Mostly froth

A history of Starbucks’ dubious social responsibility campaigns

June 18, 2014
June 18, 2014

Starbucks announced its latest effort at social responsibility this week: It will provide tuition reimbursement for its workers to take online college courses at Arizona State University for free—kicking in about $7,500 per employee.

It seems like a good move for the company and its CEO, Howard Schultz: There was lots of coverage about the benefits of investing in workers and fawning interviews, like this ABC segment where Schultz was asked about his guilty pleasure at Starbucks—”homemade chocolate cookies.” (Perhaps he brings them to the stores himself?)

But dig a little deeper and there are real questions about how much Starbucks employees will benefit: The biggest issue is that students need to complete seven courses at ASU (21 credits) before they get a reimbursement from Starbucks. In the meantime, they’ll have to pay most of the upfront costs, around $8,000 after a discount from ASU. To do this, they may seek financial aid from the government, or have to take out student loans. And that might be hard: Their salary from working at Starbucks, as well as the Starbucks reimbursement, will count against them when it comes to need-based financial aid. (The lowest-paid Starbucks employees make just under $9 an hour, according to GlassDoor, or between $7,000 and $15,000 a year.)

The 21-credit wait is intended in part to create an incentive for students to finish courses, but some education experts say that a community college might end up being cheaper for students—and Starbucks’ old tuition reimbursement program, while less generous, at least allowed students to choose that option, rather than being limited to one online-only program.

It’s also interesting to see who really pays for the program: According to ASU, every 1,000 Starbucks employees taking courses will cost the university $24 million in discounted tuition, Starbucks $11 million in reimbursements, and government education grants $7 million.

So far, there’s a lot of hype for Starbucks, but perhaps less benefit for those on the receiving end of its largesse. Yes, this is a pattern.

Let’s create some jobs

In 2011, Schultz recognized that unemployment was too high. So Starbucks started selling bracelets in stores for $5, which was donated (along with a $5-million kickstart from the company) to Community Development Financial Institutions (CDFIs), banks and loan funds that receive government support for investing in poor communities. At the time, it moved New York Times’ columnist Joe Nocera to begin a column thusly: “Howard Schultz. God bless him.”

This spring, the Opportunity Finance Network, Starbucks’ partner in this program, reported (pdf) that the program had “made a dent” on the jobs crisis, garnering $15.2 million, which was leveraged up to $106 million in loans. That helped 5,000 people “keep their jobs or get back to work—and back on the path to fulfilling the American Dream.”

It’s probably churlish to point out that in the same time period, the US economy created 7.2 million jobs, or that in 2012 (the most recent data) CDFIs had more than $11 billion on their balance sheets. Raising awareness of institutions in under-served communities is important, and every little bit helps.

But it’s perfectly reasonable—and relevant—to point out that over that same period, Starbucks has kept lots of cash offshore to avoid paying US taxes. In 2011, it had $987 million offshore; at the end of last year, it had $1.9 billion. That is potentially hundreds of millions of dollars in missing tax revenue.

Pressure on government budgets lead to all kinds of cuts. And guess what has been cut every year since 2010? Among other things, spending on CDFI guarantees, which peaked that year at $247 million after a stimulus increase; each year since it has been about $20 million lower, and this year it sits at $221 million. It also bears mentioning that between 2011 and today, 153,000 government jobs were lost.

We’ll show the politicians

In 2011, Schultz was also displeased with the US government’s fiscal gridlock, which was at the time heading for a painful showdown on the debt ceiling. To sharpen lawmakers’ deal-making incentives, the CEO announced that he would boycott political donations to either party (he had given $25,600 to Democratic politicians in the previous four years), a move that the Times’ Nocera cringingly called “hardheaded and practical.”

The boycott didn’t catch on, and Starbucks continued spending hundreds of thousands of dollars each year on lobbying, up to a high of $2.2 million in 2013. Their main lobbying firm, K&L Gates, is also a major donor to Senator Maria Cantwell, who represents Starbucks’ home state of Washington and was the main recipient of Schultz’s donations. In fact, he announced his boycott only after giving Cantwell the maximum donation for the 2012 election cycle, $5,000.

Schultz’s next idea came in the run-up to the so-called “fiscal cliff” in 2012, when expiring budget provisions and another debt ceiling debate once again had US lawmakers in an economically dangerous deadlock. He asked baristas in Washington, DC to write “come together” on their customers’ disposable coffee cups.

Cue more press attention for Starbucks and Schultz, who was also one of a number of multinational company CEOs participating in Fix the Debt, an lobbying group that pushed lawmakers to reach a compromise deal that included higher taxes and spending cuts. Ultimately, a deal was reached, and while individual taxes went up and spending cuts slowed the economy for years to come, the tax breaks that allow companies like Starbucks to keep money offshore were quietly renewed.

And so it goes for Starbucks: When responsibility and marketing are served together, the former often seems to come decaffeinated.

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