A group of investors led by New York City’s pension funds filed a shareholder proposal calling for a labor rights’ audit at Starbucks. The proposal represents a rare foray into U.S. labor rights for institutional investors, and could be a signal of increased investor interest in this area and more proposals to come. A similar proposal was filed with Apple earlier this month.
The shareholder proposal calls for Starbucks to commission and publicize a third-party audit of the company’s compliance with federal labor laws. The proposal cites the numerous outstanding unfair labor practice allegations filed against Starbucks, which is currently in the throes of a widespread unionization campaign at many of its stores. According to the proposal, the investors “believe the apparent misalignment between Starbucks’ public commitments and its reported conduct represents material reputational, legal, and operational risks and may impact its long-term value.” The coalition of investors filing the proposal includes activist investor Trillium Asset Management.
The proposal could represent a new frontier in ESG investing. The recent wave of activist institutional investing and related ESG shareholder proposals has largely been limited to diversity, equity, and inclusion and environmental concerns, including proposals pressing companies to perform racial equity audits, which experienced considerable support in 2022. The labor resolutions here are patterned after these proposals. The labor rights of American workers have rarely been the subject of a high-profile shareholder proposal such as the one filed against Starbucks. The proposal, along with the one filed with Apple, could be the first of many more to come, particularly against companies such as Starbucks that have received intense media scrutiny over alleged unfair labor practices. Indeed, Jonas Kron, chief advocacy officer at Trillium, noted that there is increasing interest among institutional investors in workers’ rights as “a result of changing expectations among workers as new generations move into the workforce.”
Outlook: Whether the Starbucks shareholder proposal creates a new trend in ESG investing, similar to racial equity audits, remains to be seen. Nevertheless, it represents another lever of pressure that can be placed on companies, and particularly those that may have outstanding unfair labor practice allegations – even if such allegations are without merit.