inject a company with passion and dedication, but that can also mean they make decisions using emotion rather than reason. It’s understandable, having created a company in which its every failure and success is tied to their own identity. In Schultz’s case, he always said he tried to make Starbucks the kind of employer his father, who had once been fired after injuring himself on the job as a delivery driver, never got the chance to work for.

So for Schultz, the arrival of the union was deeply personal. He believed that only badly behaved companies needed unions to protect their workers; in his mind, Starbucks was not that kind of a company, and he was not that kind of CEO.

When I wrote about the hearing last year, Wilma Liebman, a chairman of the National Labor Relations Board during the Obama administration, told me that Schultz was exhibiting the “reflexive anti-unionism" often seen among company founders. Because it’s a group that tends to take worker activism so personally, it makes them more prone to anti-union behaviour. “It’s a huge disappointment," she said of Starbucks.

The coffee giant, however, has reached a point where CEO Laxman Narasimhan can no longer afford to uphold his predecessor’s position on the union. When Starbucks reported earnings earlier this month, posting its slowest sales growth in a year, analysts in part blamed the impact of consumer boycotts over the war in Gaza and the company’s prolonged fight against the union.

Perhaps most worrisome, Starbucks had put itself at risk of losing its future customer base. Gen-Z has been called “the most pro-union generation" and has shown a willingness to make sure its spending aligns with its values in a way we don’t see with other age cohorts. Last week, for example, actions were planned at 25 college and universities by students who want Starbucks kicked off their campuses for its alleged anti-union activities.

Schultz built Starbucks into the coffeehouse behemoth it is today by not only keeping up with the cultural moment, but by informing it, selling not just coffee but also a set of values. His stance on unions—which now have historic levels of support in America—was a sign that he had fallen out of step. It seems to have taken an outsider to realize that moving forward with the union isn’t a personal failing but rather a good business decision. ©bloomberg

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