Inclusion of Employee Voices in Board Level Decisions
RESOLVED: Shareholders of Starbucks Corporation ("Starbucks") urge the Board of Directors to prepare a report to shareholders describing opportunities for Starbucks to encourage inclusion of non-management employee voices in Board level decisions and how the Board intends to implement those opportunities.
SUPPORTING STATEMENT: Employee engagement and trust1 are crucial to success. Starbucks experiences widely publicized incidents of employee dissent and dissatisfaction. Reputational damage, loss of key employees, and loss of good ideas are potential outcomes of inadequate employee voice, posing risks to shareholder value. Starbucks has no employee stock ownership plan to grow wealth and engagement2 and Starbucks’ CEO to median employee pay ratio is 1211:1.
Worker Voice and the New Corporate Boardroom3 found:
“Currently, workers have no formal role in American corporate governance. Worker insights rarely inform board-level decisions and the result is wasted potential that if captured, could benefit companies, workers, and society as a whole.”
Companies with worker representatives on the board have a 16-21% increase in labor productivity, lower outsourcing, and 40-50% larger capital stock invested in fixed assets, such as machines or factories.
Chief Justice Strine and Kirby M. Smith, wrote that expanding the compensation committee’s perspective beyond executive compensation would make the committee think about the “company’s workforce as a whole” and “result in directors who have a better grasp on how human talent matters for the company’s business strategy and operations.” Chief Justice Strine separately proposed that boards be required to create “workforce committees” to “address workforce issues,” including “ensur[ing] quality wages and fair worker treatment,” at the board level.
The 2018 UK Corporate Governance Code calls on boards to consider workforce views. Options include directors appointed from the workforce, a formal workforce advisory panel or designating a director liaison with workers4.
Anticipated benefits include reduced turnover as empowered employees make firm-specific investments, better informed decision-making based on specialized knowledge, better monitoring of management with increased information channels, and reduced shareholder myopia since employees often take a longer-term view.5
Adding urgency is that directors generally do not monitor and are not sure they can do so effectively.6 Governance expert Nell Minow remarked: “Usually directors at least pretend to acknowledge their legal obligation to provide oversight of CEOs on behalf of shareholders.” “This acknowledgment that directors see themselves as corporate cheerleaders instead of skeptics whose job is to push back, question, and insist on better is further proof that shareholders will need to support more Engine No. 1-style challenges."7 Including employee voices in Board decisions would reduce likely hedge fund challenges, since the Board would have additional inside information for more effective monitoring.
2 https://smlr.rutgers.edu/sites/default/files/rutgerskelloggreport_april2019.pdf
3 https://www.aspeninstitute.org/publications/new-corporate-boardroom/
4 https://assets.kpmg/content/dam/kpmg/uk/pdf/2018/07/designated-NED.pdf
5 https://www.corpgov.net/2020/04/kokkinis-and-sergakis-employee-participation-in-uk-companies/