Starbucks will hold its annual stockholders meeting in Seattle next month.  Among the items they are asking stockholders to vote on is the increasing of the board size from its current 9 members to 11.  When you look at the agenda and  statement for the annual meeting, and then take into account the current economic climate and the claims made by Starbucks to effectively “trim costs”, a few things don’t quite seem to add up.

In an open statement to ALL Starbucks stockholders, take a close look at the Meeting Statement and see if you have better answers to the questions we raise here.

New Board Members: It’s proposed to add two new members to the Board, Sheryl Sandberg, COO of Facebook and Kevin R Johnson and ex-Microsoft man and currently CEO of Jupiter Networks.  Iteresting that both are IT related people – does this say something about where Starbucks sees future marketing efforts being concentrated – Social Networks?

While many long serving employees are being given their “pink slips”, these two Non-Executive directors will be given a compensation package of $240,000 EACH!  This would bring the Non-Executive pay pot to $2.4M per year, just for attending 4-6 Board meetings per annum.  The payments are of course in line the compensation packages recommended by the Compensation Review Committee in 2008.  Oh, by the way, that committee is made up of Starbucks Non-Executive Directors – guess that’s why it was approved!

At a time when others are loosing their jobs and the emphasis is on reducing costs, where is the justification for adding 2 more part-time people to the Board at $240,000 EACH?     Unless there are overwhelming and compelling reasons why these people should be appointed VOTE – NO to this proposal.

Selection of Board Members: The Starbucks rules are pretty broad when it comes to who should be nominated for a seat on the Board.  What’s interesting is that there is an option for a nominee to come from within the company – an existing employee – Hooray!!!.  So, why is it that apart from Howard Shultz, ALL other Board members are non-employees?

There is a distinct place for Non-Executive Directors on any Board, they can bring different perspectives and are not lost in the “can’t see the wood for the trees” syndrome that can color the decisions made by a Board that is totally Executive, but there does need to be a balanced mix between Executive and Non-Executive Board Directors.  As there are no selections from within Starbucks ranks, does that say something about the caliber of senior executives within Starbucks? Just asking!  Or are the appointments predicated around the “I’ll scratch your back if you scratch mine?”  Again, just asking!  Perhaps Ms. Sandberg’s political connections are what Howard i s seeking ( a former Chief of Staff at the Treasury under Clinton – no Monika jokes please).  Can you see it – Headline News : The White House proudly brews Starbucks coffee!!!!!

Stockholders – stick to the principles of cutting costs VOTE NO to new board appointments.

One key change needed is the doctrine of  “give the customer what ever they ask for”.  In pure customer service terms it’s reasonable, but store managers need to be empowered to “manage” there stores especially as they are expected to achieve targets that were reasonable in the good times but are outrageous in this climate, when they know that customers are blatantly scamming the store’s bottom line.

The last thing we want to do is expose ALL the scams, people will read them and the problems could compound.  However, to illustrate the point here is one simple one.   If a customer has a Starbucks card and buys a drip filter coffee for $1.75, the company policy is that the customer can get a free refill from the same store that day – the customer saves $0.53.  If the customer goes to another store with the same cup and asks for a refill – that store should charge $0.53 for the coffee as opposed to $1.75.

The problem: store staff are so brainwashed with “give the customer …” that many customers will take a cup into any Starbucks and ask for a “refill” and be given it “free” regardless of whether the original coffee was purchased at that store or not.  Add to this that people will pull this stunt 2/3/4 times a day at various Starbucks locations, knowing that they are unlikely to be challenged because “that’s not Starbucks policy to question customers” you can see how the numbers start to add up.

Starbucks stock holders should be outraged at this poor level of internal financial management control.  Why?  For those who are thinking – its only $0.53, let’s look at the numbers closely.

If it happens once at each store:

• $0.53 x 7087 (Starbucks published store count) =$3,756.11

If it then happened at every store just once every day of the year:

• $3,756.11 x 365 = $1,370,980.10  ($1.37M) per year in lost revenue, and that assumes only one person per day every day at every store.  But as stated earlier, some people are doing this 2/3/4 times per day 4 or 5 days per week!  DO THE MATH!

So what, Starbucks as a corporation will never notice!  Let’s look at this another way:

• Barista’s average $10 per hour, so roughly $20,000 per year, if this one scam was stopped DEAD then the $1.37M would enable 68 Baristas to have (keep) jobs!
• OR at $10 per hour it would provide 137,098 hours to be funded for what Starbucks calls “non-coverage” which could mean Managers could spend that time managing (a novel idea) instead of working as overpaid Barista’s – OR – provide more time for staff training.

However the money is used is not the real issue, customers are not scamming a faceless corporation, they are costing people their jobs and quite possibly their homes!  What they are doing is

• Dishonest
• Deceptive
• Fraudulent
• Theft
• and quite frankly disgusting – because of their greed they are placing peoples lives in financial ruin!

The two most disgusting things about this and other more costly scams, are:

1. Starbucks (yes you Shultz) allow this to go on – so much for their “respect and dignity” policy towards their partners
2. The people who for the most part that perform this act of blatant “theft” are not the homeless, or the poor, but those who know “the rules”, who know that the brainwashed Barista will not challenge them when they say “give me my free refill”. They are the ones who can well afford to pay, are often professionals and gainfully employed with little or no sign of being “separated from their employment” (what a quaint PC term) any time this decade.  They are often well dressed, drive premium cars and can afford $0.53.

So, if you are one of those dishonest “thieves”, when your local Starbucks closes down and provides you with an “inconvenience”, pat yourself on the back for helping add to the unemployment figures and probably also to the home foreclosure statistics.  Sit back with a smug smile of contentment as you reflect on how you and others like you added to the demise.  Look out of the window of your prestige vehicle and watch as the tumbleweed rolls past what was once your “favorite, so convenient, Starbucks drive-thru’”, that was once a place of employment for many, manned by people who went out of their way to provide you with an “experience”.

Cut back on your spending habits by all means -

but cease being a thieving  ASSHOLE!!!!

As for the mighty Howard and his merry band of incompitents (including District Managers), get your heads out of the clouds (and the $45M jet!) and change the policies BEFORE firing any more people.