Starbucks Corporation · NASDAQ:SBUX
Starbucks — Proxy Contest (February 2024)
65 slides from Starbucks's proxy contest presentation, Feb 20, 2024
Slide 1: Brew A Better Starbucks
Brew A Better Starbucks Prepared by the Strategic Organizing Center February 2024
Slide 2: Legal Disclaimer
Legal Disclaimer ‘This presentation is for general informational purposes only, is not complete and does not constitute an agreement, offer, a solicitation of an offer, or any advice or recommendation to enter into or conclude any transaction or confirmation thereof (whether on the terms shown herei
Slide 3: Table of Contents
Table of Contents Executive Summary Pages 4-5 Section I: Starbucks Has Lost its Way Page 6 Section II: The Cost of Failed Oversight Page 22 Section Ill: Strengthening the Board Page 36 Section IV: Correcting the Record Page 47 Section V: Appendix Page 55 BREW A BETTER STARBUCKS
Slide 4: About the Strategic Organizing Center
About the Strategic Organizing Center The Strategic Organizing Center (“SOC”) is an innovation center that works on transformational campaigns to advance the interests of workers, consumers and shareholders * The SOC is made up of a coalition of labor unions, including the Service Employees Internat
Slide 5: Why Change is Needed Now at Starbucks
Why Change is Needed Now at Starbucks THE COMPANY HAS LOST ITS WAY + Starbucks’ flawed human capital management strategy is the most critical issue facing the Company today Starbucks’ response to its employees’ unionization campaign has been aggressive opposition, in many cases by violating U.S. lab
Slide 6: Section I: Starbucks Has Lost its Way
SECTION | Starbucks Has Lost its Way
Slide 7: Labor judge: Starbucks violated worker rights in union fight
Labor judge: Starbucks violated worker rights in union fight
Slide 8: The Board Has Backed an Unnecessarily Confrontational Strategy
The Board Has Backed an Unnecessarily Confrontational Strategy Starbucks’ response to unionization is well documented* x Pattern of violations of federal labor law x Widespread coercive behavior > Unfair labor practices > Promised improved pay and benefits if workers rejected the > Failed to bargain
Slide 9: Legal Decisions Against Starbucks Demonstrate the Lack of Oversight
Legal Decisions Against Starbucks Demonstrate the Lack of Oversight Starbucks and the incumbent Board have consistently failed to adhere to federal labor laws, leading to a potentially unmanageable volume of legal complaints against the Company “[Starbucks|] goal was to dull its employees’ appetite
Slide 10: Starbucks' Brand Has Suffered Material Damage
Starbucks’ Brand Has Suffered Material Damage 6 FINANCIAL TIMES It is a remarkable turn of events for the coffeemaker, which has long ‘°° : , - ; ~200K total mentions marketed itself as one of the most worker-friendly environments in . 7 7 14,000 Notably, even 2+ years after corporate America... Tha
Slide 11: Starbucks Shareholders Have Called for Action
Starbucks Shareholders Have Called for Action Since early 2022, important investors including Trillium and the NYC Comptroller — as well as the SOC - have publicly advocated for Starbucks to reach fair and timely collective bargaining agreements with its workers* * When the Company ignored these cal
Slide 12: Starbucks' Own Labor Rights Assessment Underscores the Deep-Seated Problems
Starbucks’ Own Labor Rights Assessment Underscores the Deep-Seated Problems Despite Starbucks’ campaign to convince shareholders the 2023 Labor Rights Assessment exonerated the Company, the findings reveal clear wrongdoing on the part of the current Board ¢¢ Inthe absence of strong and clear governa
Slide 13: The Assessment Failed to Satisfy Shareholders
The Assessment Failed to Satisfy Shareholders The 2023 Labor Rights Assessment “raises concerns about Board oversight & accountability” New York City Comptroller Brad Lander (on behalf of the five New York City retirement systems), Trillium Asset Management, PIRC and the Shareholder Association for
Slide 14: Shareholder Lawsuit Spotlights the Board's Alleged Willful Ignorance
Shareholder Lawsuit Spotlights the Board's Alleged Willful Ignorance Trimm v. Schultz et al alleges the Board breached its fiduciary duty by failing to ensure that Starbucks’ labor relations are legally compliant + “[Slystematic and flagrant violations of labor laws and illegal union-busting activit
Slide 15: The Board's Reactive Efforts Lack Substance
The Board's Reactive Efforts Lack Substance The Company's response to the SOC’s nominations has primarily been a PR campaign instead of substantive changes to its labor practices . = Starbucks Elects Daniel Servitje, Neal + Since signaling our intention to nominate director candidates, the Mohan and
Slide 16: A Case Study in Contradictions
A Case Study in Contradictions It is difficult to reconcile the vast difference between Starbucks’ words and its actions related to human capital ¢ ¢ We call our employees partners because we are all partners in shared success. We make sure everything we do is through the lens of humanity... We acti
Slide 17: The Board's Promises Continue to Ring Hollow
The Board’s Promises Continue to Ring Hollow Starbucks’ recent actions run counter to its statement regarding negotiating with its union employees + Despite sending a letter to Starbucks Workers United on December 8 with a “sincere” proposal to recommence contract negotiations, the Company continued
Slide 18: Starbucks' Legal Advisors Known for Their Anti-Union Playbook
Starbucks’ Legal Advisors Known for Their Anti-Union Playbook We question how the Board can claim it is negotiating in good faith with the union when it has hired Littler Mendelson, a law firm that has a history of anti-union actions MaweHA THEAMERICAN PROSPECT Bloomberg Not Your Father's Anti- . P
Slide 19: Starbucks sued for allegedly using coffee from farms
Starbucks sued for allegedly using coffee from farms
Slide 20: The Response to Unionization Worsens Employee Morale
The Response to Unionization Worsens Employee Morale Countless Starbucks employees have stated that stores are understaffed, hours are inconsistent and pay is low + According to Glassdoor, less than half (49%) of current or former employees wey oes have a positive business outlook, which has been on
Slide 21: The Board's Missed Opportunity for a Constructive Solution
The Board’s Missed Opportunity for a Constructive Solution Starbucks had the chance to avoid a proxy contest without removing any incumbent directors - but instead chose to expand the Board with a unilateral refreshment that fails to address the right issues * There is an important difference betwee
Slide 22: Section II: The Cost of Failed Oversight: Lost Shareholder Value
SECTION II The Cost of Failed Oversight: Lost Shareholder Value
Slide 23: $240 million in expenditures and liabilities
Expenditures through February 2024 Liabilities Based on NLRB General Counsel Complaints and Administrative Law Judge Decisions through February 2024 Legal fees: Litigation, $100 million Campaign Advice, Illegally Denied Wages Expenses $61 million and Tips (Grows at a rate of $815k per week) Consulta
Slide 24: The Connection Between Employee Relations and the Bottom Line is Clear
The Connection Between Employee Relations and the Bottom Line is Clear It is widely acknowledged that Starbucks’ anti-union campaign hurts financial performance 66 Bloomberg Starbucks Earnings Are a Warning: Take Boycotts Seriously [Starbucks’] earnings miss... was bleak but not shocking... But anal
Slide 25: North America Remains a Critical Segment for Starbucks
North America Remains a Critical Segment for Starbucks With over 74% of total net revenue, Starbucks’ North American segment is by far the Company's largest + There are currently nearly 18,000 stores in the U.S. and FY2023 Revenue by Operating Segment Canada "North America «International» Channel De
Slide 26: Risks Grow as Unionization Remains Unchanged
Risks Grow as Unionization Remains Unchanged It may have been possible at one point to address Starbucks’ human capital management issues cheaply, quickly or efficiently — but the Company's response has only made the problem worse * The number of new NLRB cases against Starbucks is rising . . Cumula
Slide 27: Starbucks' Anti-Union Approach is Destroying Shareholder Value
Starbucks’ Anti-Union Approach is Destroying Shareholder Value The Board's failure to effectively oversee human capital management issues has damaged shareholder value + Since the anti-unionization campaign became a tangible issue Total Shareholder Return (December 9, 2021, when the first union elec
Slide 28: Starbucks Has Underperformed Peers
Starbucks Has Underperformed Peers Since the start of unionization, the Company's shares have underperformed its peers* by 29.0% SBUX Peer Median S&P 500 Restaurants December (Start of Unionization) to 11/21/23 (6.0)% 10.6% 5.2% 2/14/24 (14.3)% 14.7% 9.4% 1 Year Pre-Nomination to 3 Years Pre-Nominat
Slide 29: Valuation Over Time Relative to Peers
Valuation Over Time Relative to Peers Starbucks’ relative valuation has declined as a result of its human capital mismanagement Ev M EBITDA* ‘SBUX Peer Median ‘S&P 500 Restaurant BREW A BETTER ‘Source: Bloomberg. Peer cohort comprises CMG, DRI, MCD, QSR and YUM STARBUCKS Feb '24 On December 9, 2021
Slide 30: Operational Performance
Operational Performance Since Starbucks began fighting the union, revenue has grown more slowly than general and administrative expense and margins have suffered Indexed Change in Revenue, Total Operating Expenses and EBITDA Since Unionization* G&A:$2.4B Revenue: Revenue: $36.0B 15 $32.28 Revenue: $
Slide 31: No Wonder They're Burned Out
No Wonder They’re Burned Out After peaking in 2022, employees per store dropped sharply in 2023 Employees Per U.S. Company-Operated Store Over Time 26.8 26.3 24.6 23.8 22.7 21.3 | 2018 2019 2020 2021 2022 2023 The numbers explain the narrative: fewer employees per store — increased customer dissatis
Slide 32: Quantifying the Brand Damage
Quantifying the Brand Damage A Nielsen poll of Starbucks consumers reveals connection between anti-union conduct, working conditions, patronage and perception of the Company Consumer Opinion on Company Anti-Union Conduct: © STARBUCKS The consumer survey, commissioned by the SOC, revealed that a high
Slide 33: Starbucks is Alienating a Key Demographic
Starbucks is Alienating a Key Demographic Gen Z is increasingly taking action to hold Starbucks accountable for its mistreatment of workers + Recently, students at UC Riverside and UCLA staged protests calling for Starbucks to be removed from the ith campuses in response to the Company's union busti
Slide 34: Summary: The Starbucks Board Is Not Living Up to its Duty
Summary: The Starbucks Board Is Not Living Up to its Duty The cost of Starbucks’ anti-union campaign impacts all stakeholders A Mounting Legal Liabilities A Disappointing Earnings Results A Reduced Valuation A Significant Share Price Underperformance BREW A BETTER STARBUCKS A Poor Operational Perfor
Slide 35: Unanswered Questions for the Starbucks Board
Unanswered Questions for the Starbucks Board 1. How has the Board held management accountable for the Company's alleged illegal actions? > How does the Board recommend shareholders evaluate the effectiveness of its efforts to hold management accountable? 2. How has the Board changed the KPIs it uses
Slide 36: Section III: Strengthening the Board
SECTION Ill Strengthening the Board
Slide 37: The SOC's Nominees Are Needed Now
The SOC’s Nominees Are Needed Now Our nominees have experience the current Board needs: integrating unions with customer service businesses, successful labor negotiations and successfully working with regulators Maria Echaveste v Extensive experience in government and international relations: Admini
Slide 38: Maria Echaveste
Maria Echaveste Ms. Echaveste is a former senior White House official and corporate attorney with significant international relations and public company board experience that we believe would be extremely additive to Starbucks’ Board Echaveste was integral in guiding the company in its transition fr
Slide 39: Hon. Joshua Gotbaum
Hon. Joshua Gotbaum Mr. Gotbaum has broad experience in business and government - as senior management, as a public company director and as an advisor to unions — that we believe is needed on Starbucks’ Board Appointed Ch. 11 Trustee (CEO), Gotbaum successfully managed and reorganized Hawaiian Airli
Slide 40: Hon. Wilma Liebman
Hon. Wilma Liebman Ms. Liebman has over 40 years of experience in labor management, employee relations, wage negotiations, public policy and law that we believe would bring vital experience to Starbucks’ Board €¢ Collectively, my experience and relationships with both business and labor communities
Slide 41: The Current Board Lacks Necessary Expertise for Resolution with Unions
The Current Board Lacks Necessary Expertise for Resolution with Unions Despite Starbucks’ claims to the contrary, the Board lacks the right kind of labor relations expertise Maria |Hon. Joshual Hon. Wilma! Ritch Andy Beth Mellody | Jorgen Vig| Neal Satya xman | Daniel Mike Echaveste | Gotbaum | Lieb
Slide 42: Who We're Targeting and Why
Who We're Targeting and Why We believe each committee chair bears primary responsibility for the Board’s complacency and lack of oversight that has led Starbucks to the current crisis Ritch Allison Compensation Committee Chair x Failed to oversee the development, implementation and effectiveness of
Slide 43: Investors Are Rewarded When Companies Respect Workers' Rights
Investors Are Rewarded When Companies Respect Workers’ Rights First 7 After initial resistance and union avoidance campaign, in 2008 FirstGroup plc. agreed to change conduct, resolve most labor disputes privately (not through NLRB, reducing legal expenses) and streamline national bargaining to set b
Slide 44: Mitigating Reputation Damage
Mitigating Reputation Damage Like other major consumer-facing brands with a progressive public profile, Starbucks can mitigate damage to its reputation, improve job quality, enhance operational efficiency and boost investor returns by: Improving its compliance with the National Labor Relations Act a
Slide 45: A New Status Quo
A New Status Quo A revamped human capital approach is critical to preventing value destruction and creating value for shareholders Heightened Partner Engagement Increased Customer Satisfaction Restored Reputation as Progressive Leader Higher Partner Retention BREW A BETTER STARBUCKS Reduced Legal Co
Slide 46: Vote the BLUE Proxy Card to Brew A Better Starbucks
Vote the BLUE Proxy Card to Brew A Better Starbucks PROTECT YOUR INVESTMENT IN STARBUCKS Vote “FOR” ALL the SOC’s Nominees on the BLUE Proxy Card www.BrewABetterStarbucks.com BREW A BETTER STARBUCKS
Slide 47: Section IV: Correcting the Record
SECTION IV Correcting the Record
Slide 48: Starbucks is Playing Games with its TSR Peer Sets
Starbucks is Playing Games with its TSR Peer Sets Starbucks has introduced new peer sets to make it look like it has outperformed over recent time periods — but the peers don’t make sense + Starbucks’ most detailed disclosed peer group, prior to its response to our nominees, was a group of companies
Slide 49: Questionable Milestones
Questionable Milestones Starbucks, unable to show positive TSR since it began fighting its employees, utilizes milestones that don’t make sense * The Board, with an average tenure of less than four years, is defending itself by citing shareholder value created over the last three, five, ten and twen
Slide 50: An Attempt to Mislead Shareholders
An Attempt to Mislead Shareholders Not only does Starbucks try to distract from its anti-unionization efforts by focusing on employee benefits, it does so by using cherry picked quotes that are either out of context or are living in the past The New dork Cimes Starbucks cites a quote that is almost
Slide 51: Starbucks' Phantom Benefits
Starbucks’ Phantom Benefits The Company's championing of its “best-in-class” benefits conveniently ignores the full picture * The reality is that not getting the opportunity to work the 20 hours a week required to receive benefits is a key complaint of Starbucks workers 3) Starbucks Prioritizes Part
Slide 52: Myths vs. Reality: Starbucks' Response to Unionization
Myths vs. Reality: Starbucks’ Response to Unionization Starbucks’ Myths / Misrepresentations The Reality* BREW A BETTER STARBUCKS “Starbucks is fully committed to the rights of our partners to organize, freely associate and collectively bargain.” “Our approach to good faith bargaining has been consi
Slide 53: Starbucks is Trying to Rewrite the Labor Relations History of its Targeted Directors
Starbucks is Trying to Rewrite the Labor Relations History of its Targeted Directors WHAT STARBUCKS SAYS THE FACTS Mr. Allison's time as a leader at Domino's is rife with examples of union-busting and undermining employees “i + During his tenure as President of Domino's International, Domino's engag
Slide 54: Our Nominees Address a Critical Blindspot in Starbucks' Boardroom
Our Nominees Address a Critical Blindspot in Starbucks’ Boardroom In our view, Starbucks needs a fit-for-purpose Board with the experience and expertise required to address its most pressing challenge + The Board does not need 11 directors with overlapping industry and operational experience, it nee
Slide 55: Section V: Appendix
SECTION V Appendix
Slide 56: Maria Echaveste
Maria Echaveste Key Qualifications v_ Extensive experience in government and international relations v Valuable public company board experience v Corporate governance expert BREW A BETTER STARBUCKS Ms. Echaveste is a former senior White House official and corporate attorney with significant internat
Slide 57: Hon. Joshua Gotbaum
Hon. Joshua Gotbaum Mr. Gotbaum has broad experience in business and government — both as senior management and as a director of public and private companies and non-profits + Currently a director and member of the Audit Committee of global asset management firm Thornburg Investment Management Inc +
Slide 58: Hon. Wilma Liebman
Hon. Wilma Liebman Key Qualifications vy Labor management and employee relations expert v Valuable public sector experience as former Chair of the NLRB v_ Significant legal and public policy expertise BREW A BETTER STARBUCKS Ms. Liebman has over 40 years of experience in labor management, employee r
Slide 59: A History of Our Engagement with Starbucks
A History of Our Engagement with Starbucks Feb. 2, 2022 ~Sept. 29, 2022 Mar. 23, 2023 Nov. 8, 2023 Nov. 20, 2023 Dec. 5, 2023 Dec. 13, 2023 Jan. 10, 2024 SOC Investment Group SIG submits a SIG's shareholder SIG requests copies of Starbucks announces The SOC and Starbucks Starbucks’ legal Starbucks’
Slide 60: Relative TSR Methodology
Relative TSR Methodology - Analytical Period Starbucks’ total shareholder return was evaluated over the customary 1-year and 3- year periods, as well as since December 9, 2021, the date of the first ratification of a decision to unionize. The impact of unionization, and the Company's response to uni
Slide 61: Undisclosed Legal Expenses Appear to Boost NEO Compensation
Undisclosed Legal Expenses Appear to Boost NEO Compensation The lack of transparency on the impact of legal costs related to Starbucks’ anti-union activities appears to be artificially inflating the Company’s annual cash bonus + If elected, our nominees will recommend a fresh ation| . Voter CEO Pay
Slide 62: Questionable Executive Compensation Structure
Questionable Executive Compensation Structure The Company purportedly opposes unionization because it will lead to higher wage costs, but we believe Starbucks’ peer group manipulation reveals that the Board’s concern with managing wage costs does not extend to limiting executive management compensat
Slide 63: Questionable Executive Compensation Structure (cont.)
Questionable Executive Compensation Structure (cont.) Compensation adjustments for relative shareholder return are based on S&P 500, which contains dissimilar “This threshold amount is based on achievement of pre-approved, annualized adjusted EPS targets and is subject to an adjustment, based on a t
Slide 64: Questionable Executive Compensation Structure (cont.)
Questionable Executive Compensation Structure (cont.) Starbucks chose a third peer group to comply with new disclosure requirements but avoided revealing relative underperformance “the Company's peer group cumulative total shareholder return (the “Peer Group TSR”) is determined based on the value of
Slide 65: Thank You
Thank You