Starbucks shareholder sends letter to SEC calling for disclosure of information

The Strategic Organizing Center, or SOC, a shareholder of Starbucks, submitted a letter to the SEC, detailing what it believes are failures by Starbucks to properly disclose material information – including the full cost to date of the company’s “aggressive and illegal anti-unionization efforts” – that shareholders have a right to know in advance of making voting decisions prior to the annual meeting of shareholders. The annual meeting is currently scheduled for March 13. As the letter states: “Since before the Proxy Contest began, Starbucks has attempted to create a smokescreen of positivity around its conduct concerning its aggressive opposition to Starbucks workers’ efforts to unionize, in many cases by violating federal labor laws. These efforts are well documented. Moreover, the Company’s forceful tactics have led not only to increasingly problematic human capital management issues, but also substantial costs and liabilities that the Company has never acknowledged or disclosed, but that the SOC estimates to be at least $240 million to date. The SOC’s analysis includes the estimated total of litigation costs and expenses, other categories of expenditures (including employee lost time, communications and internal Starbucks staffing) as well as liabilities associated with labor law violations sustained by National Labor Relations Board (the “NLRB”) complaints and/or labor judge determinations. Based on the SOC’s analysis, Starbucks’ anti-union campaign includes the following estimated costs and liabilities through February 2024: Estimated Costs Based on Company Anti-Union Activity through February 2024: Legal Fees: Litigation (State and Federal Court, NLRB),1 Campaign Advice, Expenses $100 million Consultants and Internal Support: Communications, Research, Training $40 million Store Employee Productivity Lost Time: Captive Audience Store and Individual Meetings, Trainings $13 million Estimated Liabilities Based on NLRB General Counsel Complaints and Administrative Law Judge Decisions through February 2024:2 Illegally Denied Wages and Tips (Note: This grows at a rate of $815,000 per week) $61 million Illegal Firings and Store Closings $26 million Total Estimated Expenditures and Liabilities $240 million The letter also describes why the SOC believes that Starbucks’ proxy materials and other filings fail to provide an accurate portrayal to shareholders: Indeed, the Company spills a fair amount of ink (in its proxy statement) on its “Reinvention Plan” and business strategy to paint a rosy-yet misleading-picture of its purported attention to its partners that acknowledges their importance while obfuscating Starbucks’ true approach to human capital management that informs the Proxy Contest.3 In doing so, the Company tactically and conveniently cherry picks what it thinks the broader investing public should know about its business and about the Proxy Contest. In the letter, the SOC requests that the SEC require Starbucks to fully disclose to shareholders the costs and liabilities associated with its anti-union efforts. The SOC believes Starbucks’ lack of disclosure and the exorbitant cost to shareholders represent just the latest examples of the current Board’s lack of oversight, counterproductive approach to labor issues and flawed allocation of resources. For these reasons – and to protect shareholder value – the SOC has nominated three director candidates (the “SOC Nominees”), who are ideally suited to help repair the relationship with the Company’s workers and regulators while safeguarding the best interests of all Starbucks’ stakeholders. The SOC Nominees are: Maria Echaveste, a former senior White House official, senior Department of Labor appointee and corporate attorney with significant international relations and public company board experience. Hon. Joshua Gotbaum, who has been a director of both public and private companies with decades of experience in corporate governance and change, as well as significant public policy and government experience. Hon. Wilma Liebman, who possesses over 40 years of experience in labor management, employee relations, wage negotiations, public policy and law – including having served as the Chair of the NLRB under President Barack Obama. Shareholders can be part of ensuring Starbucks returns to the right path for the future by using the BLUE proxy card to vote “FOR” each of the SOC Nominees today. Shareholders can also vote for the SOC Nominees on the Company’s White proxy card.”