Starbucks, Howard Schultz, Gay Marriage – Publicity Stunt or Poor Risk Management?

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Starbucks CEO, Howard Schultz, made a bold comment about the company’s stance on gay marriage at a shareholder’s meeting last month.  On March 21st when shareholder Tom Strobhar voiced his concern that Starbucks sales and earnings have been disappointing because of the National Organization for Marriage’s boycott of Starbucks due to its endorsement of gay marriage, Schultz told off this shareholder and, as a consequence, all shareholders who share his views.  Schultz is reported as telling Strobhar, “If you feel, respectfully, that you can get a higher return than the 38 percent you got last year, it’s a free country.  You can sell your shares of Starbucks and buy shares in another company.  Thank you very much.” (CNN Money)

Starbucks has officially endorsed gay marriage since January 24th, 2012 when its support of the Washington State legislation recognizing marriage equality was officially released. (Seattle Times)  But, all political and religious opinions aside, is this endorsement a good financial decision on the part of Starbucks?  How might Starbucks’ CFO have determined the effects of this endorsement on the company’s financials?

In order for the company’s take such a strong pro-gay marriage stance, let us assume that that the CFO and board of directors were consulted to determine how this position would affect Starbucks’ financial results.  It is very likely that there was a discussion on the effects of this stance on stock prices and sales for Starbucks.  The CFO likely white-boarded and discussed a risk/reward analysis of this decision with the board of directors to determine how this stance would affect the company financially.  It would seem that they looked at the demographic they would alienate by this statement and compared it to the amount of people who would support them as a result of this statement.  If they found that more people would support rather than oppose these views, then the CFO would likely have approved the decision.  In this case, it would have been a good financial decision.  If the opposite was true, then it would not be a good financial decision.

Whatever the actual outcome of such a risk management discussion might have been, Starbucks did endorse the legislation and the CEO did make his reply to a shareholder, clearly voicing Starbucks’ pro-gay marriage stance.  Was this a well-thought out decisions on the part of Starbucks or merely a publicity stunt?  Considering that Starbucks’ stock prices rose by 1.30% from $57.05 on March 21st, 2012 to $57.80 as of the market close on April 10th, 2013, it appears the controversial endorsement and the CEO’s comments may have been slightly beneficial (assuming this is the only factor affecting Starbucks’ stock price). (Google Finance)  Perhaps the CFO did indeed have some say on this decision…

 

What are your thoughts…  Is Starbucks’ stance on a gay marriage a sound financial move for the company?  Or, is it hurting the company financially?