NBIM backs freedom of association audit proposal as pressure on Starbucks ramps up

Trillion-dollar fund backs worker rights resolution as New York State announces votes against coffee giant’s CEO and directors.

Norway’s trillion-dollar sovereign wealth fund has thrown its weight behind the worker freedom of association audit proposal at US coffee giant Starbucks. 

The disclosure by Norges Bank Investment Management (NBIM) comes as the New York State Common Retirement Fund revealed that in addition to backing the proposal it will also vote against Starbucks’ outgoing CEO, Howard Schultz, and all the current members of the company’s Compensation and Management Development Committee. 

Starbucks has “failed to appropriately manage and address numerous ESG risks, including lack of oversight and failure to uphold the company’s corporate policies on human rights and freedom of association”, the $233 billion US public pension fund stated. 

On Monday, Starbucks revealed that its incoming CEO Laxman Narasimhan had taken up his new role, nearly two weeks earlier than expected. Narasimhan will reportedly lead the annual meeting on Thursday.

The proposal calls on Starbucks to undertake an independent assessment of its labour practices, including whether it is adhering to its “stated commitment to workers’ freedom of association and collective bargaining rights”. 

It was filed by the Office of the New York City Comptroller, Brad Lander; UK proxy adviser PIRC and Canadian responsible investment association SHARE, representing investors including US-based Trillium Asset Management.

In the resolution, the proponents highlight allegations that Starbucks has interfered with workers’ attempts to unionise, despite the commitments in its Global Human Rights Statement. 

Earlier this year, Comptroller Lander told Responsible Investor that Starbucks has not engaged in good faith negotiations with it over its anti-unionisation concerns. 

The same proposal filed at Apple by the group was withdrawn in January after the tech giant agreed to undertake a third-party assessment. 

Pressure on Starbucks has been mounting. Last week’s news that influential proxy advisers Glass Lewis and ISS were backing the resolution is likely to substantially buoy support.  

ISS stated in its advice that there “seem to be credible reasons that may lend support to various accusations raised by the NLRB [National Labor Relations Board], Starbucks, and Workers United.” 

“The proposed third-party assessment would benefit shareholders by cutting through some of the noise and helping them evaluate the company’s management of any related risks,” it added. 

Investors have ramped up efforts to engage on worker rights at US companies in recent years. In May, a proposal filed by SHARE asking Amazon for greater disclosure on its approach to labour rights and freedom of association drew support of close to 40 percent. That proposal was also backed by ISS and Glass Lewis.  

Amazon is facing a similar proposal to the one at Starbucks this year. That proposal was filed by SHARE and US-based SOC Investment Group, with UK fund manager CCLA and Canada’s British Columbia Investment Management Corporation (BCi) acting as co-filers.   

“We respect our partners’ rights to organise and engage in lawful union activities and we have fully honoured the process laid out by the NLRB to ensure that partners can trust the process is fair and their voice is heard,” a spokesperson for Starbuck’s told RI.

“We believe our direct relationship as partners is core to the culture and experiences we create in our stores and are actively engaging with shareholders on a variety of matters related to our 2023 Annual Meeting of Shareholders.”