Two years ago the powerful Starbucks Coffee Company committed to follow a course unique among agricultural companies. It adopted a Code of Conduct in a move to hold coffee growers accountable for acceptable working conditions, wages and basic rights for workers. The company's goal was to purchase coffee from people who share a commitment for treating employees "with respect and dignity." Starbucks would address wage and benefit levels, safety and health conditions, child labor, and the right of free association, all factors addressed within its code.
The company's remarkable move earned it wide-spread acclaim and recognition. Starbucks' announcement made the front page of the Wall Street Journal. Business Ethics magazine termed it one of the five best moves by a corporation in 1995; and the Council on Economic Priorities gave Starbucks its 1996 Corporate Conscience Award for International Human Rights.
All this fanfare obviously did not hurt sales, for during the last two years the company quadrupled its yearly profits to $42.1 million.
But what of the promises made under the Code of Conduct to help the poorest of the world's coffee workers, workers who literally carry on their backs what has become the black gold in Starbucks coffers? As one of the organizations who originally encouraged Starbucks to adopt the code, we have been kept largely in the dark. We are often told that the situation is very complex, and that the company is moving ahead as best it can. Unfortunately, particulars are rarely forthcoming.
A highly anticipated on-the-ground investigation in Guatemala by George Howell, the former president of Coffee Connection (a company which was purchased by Starbucks) somehow disappeared from discussions and nothing is publicly known about his efforts. So how has the company used these last two years? In these two years the company made two sizable contributions to one charity (CARE), and announced a $75,000 initiative (0.2 percent of 1996 profits) for 1997 to fund a program to help small coffee growers (not workers) produce gourmet quality beans. Both seem worthy programs which cannot be faulted on their own merits. But as Margaret Swedish of the Religious Task Force on Central America & Mexico has noted, "It is another example of a company that claims to pay back in charity what it does not give in justice."
Indeed, Guatemalan workers still earn less than the legal minimum wage and live in horrific conditions. Were the company to help create pay equity for the workers who pick its beans, it might eliminate the need for CARE's work in the region altogether. Estimates show that the cost of paying coffee workers a legal minimum wage would be equivalent to only 25 cents per pound of Starbucks coffee, or less than a penny a cup.
The company now maintains that it won't attempt to identify the growers of its coffee and won't establish programs to monitor working conditions, as indicated in the code. Clearly, real impact under the code is impossible until Starbucks identifies who its coffee growers are, and monitors and encourages their progress via the Code of Conduct.
At the recent annual meeting of the company at its Kent roasting facility, I commended the company's charitable efforts, and expressed the view that our company is definitely not responsible for the problems in Guatemala, but that it can be a very great part of the solution.
Although we represent religious institutional shareholders, and though the above reflections were offered quite calmly (as documented by TV broadcasts), CEO Howard Schultz reacted strongly. He exaggerated by asserting that we were asking the company to change all of Guatemala overnight, and he indicated that because Starbucks does more than other coffee companies that our questions were somehow unfair.
Mr. Schultz almost seemed to express a belief that the workers' harsh reality as we described it does not exist, and he threatened to cease operations in Guatemala should a focus on the company's unfulfilled promises continue.
Then the company switched off our microphone. When I raised my hand to ask a responding question, as every shareholder before had been allowed to do, Mr. Schultz threatened to have me removed from the room.
Our company's avoidance of its commitments under the Code of Conduct is disappointing. Its assertions of unfairness and pressure, when its own operations involve muscling other coffee concerns out of business, seem unbecoming and disingenuous. And what of shareholder democracy? When a company's owners are only allowed one instance a year to discuss among themselves matters of importance, thwarting that opportunity in any way is contrary to public policy concerning corporate governance, even more so when time allowed to many is unequally denied to one.
Nevertheless, we maintain an open posture toward our company and a willingness to help it follow a path toward increased equity for foreign workers.
Codes of conduct are proven as significant tools that improve the lives of workers. As John Boonstra, Executive Minister of the Washington Association of Churches has said: "many profit-making corporations, particularly those like Starbucks, have the capacity to enter into agreements with coffee exporters...Corporate responsibility means using economic power to secure just relationships and the dignity of workers."
Starbucks advertises itself as being purveyors of coffee, tea and hope. For the workers of Guatemala, two years seems a long time to hope for these promises to be acted upon.
Bruce Herbert is Director of the Northwest Coalition for Responsible Investment and president of Thomson Herbert Company, a registered investment adviser. To get involved in local efforts concerning Guatemalan workers, contact Roberta Ray, Coalition for Justice for Coffee Workers (206) 527-6625.
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