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Starbuck’s CEO Schultz Warned Hillary Clinton About Obamacare

The email correspondence of Hillary Clinton as Secretary of State under President Obama is an open book, thanks to WikiLeaks. Much has been made of the breach of security that the current Democratic candidate for the Presidency may have committed. We marvel that this dereliction of duty or intentional breach has been allowed without prosecution due to Clinton’s peculiar personal placement, though another person committing the same act would undoubtedly have suffered severe penalties.

But the open book that Hillary Clinton has laid before the public has so many pages and tells so many compelling stories that most of us have only an inkling of what it may contain. Not all the stories are about National Security. Some of them concern our domestic economy and mysterious ties between governmental entities and private enterprise.

One such story is about the correspondence between Harold Schultz, of Starbucks fame, and the Secretary of State. In the email reproduced below, Schultz warns Hillary Clinton that if passed, the Affordable Care Act would undermine Starbuck’s efforts to provide its employees with health insurance benefits and would be a drain on the company and by extension the economy.

Dear Mr. President and Madam Secretary:

First of all, Sheri and I very much enjoyed our time together in East Hampton. We would love to spend time with you again if the opportunity arises. I wanted to follow up on a couple of items we discussed. First, let me respond to you on the question of the recent health care legislation and its impact on Starbucks. As I mentioned to you, Starbucks has been providing health insurance as an option to our full and part time employees since 1992. We made a decision to extend the health care option to any partner (we call our employees partners) who works 20 hours a week at that time and it has been a core benefit and an example of the kind of values we embody.

We anticipate that the Affordable Care Act will increase benefits costs to Starbucks because the individual mandate will cause many partners who currently waive our coverage to join our benefit plan. Eligibility for other coverage, including Medicaid, could mitigate the additional cost, but we anticipate that the initial impact will be an additional cost to Starbucks. There is some irony to this as the ACA mandates plan coverage to employees who work 30 hours a week. We could change our eligibility to the new law, but that is not something we want to sacrifice. Our legacy of health coverage for part-time partners is deeply rooted in our mission, and aligned with our commitment to the Partner experience and the customer experience. Offering affordable health insurance to all partners who work an average of 20 hours a week will continue at Starbucks and will remain an important part of our culture.

Approximately 92,000 partners are eligible for benefits and historically some portion have waived coverage. With the mandate extension this will change the equation for us and add to our cost basis. Further, in the initial years of the Affordable Care Act implementation, we believe that partners will prefer the Starbucks plans to Medicaid due to lack of understanding of the Medicaid coverage and/or due to a negative stigma associated with Medicaid. The Starbucks coverage will comply with the Act precluding partners from getting any federal subsidy to purchase coverage on an exchange. Given this, we expect that the number of partners on the Starbucks plan will increase—also increasing costs to us. We were supportive of the ACA and would oppose its repeal. At the same time, it is far from perfect and will result in greater expense to us….a somewhat counterintuitive result, given that we have tried to do the right thing for all these years.

As to the other matter you asked for information about, I’m passing along a memo from Mark Pinsky, President and CEO of the Opportunity Finance Network that outlines the evidence that there is an unmet demand for small business financing.

Good luck on the convention speech tonight. The picture you collectively painted for our future as a nation will no doubt be reflected in the speech this evening and contribute greatly to this re-election effort. The country is blessed to have both of you continue to give so much. And Sheri and I loved every minute of your company. Until our paths cross again, our very best to you both.

Warm regards,
Sheri and Howard

This email, dated September 5, 2012, explains how the ACA would negatively impact the Starbucks bottom line by preventing those employees who would typically waive coverage from doing, so while keeping anyone working for Starbucks from being eligible for Obamacare’s price reductions under the insurance exchanges, since they already had insurance available from their employer.

Likewise, the email very succinctly explains how no one would choose to be covered under Medicaid if there were another option available. And then, seemingly in no way to the point, the email mentions an unmet demand for small business financing. Is this a hint about a loan? All in all, despite the negative impact to his company, Howard Schultz reiterates his support for the ACA. He does not want it repealed.

Why would a businessman support a law that is about to destroy the profit margin of his business? What possible motive could Howard Schultz have for such unstinting loyalty to the program popularly known as Obamacare?

What would make a business person behave that way? What threat or bribe could cause him to accept a reduction to his bottom line that would negatively impact not only his own profits but also the livelihoods of all who depend on his business?

While Howard Schultz is currently Starbucks’ CEO, and it was he who headed up the business when it first became a publicly traded stock in 1992, the company was founded in 1971 as a single store by Zev Siegel, Jerry Baldwin and Gordon Bowker, two school teachers and a writer,  in Seattle, Washington.

The business was first known as Starbucks Coffee Company. The store was named for the literary figure from Moby-Dick and the logo, featuring a half-clad mermaid, recalled the seafaring history of the coffee trade. By 1980, when Zev Siegl left Starbucks, the business had expanded to six stores in the Seattle area. Howard Schultz had not even set foot in a Starbucks store until 1981, according to the company’s website.

In 1982, Schultz joined the company. In 1983 he introduced the latte. By 1992 Starbucks was a publicly traded company, and today 70 percent of its stock is institutionally held so that it is nearly impossible to ascertain what individuals actually own a controlling interest in the company.

However, an insider in the stock brokering trade, such as Chelsea Clinton, who is married to investment banker Marc Mervinsky, and has worked for Avenue Capital Group and who is on the board of IAC, might be able to have better insight into the ultimate ownership of institutionally held corporations.

What is undoubtedly true is that the ACA has had a devastating effect on the working opportunities of Starbucks employees, so much so that there is now a petition in place protesting reduced work hours.

Jaime Prater speaks for himself and fellow Starbucks employees:

We understand that businesses have to be profitable to survive, we get it. What’s happening currently is some of the most extreme labor cuts in Starbucks history.

Morale is at the lowest I’ve seen it in my nearly 9 years of service with Starbucks. Customers feel this the most, of anyone.

The labor situation has gone from tight to infuriating. Labor has been cut so much in corporate stores, that one call-off (an employee calling in sick) impacts the entire day, as managers are directed to cut shifts to save on labor costs. Baristas trying to work more than 25 hours a week (myself included) find that a near impossible task. You end up taking it personally, when corporate directs your stores to understaff, and under schedule. You wonder if they realize how difficult it is to pay your bills when you work 25 hours a week?
As labor continues to be cut, it creates an atmosphere where baristas are worn to the bone without being able to take a breath. Cleanliness suffers, speed of service suffers, partners suffer.

Many baristas are twenty-something college students, living at home. Many more are people like myself, artists, writers, breadwinners, who depend on their income.

The tip situation has also drastically changed. Before the implementation of a Starbucks Reward program (MSR), tips were higher. Now, with a growing percentage and majority of customers using the app, and their registered cards, tips are in major decline. When you factor that in with actual take home pay, it’s a scary place to be.

We may never know what benefits accrue to Howard Schulz from government sources to induce him to show such loyalty toward the ACA. Despite the harm to Starbucks, its customers, and employees, but one thing is clear, everyone knows that the Affordable Care Act is affordable only to those so wealthy that they don’t need health insurance for themselves. In the process of complying with the act, companies find themselves cutting hours for employees.

It is possible that the people at the top do not yet feel the pinch, but Starbucks prides itself on its humanitarian concerns. How can it now turn its back on employees for the sake of a piece of legislation Howard Schultz knew in advance would hurt the business?

As a bit of advice to would-be entrepreneurs, we might well heed the words of Zev Siegl, once a co-owner of Starbucks but now a business coach, who in the video below says that “it’s the mistakes that you leave in your emails when you push send” that determine the course of your business.

Those mistakes may not haunt a Secretary of State immune from prosecution, but one has to wonder what they could do to the value of stock in a publicly held corporation like Starbucks.

Howard Schultz, Hillary Clinton, and  Starbucks have been asked to comment on the email correspondence in question. We will report on any responses from them here as they arise.

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