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Starbucks Making Big Moves in Corporate Social Responsibility

WorldatWork has designated October as “Workplace Equity Month.” To shine the spotlight on issues of pay equity, diversity and inclusion, and social justice, Workspan Daily will be publishing various articles throughout the month on related topics. Visit our Workplace Equity page for more content on this critical area of total rewards.

Starbucks has built a loyal customer base with chai lattes and Frappuccinos. But the world’s largest coffeehouse chain has built an employment brand, at least in part, on a reputation for progressive policies.

There’s been at least one occasion when Starbucks didn’t quite embody its ideals, though. In April 2018, the company courted controversy when two Black men were led out of a Philadelphia Starbucks in handcuffs after an altercation with the store’s manager.

The two business partners — who eventually reached a settlement with Starbucks and the city of Philadelphia — were arrested as they sat waiting for a professional associate, without placing an order.

Starbucks CEO Kevin Johnson issued a statement two days after the confrontation, saying the organization’s “practices and training led to a bad outcome.” The following month, the company shut down its 8,000 stores for a day to conduct organization-wide anti-bias training.

Now, more than two years after that incident, Starbucks is reiterating its commitment to “lead by example in areas of inclusion, diversity and equity,” according to an Oct. 14 letter Johnson wrote to the company’s 346,000 employees.

In that letter, Johnson announced a series of steps designed to reinforce and improve upon the principles Starbucks outlined for itself in the wake of the aforementioned Philadelphia encounter.

This effort starts at the top of the organization, as Starbucks will begin tying executive compensation to the company’s diversity goals in 2021.

Starbucks did not share specifics as to how executive pay will be impacted. But it did set goals for increasing the number of Black, Indigenous and People of Color (BIPOC) employees at all levels of the organization. Those goals include achieving at least 30% BIPOC representation at all corporate levels by the year 2025, and at least 40% representation in all retail and manufacturing roles in the same timeframe.

Currently, 53% of Starbucks’ U.S. employees are White, 27% are Hispanic or Latinx, 8% are Black, 5% are multi-racial. Less than 1% are Native American or Native Alaskan, with the same percentage identifying as Native Hawaiian or other Pacific Islander.

“We will hold ourselves accountable at the highest levels of the organization, connecting the building of inclusive and diverse teams to our executive compensation program, effective immediately,” Johnson wrote, adding that all of the company’s senior leaders at the vice president level and higher will be required to complete two-hour anti-bias training as well.

Starbucks is also creating an analytics tool intended to help senior leaders track diversity, launching a mentorship program connecting BIPOC partners to senior leaders, and establishing an inclusion and diversity executive council “to provide internal governance to integrate inclusion and diversity throughout the organization,” according to Johnson.

Starting an Exec Comp Trend?
Starbucks isn’t the only large organization getting serious about holding executives accountable for the company’s diversity goals.

PepsiCo chairman and CEO Ramon Laguarta, for example, sent a letter to employees the same day Johnson shared his message with Starbucks workers. In his dispatch, Laguarta outlined the food, snack and beverage producer’s goals to increase gender and racial diversity in its management ranks.

For instance, PepsiCo aims to increase Black representation in managerial positions by 30% and plans to expand Hispanic managerial representation to 10% of its workforce by 2025, by hiring 120 Hispanic managers, including 50 Hispanic executives.

Sue Holloway, director of executive compensation strategy at WorldatWork, expects to see other organizations following the lead of companies like Starbucks and PepsiCo.

Holloway points out that many organizations are already establishing, monitoring and disclosing environmental, social and corporate governance (ESG) and diversity, equity and inclusion (DEI) metrics and the progress the company is making on these fronts.

This might come in the form of ESG or corporate social responsibility scorecards that include environmental factors, employee engagement and company culture, for example, with some organizations disclosing such information to employees, media outlets and shareholders, says Holloway.

“However, only recently have we seen organizations begin to link these metrics to their executive incentive plans.”

Holloway also anticipates the prevalence of DEI metrics to grow, citing several factors such as increased pressure that companies should operate for the benefit of all stakeholders, recent protests demanding racial equality and concerns that progress toward true workplace diversity, equity and inclusion isn’t moving fast enough.

“Incentives are a great mechanism to focus attention, signal what’s important and encourage behaviors of incentive plan participants,” she said, noting that organizations and compensation leaders must weigh a number of factors when deciding to connect executive pay to DEI efforts.

“[Ask yourself], ‘Does this make sense for the organization?’ Determine if and how DEI fits with your business strategy and if it makes sense to include DEI metrics in incentive plans.”

She also suggests considering what metrics to use and the timeframe in which you expect goals to be reached.

“Identify metrics to use and [that] are best to align with short- or long-term incentives,” Holloway said. “And who should be incented and rewarded? Consider if metrics should be included in just executive incentive plans, or more broadly to include managers and employees.”

About the Author

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Mark McGraw is managing editor at Workspan.

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