Great Neck, N.Y.: Protestors rally against what they perceive to be union busting tactics, outside a … [+] Starbucks in Great Neck, New York, demanding the reinstatement of a former employee. (Photo by Thomas A. Ferrara/Newsday RM via Getty Images)
What triggers public outrage towards firms? Big issues involving say pay disparities between the CEO and thousands of employees? Or something less dramatic such as the CEO’s use of corporate jets? The Starbucks saga reminds us that we live in an era of heightened climate sensibilities, where corporate reputations are tarnished by small acts of CEO’s perceived climate transgressions. Doing a lot of good climate deeds no longer provides reputational insurance; instead, it probably feeds the audience’s outrage over what it perceives as moral climate violations.
How does the public decide whether a firm is a climate hero or a villain? Do people look at the firm’s records in detail, or do they focus on visible issues? In reality, most people do not have time and resources to gather information (and the capacity to process it). “Boundedly rational” individuals rely on short cuts, often triggered by visible issues. This is why organizations carefully manage their corporate communications with the aim to shine the spotlight on good things and play down stuff that is less flattering.
This strategy seems to work most of the time—until it doesn’t. This, in short, explains the media outrage over Starbucks’ new CEO’s use of corporate jet to commute 1,000 miles from Newport, California (his home) to Seattle (where the company is headquartered).
Reputation management is critical for firms selling lifestyle products that epitomize specific values and personas. These firms spend enormous amounts on marketing research, advertising, packaging, and in-store décor.
Starbucks sells more than coffee; it sells an aspirational lifestyle. It appeals to demographic groups (22-60 years, urban and suburban, educated, and relatively affluent) associated with liberal values. This is probably why Starbucks proclaims its support for many liberal causes.
Did the High Salary Cause the Media Storm?
Starbucks CEO Brian Niccol’s sign-on package is about $113 million. In contrast, the baristas get paid between $15 to $17 per hour, which adds up to $35,360 per year if they work for 40 hours per week, for all 52 weeks!
Some might say that the enormous package is actually a very good deal for shareholders. After all, Starbucks’ stock price jumped by 25% (that is, $26 billion increase in market capitalization) in response to Niccol’s appointment. Thus, Niccol received only 4.3% of the wealth gain – shareholders got 95.7%.
But the optics of big pay packages do not look good. Starbucks’ customer-base tends to hold liberal values and income inequality is outraging liberals. Moreover, while Starbucks’ baristas want to unionize to secure better compensation, Starbucks has waged a “Dirty War Against Organized Labor.” Given this background, one would expect that Niccol’s high salary would have caused the media storm.
This is where it gets interesting. Much of the backlash is not over his compensation but over a “minor” detail: Niccol gets to work from home in Newport, California and commute 1,000 miles to Seattle in a company owned 2007 Gulfstream G550 (a 20-seat aircraft). By some estimates, his annual carbon footprint will be “more than 60 times the annual emissions from the average American, and about 1,800 times more CO2 emitted from flying than the average American aviation passenger.” For critics, the corporate jet perk reveals Starbucks’ climate double standards.
Private Jets and Climate Change
Starbucks is a marketing success story. In a Harvard Business Review article “The Starbucks Effect,” the authors noted, that “Starbucks has given coffee a new cachet.…What’s more, Starbucks’ creativity has set off a chain reaction of innovation in the once-sleepy industry.”
In the spirit of lifestyle marketing, Starbucks proclaims its green agenda. On its website (starbucks.com), it has a separate link to “Social Impact”, with sub-links to “People” ,“Planet”, and “Environmental and Social Impact Reporting.” But its impressive list of projects, activities and initiatives is not providing reputational insurance. Instead, the jet issue has triggered a moral outrage, uniting both liberals and conservatives, a rare occurrence in American politics!
For liberals, governments and firms are not doing enough on climate issues. They are particularly critical of the affluent classes that have disproportionately high carbon footprints. To them, Brian Niccol’s corporate jet issue shows the elite contempt for climate issues; as one commentator noted, “Forget conspicuous consumption – it feels like we have entered an era of contemptuous consumption.” Even Taylor Swift has been criticized for her jet use!
Conservatives have their own complaints about the state of climate issues, especially corporate climate policies. For them, corporate elites are using net-zero commitments or ESG in general to push woke agendas (see recent backlash against Ford, Harley Davidson, Lowes and John Deere). A Wall Street Journal opinion piece notes that Niccol’s “commute will release nearly nine tons of carbon dioxide each round trip. That’s roughly the annual energy-consumption footprint of the typical American household. We’d like to see him explain to California’s dairy farmers (where the latte for the latte comes from) why they should have to install cumbersome and costly “anaerobic digesters” to manage emissions from cow manure while the new Starbucks CEO jets up and down the West Coast to keep his Newport Beach lifestyle.”
The takeaway is that because climate change is now a trigger issue, if companies wave the climate flag, they should expect high level of scrutiny. In the age of social media, small issues can quickly become major reputational problems. The challenge is to anticipate trigger issues so that companies do not get embroiled in moral wars.
