Two influential proxy advisory firms in the United States are alerting shareholders that global coffee giant Starbucks may be overlooking the financial, operational, and reputational risks stemming from its labor disputes, which could negatively impact long-term shareholder value growth. This warning comes more than a year after contract negotiations broke down between the company and a union representing its U.S. store baristas.

Controversy surrounding labor relations persists, and it remains unclear whether the board has provided sufficient oversight of management's handling of these issues, analysts from the world's largest proxy advisor, ISS, wrote earlier this month, ahead of the company's annual shareholder meeting on March 25. ISS specifically highlighted a major strike initiated by the U.S. union and Starbucks' recent agreement to pay a $38.9 million settlement, citing allegations that the company violated a New York City law requiring predictable and stable schedules for fast-food workers.

Both ISS and Glass Lewis noted that Starbucks recently disbanded a board committee, established under former CEO Laxman Narasimhan, which was tasked with long-term oversight of labor relations. The Starbucks board had formed the "Environment, Partner, and Community Impact Committee" in 2023 under pressure from shareholder groups, partly in response to a passed vote compelling the company to hire an external auditor to review its labor practices.

Some of these same shareholder groups, including the New York State Comptroller's Office and the union-affiliated SOC Investment Group, are attempting to pressure Starbucks again, citing the committee's formal dissolution and claiming that prolonged labor conflicts threaten the large-scale strategic overhaul being pursued by CEO Brian Niccol. Starbucks, however, stated in a declaration that these groups represent only a minority of shareholders.

Glass Lewis, referencing the dissolution of the labor committee, has recommended that shareholders vote against the re-election of board member Beth Ford, who chairs the Nominating and Corporate Governance Committee. Glass Lewis stated that the governance committee "should be held accountable for failing to ensure oversight of risks that could harm shareholder interests."

Labor risk is no longer just an employee relations issue but a shareholder risk issue. The focus of ISS and Glass Lewis is not merely on the existence of union conflicts, but on whether these conflicts pose a material threat to the company's finances, reputation, and governance. This risk is becoming tangible; the market's concern extends beyond the disputes themselves to whether the Starbucks board is underestimating such risks, especially after dissolving the dedicated labor oversight committee.

In its proxy statement, Starbucks stated that oversight of labor matters will now be the responsibility of the full board, while other key duties of the dissolved Impact Committee have been reassigned to other committees. An internal document indicated that the adjustment was made to simplify the board's structure and allow board and committee members to "focus attention on core matters that drive long-term shareholder value."

Starbucks spokesperson Jaci Anderson stated in an official declaration that the board "has the skills and experience necessary to effectively oversee our strategy, including human capital management." Starbucks claims it offers "one of the best jobs in retail," partly due to benefits like health insurance, parental leave, and tuition coverage for Arizona State University online courses for employees working over 20 hours per week.

Starbucks' 2025 annual SEC filing detailed risks that labor issues pose to shareholders, including business disruption from work stoppages, potential "unfavorable" impacts from future union contracts, and significant reputational damage risks related to the company's public stance on unionization. According to Starbucks, unions have gained representation rights in approximately 6% of its U.S. stores. While union elections at the store level have slowed from their 2022 peak, they have continued into 2026.

In December of last year, unionized café workers in 40 U.S. cities launched an indefinite strike. While this widespread strike has largely subsided, localized, rotating work stoppages at specific stores have continued. Starbucks stated that these strikes involved less than 1% of its stores and that all participants have formally returned to work. Both sides blame each other for the breakdown of negotiations at the end of 2024 and have expressed readiness to return to the bargaining table.

Under Niccol's leadership, Starbucks is actively implementing various initiatives globally to boost sales. These include the return of the Pumpkin Spice Latte, remodeling numerous U.S. stores, upgrading its mobile app and order-ahead system to enhance customer experience, and rolling out the "Green Apron Service" operational model. This new model aims to standardize transaction flow, sales, and customer service times across its coffee shops.

Starbucks reports that stores which have implemented the new model have seen improvements in transaction volume, sales, and customer service times. Although the company has so far only remodeled 70 stores, primarily in New York and Southern California, management expects the pace to accelerate, projecting over 1,000 store remodels completed by the end of the current fiscal year in September 2026.

CEO Niccol stated on an earnings call, "While the sample size is still small, we are encouraged by the improvements in sales and transactions we are seeing so far."