From the Great Strike to Corporate Governance Warning Lights — Starbucks(SBUX.US) Labor-management risks may endanger shareholder value

Two influential U.S. shareholder advisory firms are warning shareholders that global coffee beverage giant Starbucks(SBUX.US) may have overlooked the financial and reputational risks brought about by labor disputes, risks that could affect the long-term growth trend of total shareholder value. This warning comes more than a year after the company’s contract negotiations with its U.S. union organization—formed by its coffee shop baristas—broke down.

“Controversies surrounding labor relations are still ongoing, and it is currently unclear whether the board has provided sufficient oversight of management’s handling of labor relations,” analysts from ISS, the world’s largest shareholder advisory firm, wrote earlier this month. At the time, the company’s annual shareholder meeting on March 25 was not far off.

ISS also specifically mentioned the major strike launched by Starbucks’ U.S. union, as well as the $38.9 million settlement payment Starbucks recently agreed to, highlighting allegations that it violated New York City law—law requiring fast-food industry employees to receive predictable and stable scheduling.

Both ISS and Glass Lewis pointed out that Starbucks recently dissolved a board committee that had been set up during former CEO Laxman Narasimhan’s tenure and was responsible for long-term oversight of labor relations. In 2023, under pressure from shareholder groups, Starbucks formed the “Environmental, Partner and Community Impact Committee” in response to labor-related issues, including a passed vote that forced Starbucks to hire an external audit firm to review how it handles labor relations.

Some shareholder groups that are similar in substance—for example, the New York State Comptroller’s Office and SOC Investment Group, which is affiliated with a union—are trying to pressure Starbucks again, partly because the committee was officially dissolved by management, and because a joint letter claims that ongoing labor-management conflicts are threatening the large-scale reform strategy that CEO Brian Niccol is pushing forward. However, Starbucks said in a statement that these groups represent only a minority of shareholders.

Citing the dissolution of Starbucks’ labor committee, Glass Lewis recommended that shareholders vote against the re-election of Beth Ford, chair of the Governance Committee, as well as her director role. Glass Lewis said that the Governance Committee “should be held responsible for failing to ensure oversight of risks that could harm shareholders’ interests.”

Labor risks are no longer just an employee-relations issue, but a shareholder risk issue. The focus of ISS and Glass Lewis is not simply “whether there is a union conflict,” but whether these conflicts have already constituted a material threat to the company’s finances, reputation, and governance. And this risk has begun to take shape: what the market is worried about is not only the labor disputes themselves, but whether the Starbucks board has underestimated this kind of risk, especially after it scrapped a dedicated board committee for overseeing labor relations.

In its proxy materials, Starbucks wrote that oversight of labor affairs will be handled by the entire board going forward, and that the other important responsibilities of the above-mentioned Impact Committee(Impact Committee) have been reassigned to other committees.

An internal document says Starbucks made this adjustment to simplify the board structure, and to enable the board and members of each committee to “focus on core matters driving long-term growth in shareholder value.”

In an official statement, Starbucks spokesperson Jaci Anderson said that the board “has the skills and experience necessary to effectively oversee our strategy(including human capital management).”

Starbucks says that part of why it can provide “the best jobs in retail” is that employees working more than 20 hours per week are entitled to benefits including health insurance, parental leave, and tuition for online courses at Arizona State University.

Starbucks’ 2025 annual SEC filing details the risks labor issues pose to shareholders, such as business disruptions caused by work stoppages, potentially “adverse” impacts from future union contracts, and major risks related to reputational damage that could result from the company’s public position on union issues.

According to Starbucks, union organizations have gained representation in about 6% of its stores in the United States. Although union elections at the store level have slowed from their peak in 2022, they have continued through 2026.

Last December, employees at unionized coffee shops in 40 U.S. cities launched an indefinite strike. The strike has now largely died down, but specific store-level rotating shutdowns are still continuing. Starbucks said that the stores involved in these strikes account for less than 1%, and that all participants have officially returned to work.

Both sides blame each other for the termination of labor negotiations at the end of 2024 and say they are ready to return to the bargaining table.

Under Niccol’s leadership, Starbucks is currently taking various proactive actions worldwide in an effort to boost sales. For example, the return of the Pumpkin Spice Latte, renovations of many brick-and-mortar locations in the U.S. market, upgrades to mobile applications and mobile ordering systems to improve the customer experience, and the rollout of the “Green Apron Service”(Green Apron Service) innovative operating model—aimed at bringing its stores’ transaction process, sales, and customer service times to consistent and repeatable standards. Starbucks says that stores that have already implemented this model have improved in transaction volume, sales, and customer service times.

Although Starbucks has only renovated 70 stores so far, mainly in New York and Southern California, the company’s management expects this pace to accelerate, with more than 1,000 stores completed by the end of the current fiscal year( ending September 2026). CEO Niccol said during the earnings call, “While the sample size is still not large, we are encouraged by the improvements in sales and transaction volume we’re seeing so far.”