Harrington Investments, Inc. of Napa, a socially responsible investment advisory firm, is asking Starbucks to be clear with shareholders about who is ultimately responsible for keeping the company’s sustainability promises, according to a news release from the company.
In several months, Starbuck’s shareholders may have the opportunity to weigh in on whether or not sustainability oversight should be a high priority focus for the company at the highest level—as a duty of the board of directors.
In a proposal submitted to Starbucks last week, on behalf of shareholders by Harrington Investments, CEO John Harrington is asking Starbucks’ board of directors to establish an independent sustainability committee. The company has committees in place to oversee compensation practices and audit compliance, but board members only review, once a year, a single sustainability report based on management’s voluntary public disclosures.
In contrast, the proposed board committee on sustainability would be authorized to initiate, review and make policy recommendations on an array of issues regarding the company’s preparedness for changing environmental conditions that may affect the sustainability of business. Issues might include global climate change, emerging concerns regarding toxicity of materials, resource shortages, biodiversity loss and even political instability resulting from environmental uncertainty and upheaval.
Harrington, with more than 30 years of experience challenging corporate power, has had success with this issue with other companies, said the release. In 2008, at Harrington’s urging, both Intel and Monsanto instituted oversight of sustainability at the board level, and even produced legal opinions stating that the newly created oversight processes brought with them a new fiduciary duty of board members to oversee sustainability. In the past, according to Harrington, Starbucks has been responsive to shareholder concerns.
Harrington Investments is a long-term shareholder of Starbucks, and John Harrington has worked with the company on corporate governance issues for almost a decade.
Harrington’s advocacy led to the elimination of undemocratic voting for the board of directors (known as “classified” voting), and the enactment of a requirement for an annual election of directors by a majority vote, said the release. Harrington has also worked with other institutional shareholders supporting non-GMO and fair-trade coffee purchasing policies for Starbucks.
“The only body directly accountable to shareholders within public companies is the board of directors,” Harrington said. “Corporate managers will do, say, or sign anything to make their company look good — but anything that lacks an enforcement mechanism amounts to, ultimately, just a public relations move.”
Harrington said while the current Starbucks CEO Howard Schultz is recognized as an industry leader in social responsibility, sustainability oversight is too important to be left to any one individual.
“If Starbucks’ CEO wants to ensure his legacy of sustainability is carried on beyond his lifetime,” said Harrington, “he and the Board should embrace policy proposals designed to protect the company – and the environment – in perpetuity. It should be inserted as policy into the DNA of the company.”