February 12, 2019 / 4:04 PM / 6 months ago

Breakingviews - Cox: Consider the merits of a Starbucks presidency

PARIS (Reuters Breakingviews) - Starbucks has had two nationwide shutdowns in its history. The first one, 11 years ago, saw 135,000 baristas retrained in the “art of the espresso” at roughly 7,000 U.S. stores to revive customer service and combat flagging sales. The second Starbucks shutdown was last year. For four hours, 175,000 U.S. employees in 50 states participated in racial-bias training, following an incident in a Philadelphia store where two African-American patrons were wrongly arrested for trespassing.

Former Starbucks Chairman and CEO Howard Schultz delivering remarks at the Starbucks 2016 Investor Day in Manhattan, New York, U.S. December 7, 2016. REUTERS/Andrew Kelly

The first one worked incontrovertibly. Within five years of that three-hour closure, Starbucks recorded the best year in its history, with U.S. same-store sales rising 8 percent. The stock tripled. After the second one, which cost $50 million, Starbucks shares are up by around 20 percent, way outperforming the S&P 500 Index. That’s no way to measure whether the company made headway in eliminating bias. But it might suggest a link between doing good and doing well commercially.

That, if anything, is the takeaway from Howard Schultz’s seemingly quixotic bid for the White House. The man who became a billionaire through the cultural appropriation of Milanese coffee bars has taken enormous grief for considering a run as an independent, mainly from Democrats worried he’ll split the vote. Really both political parties should be wooing him. The conscious capitalism he pursued as chief executive and chairman of the coffee giant offers a healthy model for American business and society.  

Closing Starbucks stores for hours is not Schultz’s primary achievement at the company he started at in the early 1980s and retired from last year. But they provide a useful contrast to the 10 versions, lasting over 120 days, of U.S. government shutdowns that occurred during the same period. It’s harder to argue the latter have benefited the country, particularly the recent 35-day partial closure over funding for President Donald Trump’s wall on the Mexican border.

Nearly everything Schultz has done at Starbucks is measurable. It would therefore be foolish to dismiss his presidential inclinations out of hand as billionaire braggadocio. Granted, there may be some of that: he’s got $3 billion to spare. And even though Starbucks is a relatively democratic institution – with a single class of shares conferring one vote apiece – the limited challenges posed by handpicked directors and fawning stockholders tend to spawn imperialism among the CEO class.

But some of Starbuck’s accomplishments read like a checklist for a progressive political platform. Access to healthcare – check. College tuition assistance for staff – yep. Expanded employment opportunities in disadvantaged communities – done. Aggressive hiring of veterans and refugees – indeed. Moreover, these are policies that developed over decades, not ahead of the 2020 presidential race or in response to a letter from BlackRock CEO Larry Fink. 

Yet Schultz is being treated like a pariah by the Democrats, the party that has advocated universal healthcare and tuition-free education – corporate benefits that Starbucks has championed well beyond its white-collar workforce. Robert Reich, the former Labor Secretary under Bill Clinton, said in a tweet earlier this week that “anyone who has a billion dollars either exploited a monopoly that should have been broken up, got inside information unavailable to other investors, bribed some politicians, or inherited the money from their parents (who did one of the above)”.

While it’s true that Schultz might be less willing to stump for the higher taxes that Democrats want on capital gains, big incomes and inheritance, it’s too simple to dismiss him as a turkey unwilling to face Thanksgiving. During his career, he has exhibited a willingness to roll with the facts and admit mistakes – ranging from his poor stewardship of a National Basketball Association franchise or “Race Together,” a botched PR attempt at racial healing. These and other admissions populate his new book, “From the Ground Up”.  

Concerns by Democrats and many centrists that Schultz will siphon away votes needed to counter Trump are valid given the experience of third-party candidates. America’s electoral system makes it virtually impossible for a new party, like French President Emmanuel Macron’s En Marche, to sweep into the Oval Office, much less the House of Representatives. And Schultz would need, very quickly, to dispel conflict of interest charges by divesting Starbucks stock, not least given the company’s large presence in China, where it prospers thanks to the good graces of the Communist Party. 

But that’s why Schultz’s public rumination of a third-party bid is clever. Had he just entered the race as another Democrat billionaire – alongside, say, Michael Bloomberg or Tom Steyer – he would have dissolved like skim milk into a venti Pike. His achievements as a capitalist – as a generator of extraordinary wealth and as a proponent of woke policies – would have received little attention. He’d have been the center-left version of Jon Huntsman, whose 2012 Republican bid fizzled before it began.

If Schultz can get his bigger message above the daily Twitter tit-for-tat, he may be able to influence the broader political debate. As a boy brought up in public housing, he can even perhaps neutralise the left-wing, anti-success rhetoric of fellow Brooklynite, Senator Bernie Sanders. The story he tells of having to ask a neighbour for a $5,000 loan to keep moneylenders from hurting his father could come from Elizabeth Warren’s canon. Only at his father’s funeral, 15 years later, did Schultz learn the loan had gone unpaid.

Sob stories aside, Schultz’s success in building a major corporation also provides a positive counternarrative to Trump’s. The Trump Organization was a family affair, seeded by the president’s father and quite literally in the business of rent-seeking. By contrast, Starbucks is a transparent, public enterprise gainfully employing hundreds of thousands. Also, $10,000 invested in the IPO in 1992 would be worth more than $2 million today, including dividends – and those stock buybacks Sanders and other Democrats revile.

As Schultz argues in his book, “the future is not going to bend toward America because we’re American. We’re going to have to bend it ourselves, nudge it, move it”. That may be what he’s doing to Democrats. If they’re smart, they will find a way to bring him into the fold. 


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