Comment: It’s not Starbucks, but Schultz who doesn’t get it

By Beth Kowitt / Bloomberg Opinion

Former Starbucks CEO Howard Schultz kept his cool and stayed on message on Wednesday amid pointed questioning during a Senate committee hearing about the coffee giant’s alleged labor law violations. Even as Sen. Bernie Sanders. D-Vt., who chairs the Senate Health, Education, Labor and Pensions Committee, described Starbucks as waging “the most aggressive and illegal union busting campaign in the modern history of our country,” Schultz continued to project an image of confident self-made entrepreneur.

That is, except for one exchange — a heated back and forth with Sen. Ed Markey, D-Mass., that seemed to hit a nerve with Schultz.

Countless times during the hearing, including in his prepared testimony, Schultz recalled his father, who after injuring himself in 1960, when he slipped on a sheet of ice, was fired from his job as a delivery driver. Schultz said the experience “fractured our family and it deeply scarred me.” That Schultz has tried to build Starbucks into the kind of company that his father never got the chance to work for has become one of his standard lines and part of the company’s lore.

It’s a poignant story, one that evokes the American Dream, and earned Schultz kudos from the Republican committee members. But in the end, it backfired on him. Markey used his time to make the point that Schultz’s father would have in fact benefited from union membership. Without it, he had no rights when he got injured, and Schultz’s family paid the price; which is how Starbucks workers feel right now, Markey said. Through a union, something Schultz has vehemently opposed, Starbucks employees want to be able to protect themselves in a way that Schultz’s father could not, he added. “I would just hope that you would understand that,” Markey said. “But I’m afraid you don’t.”

Schultz clearly did not like that line of rhetoric. “You don’t understand, sir,” he repeated as he and Markey spoke over one another.

But Markey may be onto something. During the hearing, Schultz’s reasoning for opposing the union could come off as confusing, at times contradictory, and even out of touch; something the Democratic senators called him out on.

Shareholders also seem to be questioning Starbucks’ and Schultz’s stance on the union. The hearing came the same day that the company reported its investors voted last week in favor of a proposal seeking a third-party assessment of worker-rights commitments. The close vote came against the company’s recommendation.

About 300 of Starbucks’ some 9,000 company-owned U.S. stores have voted to unionize over the past year and a half, calling not only for better wages, benefits and stability but for the company to live up to its reputation as a progressive employer. But the pace of unionizing has been slowing; from November through January, only about 20 locations voted to unionize, compared with roughly 180 in the April-through-June period. Labor organizers have blamed the company’s alleged retaliation, though a strategy that’s included raising wages and benefits has also undercut support for a union. The U.S. National Labor Relations Board has issued more than 80 complaints against Starbucks, accusing the company of anti-union activity.

During the hearing, Schultz repeatedly made the case that he is the good kind of CEO who runs the good kind of company, and therefore it’s one that doesn’t need a union. He has implemented best-in-class benefits not because anyone told him to or made him, but because he believed it was the right thing to do. His argument: A union would interfere with the company’s ability to have a direct relationship with its employees, which allows management to best anticipate their needs.

Sen. Tammy Baldwin, D-Wis., questioned how it’s possible for the company to have a direct relationship with more than 200,000 employees. If the company really does care about listening to employees, wouldn’t a union give workers the chance to give more direct and honest feedback without fear of retaliation, she posited. Baldwin told Schultz that she found it particularly ironic, given his own personal story, that he does not see this power dynamic at play.

“While you call them partners, your workers are limited in their ability to engage with you directly because there’s a power differential,” she said. “And you have power over them and the benefits that they cherish; a power you have shown your willingness to wield, involving employees attempting to organize.” She was alluding to accusations that Starbucks has withheld benefits, like pay increases, from stores that have voted to unionize. Schultz repeatedly said that the company has not broken the law. And Republicans repeatedly rose to Starbucks’ defense.

The fact that Schultz has long painted himself as the benevolent CEO and the company’s savior is now undermining his case. Schultz has said many times that the union showed up because the company “lost its way,” which precipitated his return for a third stint as CEO to get the company back on track. While he remains on the board, Schultz officially handed over the reins to Laxman Narasimhan earlier this month and has unequivocally said he will not return for a fourth time. Without Schultz as CEO, Sen. Markey questioned what would happen if the company lost its way again. “Workers should not be dependent on you and your sense of right and wrong.” he said. “They should be able to have laws, protections, unions that stand up for them every single day.”

Schultz has readily admitted that he takes employees’ labor organizing as a personal affront, that somehow it means Starbucks has fallen into that category of bad company. It seems that to Schultz, victory over the union is necessary to affirm his legacy. But for the workers who want to unionize, it’s not personal. It’s just business. One would think that would be something a self-made entrepreneur would understand.

Beth Kowitt is a Bloomberg Opinion columnist covering corporate America. She was previously a senior writer and editor at Fortune Magazine.