Recent headlines blasted “Starbucks to Close 8,000 U.S. Stores for Racial-Bias Training After Arrests.” Starbucks executives’ response to the recent arrests in a Philadelphia café are unprecedented.
Starbucks is known as a strong company with a concern for its employees and a socially responsible agenda in its community. It has a reputation for excellent customer service.
In fact, it has once again been honored as one of the world’s most ethical companies by The Ethisphere Institute, a global leader in defining and advancing the standards of ethical business practices. The Institute announced 135 companies spanning 23 countries and 57 industries as being honored for 2018 World’s Most Ethical Companies. By the way, Starbucks has been on this list since the awards’ inception in 2007.
“Over the last 12 years, we have repeatedly seen that those companies who focus on transparency and authenticity are rewarded with the trust of their employees, their customers and their investors. While negative headlines might grab attention, the companies who support the rule of law and operate with decency and fair play around the globe will always succeed in the long term,” explained Ethisphere CEO Timothy Erblich. “Congratulations to all of the 2018 honorees.”
In keeping with its integrity and values, last week Starbucks announced it would close its more than 8,000 stores in the United States for one day to conduct anti-bias training for 175,000 employees.
The catalyst? Two African-American men were arrested at one of its Philadelphia Center City stores last week after being asked to leave for not purchasing anything, causing a store employee to call police.
The incident has prompted a national outrage with charges of racial discrimination at the core. The arrest has prompted a hashtag on social media, #BoycottStarbucks, included protests at the store with chanting and signs that say Black Lives Matter and POWER, Building a City of Opportunity That Works For All. Protest meetings have involved clergy leaders, meetings with city leaders and other officials.
Apparently the two men asked to use the restroom and were refused, supposedly because they had not purchased anything. The men sat down, were asked to leave, declined to do so and an employee eventually called the police.
Starbucks did not want to press charges and the men were later released, Commissioner Richard Ross Jr. of the Philadelphia Police Department said in a recorded statement on Saturday.
The employee has been fired. A review from the Philadelphia Commission on Human Relations is underway. A Starbucks spokesperson told The Washington Post, “In this particular store, the guidelines were that partners must ask unpaying customers to leave the store, and police were to be called if they refused.”
Two days after the episode, Starbucks apologized and Kevin R. Johnson, Starbuck’s CEO called the situation a “reprehensible outcome.” “I’ve spent the last few days in Philadelphia with my leadership team listening to the community, learning what we did wrong and the steps we need to take to fix it,” he said in a statement announcing the training.
Mr. Johnson pledged to make “any necessary changes to our practices that would help prevent such an occurrence from ever happening again.” He said he hoped to meet the two men in person to offer a “face-to-face apology.”
“Starbucks stands firmly against discrimination or racial profiling,” he said. “Regretfully, our practices and training led to a bad outcome — the basis for the call to the Philadelphia Police Department was wrong. Our store manager never intended for these men to be arrested and this should never have escalated as it did.”
According to Commissioner Ross the police officers asked the men to leave three times because employees had said they were trespassing. The men refused, he said.
“These officers had legal standing to make this arrest,” Commissioner Ross said. “These officers did absolutely nothing wrong. They followed policy, they did what they were supposed to do, they were professional in all their dealings with these gentlemen — and instead they got the opposite back”.
Commissioner Ross (who himself is black) has since apologized, “The issue of race in this situation is not lost on me,” adding that he shouldn’t be the one making it worse.
Jim Kenney, the mayor of Philadelphia, blamed Starbucks, saying that the episode “appears to exemplify what racial discrimination looks like in 2018…Starbucks has issued an apology, but that is not enough,” he said in a statement. He said he has asked the Philadelphia Commission on Human Relations to examine the company’s policies and procedures; which, by the way, Starbucks had also requested.
Donte Robinson and Rashon Nelson — the 23-year-olds at the center of it all — say they just hope the incident will lead to change.
Presently Starbucks has 9,400 plus stores in the United States, Canada and Latin America and more than 12,000 Starbucks worldwide. The stores generated nearly $14 billion in revenue in the company’s most recent fiscal year.
According to Professor of Business Ethics and Management and Executive Director of the Institute for Ethics in Business at Duquesne University’s Palumbo Donahue School of Business Dr. James Weber, one bad incident does not characterize an entire company. He calls the Starbucks’ reaction an unprecedented move.
Starbucks’ message is loud and clear: Let’s make sure this doesn’t happen again. A deplorable mistake occurred that should not have happened. Zero toleration. And while all employees should know company policy, it looks as if, in this case, those store employees were under another conception that you must be a paying customer to use the restroom and the facility.
By the way, many other “stores” post signs that you must be a customer to use the facilities, so this is unusual in itself.
Doing the right thing is at rock bottom of ethical behavior and, in this case, this is what Starbucks is doing regardless of the substantial cost. Speculating on what cost they could have incurred from lost customers and future business if they hadn’t proceeded along these lines is not the question. Their actions to do right are unprecedented today and to be applauded and encouraged.
Unprecedented — that’s sad as so many companies caught in this bind in the last several years have not exhibited social responsibility and ethical values — from Wells Fargo to dozens more I’ve talked about before.
We talk a good game about ethics and the right behaviors. However, having those behaviors as the fundamental values of a company is not always the way companies act. Doing the right thing for the good of all stakeholders, employees, shareholders, and the community is a critical ethical construct, regardless of the consequences.
Starbuck’s CEO Kevin R. Johnson, is doing the right thing. And sometimes that has a price. In this case a huge one. It exemplifies what an ethical company should do and the strong foundational values of doing the right thing regardless of the very considerable cost.
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Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.
