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Former Starbucks CEO, union leaders testify before Congress to address labor practices

Yahoo Finance food reporter Brooke DiPalma joins the Live show to highlight testimonies from former Starbucks CEO Howard Schultz and labor union leaders to Congress in a Senate committee hearing addressing concerns surrounding the chain's labor practices.

Video transcript

- Former Starbucks CEO Howard Schultz testifying in front of senators today over accusations that the coffee chain waged an aggressive and illegal union-busting campaign under his leadership, those words from Senator Bernie Sanders. Our Brooke DiPalma has been following that hearing all day. Brooke, some fiery exchanges between the senators and Howard Schultz. What stood out to you?

BROOKE DIPALMA: Well, certainly, lots stood out to me in a more than three-hour hearing that took place today. Schultz responded to questions across the aisle, some rewarding his and the company's success, others calling him straight-up wrong. Committee Chairman Bernie Sanders hit the ground running, accusing the coffee chain of illegal union-busting activities.

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BERNIE SANDERS: On the other hand, we have a corporation worth some $113 billion, largely controlled by an individual worth some $4 billion, who are using their unlimited resources to do everything possible, legal and illegal, to deny these workers their constitutional right to form a union.

BROOKE DIPALMA: Now, from the get-go, Howard Schultz, who stepped down as CEO last week, said he wanted to set the tone that Starbucks has not broken the law. And when asked by Senator Sanders if he could agree to exchange proposals with the union within 14 days of the hearing, Schultz responded that the company has been trying to do that, but has been met with challenges.

HOWARD SCHULTZ: Because the arrangement that was made by the union and the NLRB in Buffalo to negotiate one single store at a time, we have met over 85 times for a single store. We've tried to arrange over 350 separate meetings. We've said publicly and I say it here again that we believe that face-to-face negotiations is the way to proceed. And the reason I want to make that point is that there have been safety issues in which Starbucks' managers have been outed on social media. There are privacy issues. We don't want to do it on Zoom. We are prepared to meet face to face on a single-store issue.

BROOKE DIPALMA: And in response to Starbucks' hometown senator, Seattle-based Senator Murray, Schultz said he believes that a person at Starbucks has the right to decide if they want to join a union, but Starbucks' vision is a preference to maintain a direct relationship with partners, which it calls its employees. And later on, one of those partners took the stand. That was Maggie Carter. And she works at one of the first locations to unionize in Knoxville, Tennessee. She responded on why she felt encouraged to unionize.

MAGGIE CARTER: The wages and, you know, rent rising in our state is just not something that worked for us. And also, benefits are just too expensive for us to actually be able to use. So rather than forego a paycheck, we just choose not to have health insurance. So those are a lot of the reasons why we chose to organize. And I'll say Howard Schultz does not feel like a partner to me.

BROOKE DIPALMA: Now, Schultz does remain on the board, but these issues largely fall under the scope of new CEO Laxman Narasimhan, who took the helm last week. And as of now, there have been no conclusions reached. But Wall Street not reacting to much of this. Shares up just 1%.

- What happens next?

BROOKE DIPALMA: Yeah, that's a great question. And that's something that I asked an analyst on Wall Street of Wedbush as well. And he particularly said that this is a small amount of companies. It's only more than 290 of 9,000 US company-owned stores at Starbucks. And so Starbucks will keep coming to the table. They want face-to-face. Then the unions have to agree-- the stores, rather, that voted yes to unionize. And he said that it may take a long time for these companies-- rather, these stores to reach a conclusion, to reach some sort of agreement.

But he also noted that this is baked in. At some point, this comes an incremental cost of business to Starbucks, and that it's going to be baked into margins, valuations, and expectations. So lots of fallout from this.

- And Bill Cassidy, Republican senator, wanted to make clear that they have some issues with the National Labor Relations Board. They feel they have politicized this fight and have taken a side here. So that will continue that fight as well. Excellent reporting. Thank you, Brooke. Good to see you.