The Strategy Of Shareholder Activism: Working From Inside Public Companies To Make Change
Starbucks has announced long-awaited plans to phase out plastic straws. The company will replace them with a strawless lid that looks a bit like a child’s sippy cup. They’ll also be offering straws made out of alternative materials such as paper and corn-based plastics that can be composted.
The policy applies to all of Starbucks’ stores around the globe. It is to be implemented worldwide, by 2020. The company says this builds on a $10 million commitment it made in March to work harder on creating truly recyclable cups.
An investor advocacy group called As You Sow has been hounding the company from the inside on this issue since 2010. Cyrus Nemati, Director of Communications for the group, says this is a big win.
“It’s a major victory. When we had our shareholder vote back in March, we were expecting good numbers and the big numbers did come. And we’re really happy that Starbucks listened to their investors,” Nemati said.
The resolution calling for a ban on plastic straws failed but garnered 29 percent of the vote. As You Sow says anything over 10 or 12 percent is enough to show real momentum and convince a company like Starbucks to act.
The coffee chain has been on the forefront of progressive policies for decades, including the benefits it provides to part-time employees and its efforts to source coffee beans sustainably.
Shareholder activists use their ownership of shares in a company to push for changes from the inside. They have to argue how market conditions and other factors mean it’s in the investors’ interest to implement new policies.
Their resolution, which includes a global ban on plastic straws as well as reporting requirements on implementation of recycling goals has been a central project for As you Sow’s Senior Vice President, Conrad MacKerran, who notes that while 29% is not a majority, it’s still nearly a third of a huge and wealthy corporation.
“Nearly a third of shareholders approved our proposal – or voted for it – and that was shares worth over $54 billion,” MacKerran said.
“The companies realize you are making an impact with their investors and not just the ones who are traditionally very progressive ones.”
He says a variety of factors contributed to their win, including growing concern about ocean health and viral videos showing, for example, how straws and can get into turtles noses or how six pack holders sometimes strangle marine mammals.
Seattle’s ban on plastic straws, which officially started July 1, also played a part. Enforcement with fines for the new policy won’t begin for another year, but all food service providers have to show they have a plan in place to use up old inventory and phase in compostable straws and utensils. Seattle is where the coffee giant began and has its headquarters.
Starbucks did not respond to request for comment, but its gloassy online news release announcing the policy says the new strawless lids for cold beverages will be introduced first in Seattle and Vancouver with phased rollouts in the U.S. and Canada to follow and Europe and the U.K. after that.