Starbucks CEO Politics Work Against Shareholder/Customer Interests

Starbucks (NASDAQ: SBUX) CEO and founder Howard Schultz should be ashamed of himself. He has begun a movement to reform campaign finance without consideration for his shareholders, customers, or employees.

The extremely wealthy chief executive has decided that he is unhappy with the partisan politics in Washington, which he believes have prevented that country from setting its financial house in order.

As he puts it in a letter to the nation,

  Over the last few weeks and months, our national elected officials from both parties have failed to lead. They have chosen to put partisan and ideological purity over the well-being of the people. They have undermined the full faith and credit of the United States. They have stirred up fears about our economic prospects without doing anything to truly address those fears. They have spent a resource even more precious than the dollar: our collective confidence in each other, in the future, and in our ability to solve problems together

His solution is idealistic, and impossible,

  That is why we today pledge to withhold any further campaign contributions to the President and all members of Congress until a fair, bipartisan deal is reached that sets our nation on stronger long-term fiscal footing. And we invite leaders of businesses – indeed, all concerned Americans – to join us in this pledge.

A few CEOs have joined in the commitment to withhold contributions. There is no evidence that any ground swell of tens of thousands of American has joined Schultz’s campaign. There is also no indication that any PACs or lobbyists support him. His plan was stillborn; because US citizens don’t care enough about the issues Schultz wants address. All of that is beside the point when Schultz’s other responsibilities are weighed.

Schultz will try to get further support for an effort which has already faltered with at a telephone “town hall” on September 6.  During the meeting “we’ll discuss how we stop the hyper-partisanship plaguing Washington and how we can set in motion an upward spiral of confidence in our economy and our politics.”

Schultz is a public company CEO, obviously. His first commitment has to be to his shareholders, customers, and employees. Shareholders might rightly ask why he has taken time away from his duties as Starbucks chief executive and whether his campaign will alienate any of the institutions or individuals who own Starbucks stock. Just as important is the question of whether his activism will keep even one current or potential customer out of a Starbucks store. If so, he risks revenue, and the livelihood of the people who work for the company he runs.

Several analysts who cover Starbucks for Wall St. or run portfolios which hold Starbucks shares say that they are not worried about the effect of Schulz’s activity on the company’s success. That guess is right until it isn’t. Politics and public company actions sometimes make incompatible bedfellows. Just ask anyone who does not think CEOs who should use their company brands and customer bases to help them get a message out. Brands ultimately belong to shareholders, and CEOs are brand managers

Schultz has been both poor and good leader at Starbucks. He stayed on the sidelines while management took significant over-expansion risks from 2005 to 2008. He brought the company backs from 2009 to the present, but was at the cost of many jobs.

Schultz’s moral obligation and his duty as a public company CEO run counter to his attempt to reform the American political system

Douglas A. McIntyre