Howard Schultz: Unions ‘the manifestation of a much bigger problem’

New York (CNN) Fifteen years ago, Howard Schultz resumed his role as CEO of Starbucks, returning to the helm to help get the struggling company back on track. At the time, the coffee chain was struggling, facing increasing competition, cooling customer interest and the financial crisis.

Last year, he returned once again, when Starbucks was in the midst of a different crisis: a growing wave of unionization.

Schultz, who sat down for an in-depth chat with CNN’s Poppy Harlow in February covering the union, China relations and the US economy, said he did not return to Starbucks due to the union effort. But he saw the labor movement as a sign that things had gone wrong at Starbucks, and for young people in general.

“I’m convinced that the organizing efforts in America are in many ways a manifestation of a much bigger problem,” he told Harlow. “There’s a macro issue here that’s much, much bigger than Starbucks.”

Howard Schultz sits offstage to listen to new Starbucks CEO Laxman Narasimhan at the company’s September Investor Day in Seattle, Washington.

The first Starbucks store voted to unionize in December 2021, about five months before Schultz became CEO — this time on an interim basis — for the third time, and he says the last time. Even before officially joining the company, Schultz was already alarmed by the union push.

In November, a month before the pro-union vote, he published an open letter to employees. “No partner has ever needed a representative to seek things that we all have as partners at Starbucks,” he wrote, using the word “partner” to refer to employees, as Starbucks does. “I’m saddened and worried to hear anyone think it’s necessary now.”

Unionized workers are fighting for guaranteed hours, benefit protections for part-timers and more. One of the priorities, they say, is to get Starbucks to sign Fair Election Principles that protect the right of workers to organize without reprisal.

In the months following his return as CEO, Schultz doubled down on his opposition to the union. And during his tenure, the battle escalated and turned ugly.

The union leadership has accused Starbucks of refusing to come to the bargaining table, threatening its benefits and employing union-busting tactics, which the company has denied.

Starbucks employee Brian Murray, center, and other employees and supporters react as votes are read during a viewing party for their union election on Thursday, December 9, 2021 in Buffalo, NY

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, claiming it is the union that is blocking negotiations.

The NLRB found, in some cases, that the company unlawfully threatened and fired workers involved in the union effort. A judge recently ruled that Starbucks should stop firing employees involved in the union. Starbucks said the measure was unjustified and, regarding the NLRB’s findings, that it was trying to comply with the law.

And recently, Vermont Sen. Bernie Sanders and the rest of the Senate Health, Education, Labor and Pensions Committee asked Schultz to testify at an upcoming hearing on Starbucks’ compliance with labor laws. . Schultz declined, and Starbucks announced that its public affairs director AJ Jones II would attend instead.

In mid-February, the National Labor Relations Board certified 282 stores voted to unionize and 56 voted against. There are approximately 9,300 company-operated Starbucks stores in the United States, and a relatively small number have voted to unionize. For Schultz, that means the vast majority of Starbucks store employees are happy with the situation.

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The union sees its growth, despite Starbucks’ tough fight against it, as a clear sign of worker interest. “The fact that Starbucks workers continue to organize and win shows how much workers need and want a union,” Starbucks Workers United said in a statement to CNN.

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

But as he prepares to step down as CEO, that reputation is in question, in large part because of the company’s unwavering opposition to the union. But Schultz, who doesn’t think fighting the workers’ organizing effort will hurt the company’s legacy, isn’t backing down.

“People have lost confidence”

When Schultz joined the company last year, he spent months visiting employees on a listening tour that helped him craft a new roadmap for the company, which , according to him, had “lost his way”.

“I’ve spoken to thousands of our Starbucks partners,” he told Harlow. “I was shocked, amazed to hear the loneliness, the anxiety, the breakdown of trust in government, the breakdown of trust in businesses, the breakdown of trust in families, the lack of hope in terms of ‘opportunities.”

Baristas prepare orders at a Starbucks coffee shop in New York, NY.

American companies are “facing unionization because (workers are) unhappy, not so much with the company as with the situation”.

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

Before becoming interim CEO last year, Schultz held the top spot from 1987 to 2000 and then again from 2008 to 2017. But even when he last handed over the role, he remained involved as chairman. of the board – until 2018, when he retired. That four-year delay, Schultz said, was a “mistake,” adding, “I probably should have stayed engaged.” This time, Schultz will retain his seat on the board after new CEO Laxman Narasimhan takes over.

Especially during the pandemic, “some decisions were made that I wouldn’t have made,” he said, without specifying which ones. Asked for more details, a spokesperson mentioned the resumption of training programs in 2022.

“As a result, I think people have lost faith in the management of the company.” Efforts to unionize, he said, were spurred “because Starbucks was not leading in a way consistent with its history.”

Yet 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 any place at Starbucks,” he said. “If a group of de minimis people…file a petition to unionize, they have the right to do so. But we as a company also have the right to say that we have a different view which is better.”

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

Starbucks employees at a rally on October 05, 2022 in New York City.

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

Collectively, workers have more power over employers, which gives them more bargaining power.

“If Starbucks really thought few people were interested, then they might promise neutrality,” Givan said, as Microsoft did last year. Schultz said just as workers have the right to organize, Starbucks has “the right to defend themselves.”

As CEO, Schultz responded “very typically,” Givan said, indicating how opposed he was to the union. “I think every business leader takes it personally and when their workers organize, even though they really shouldn’t,” she said.

“I don’t see a recession coming”

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

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

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

As it advances in China, Starbucks is avoiding Russia, he said.

Starbucks left the country last year because of Russia’s attack on Ukraine, and Schultz doesn’t see the company returning. “I think Starbucks has left Russia for good,” he said.

Back in the United States, Schultz anticipates 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.

This also goes for Starbucks prices. “I don’t think our prices are going up,” he said.

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