On Monday, Howard Schultz returned to Starbucks as its CEO. It's the third time he has held the role, this one after Kevin Johnson, who was appointed CEO in 2017, announced last month that he was retiring.
While Schultz has made it clear that he intends to hold the role only on an interim basis, he wasted no time making a significant change. In a letter to employees that was published on the company's blog, Schultz said the company was canceling its plans to buy back $20 billion of its stock over the next few years. That move had been announced in October and came after the company previously spent $12 billion in 2019 and 2020 on its shares. Schultz wrote:
Starting immediately, we are suspending our share repurchasing program. This decision will allow us to invest more profit into our people and our stores -- the only way to create long-term value for all stakeholders.
Starbucks's shares fell 5 percent when the market opened, a sign that the move is controversial, especially among investors who had seen the buybacks as a positive move amid slowed growth and increased expenses during the pandemic. The company's shares had climbed 79 percent under Johnson, much of that due to the buyback strategy.
Despite the controversy, the more important lesson is the second sentence above: "This decision will allow us to invest more profit into our people and our stores." That, Schultz says, is "the only way to create long-term value for all stakeholders."
That, in fact, is where things get interesting. Schultz is inheriting a company that looks different than the one he left five years ago. Employees have stepped up efforts to unionize as they criticize the way they are treated by the company, especially during the pandemic. To date, 11 stores have voted to form unions, including the company's flagship roastery in the Chelsea neighborhood of New York City.
Some of the primary complaints center on employee pay and working conditions. It's no coincidence that the two things Schultz mentioned the company plans to do with the $20 billion are investing in its people and its stores.
Schultz is a well-known opponent of unionization efforts. He spent much of his time as CEO pushing back against unions. He seemed to take efforts to unionize personally -- considering it a leadership failure that employees would want to join a union at all. In his 1997 book, Pour Your Heart Into It, Schultz wrote that if employees "had faith in me and my motives, they wouldn't need a union."
I don't know if Schultz's return is a direct effort by the company to cut off the unionization efforts. Certainly, if that's the company's goal, he's the best person to have in charge. Even if it isn't the overt goal of bringing him back, there's no question the company needs someone focused on improving its relationship with its employees, which it calls "partners." Of course, the thing about "partners" is that the relationship is mutually beneficial.
In the long run, investing in its people benefits everyone. Employees benefit when they feel valued and are compensated fairly for the work they do. Starbucks benefits by earning back trust and fixing the broken relationship.
Shareholders benefit too, especially if the company is able to head off further efforts to unionize stores -- something investors fear will jeopardize the company's reputation. Committing to spend $20 billion on employees instead of handing money back to shareholders seems like the type of thing that could make a real difference, even if it's sure to be controversial.