By Waylon Cunningham
NEW YORK, March 13 (Reuters) - Starbucks may be neglecting the financial and reputational risks that stem from labor disputes, two proxy advisory firms are warning shareholders.
The warnings come more than a year after contract talks between the company and its U.S. union, formed by baristas at its coffee shops, broke down.
“There are ongoing controversies related to labor disputes, and it is not clear there is sufficient board oversight of the company’s management of labor relations,”
analysts at ISS, the world’s largest shareholder proxy advisor, wrote earlier this month, ahead of Starbucks’ annual meeting March 25.
ISS highlighted strikes from Starbucks' U.S. union as well as a $38.9 million settlement Starbucks recently agreed to pay over claims it violated New York City law requiring fast-food workers be given predictable and stable schedules.
ISS and Glass Lewis flagged Starbucks’ recent dissolution of a board committee formed under former CEO Laxman Narasimhan's tenure to oversee labor relations. Starbucks’ board of directors created the “Environmental, Partner, and Community Impact Committee” in 2023 under pressure from shareholder groups to address labor concerns, including a successful vote to force Starbucks to hire an outside auditor to review its approach to labor relations.
Some of the same shareholder groups, such as the New York State Comptroller and the union-affiliated SOC Investment Group, are seeking to pressure Starbucks again in part because of the committee’s dissolution, and what a collective letter said was prolonged labor conflict that threatens CEO Brian Niccol's ongoing turnaround strategy. Starbucks in a statement said these groups represent a minority of shareholders.
Glass Lewis, citing Starbucks' dissolution of the labor committee, recommended shareholders vote against re-electing board director Beth Ford, chair of the nominating and corporate governance committee. Glass Lewis said the governance committee "bears responsibility for failing to ensure” oversight of risks that could harm shareholder interests.
Starbucks wrote in its proxy filing that labor oversight will now be the responsibility of the general board, and other responsibilities of the Impact Committee have been re-allocated to other committees.
The filing said Starbucks made the change to simplify its board structure and allow board and committee members to “focus their attention on matters that drive long-term shareholder value.”
A spokesperson for Starbucks, Jaci Anderson, said in a statement that the board has "the necessary skills and experience to effectively oversee our strategy, including human capital management."
Starbucks says it offers "the best job in retail" in part because employees who work more than 20 hours a week have benefits such as healthcare, parental leave, and tuition for online classes at Arizona State University.
Starbucks’ annual SEC filing for 2025 goes into depth on shareholder risks from labor issues, such as disruptions from work stoppages, an “unfavorable” future union contract, and reputational harms from Starbucks’ public positions on unions.
Unions have secured representation at around 6% of Starbucks stores in the U.S., according to the company. Union elections in stores have slowed from their peak in 2022 but have continued into 2026.
In December, unionized café workers in 40 U.S. cities launched an open-ended strike. The strike has largely dissipated, but work stoppages continue at stores on a rotating basis. Starbucks said the strikes involved less than 1% of stores and that all have officially returned to work.
Both sides blame the other for ending talks in late 2024 and say they are ready to return to discussions.
(Reporting by Waylon Cunningham; Editing by Anna Driver)
