Starbucks Founder Howard Schultz Shares 4 Key Insights About Brand Purpose at SXSW

The centrist argues companies have to do more for people

Howard Schultz discusses corporate responsibility at SXSW. Getty Images
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Starbucks founder Howard Schultz has not said definitively whether he will run for president. As he’s mulling over the idea, he says he’s speaking to Americans across the country and presenting them with a possible centrist candidate as an answer to what he believes is a broken two-party system. Schultz, over the course of a panel with CNN’s Dylan Byers at South by Southwest in Austin, argued that if he were president he would convince businesses to do more for people. Below are the key insights on brand building, capitalism, businesses doing good and the Howard Schultz brand from the discussion.

Balance a fiduciary responsibility and humanity

“In 1987, Starbucks had 11 stores and 100 employees,” said Schultz. “People said there’s no way this could travel outside of Seattle. People told me that a venture capitalist would never give any money if we gave healthcare to every employee, if we gave ownership. They thought we were crazy three years ago when I said we’ve got to find a way to crack the code—even though no one’s ever done it—to give free college tuition to every employee. We did all of that and Starbucks stock since 1992 is up almost 25,000 percent.”

Schultz added: “We were able to create the fragile balance between a fiduciary responsibility and the humanity of our organization and learning two things: That, not every business decision is an economic one and that success is best when it’s shared.”

Still, Schultz recognizes that running a company and running the country are not the same thing.  “Building Starbucks is not a proxy for running the country but what it is a proxy for is the kind of leadership that I have displayed,” said Schultz.

The tax rate can encourage businesses to do more for people

Schultz repeatedly defended capitalism and argued that the Democrats push toward socialism is not the way to win against President Donald Trump in the 2020 election.

“There is a growing crisis of capitalism in the country,” said Schultz. “That doesn’t mean we should run to the extreme of saying every company in America is bad or capitalism is bad and we should run to socialism. But I do believe because the government is $22 trillion in debt, the government can’t solve all these problems.”

Schultz added: “If I ran for president and was fortunate enough to win, I would be doing everything I could to convince businesses in America that they have a moral obligation to do more for their people and the communities they serve.”

For businesses to do more, Schultz believes the tax rate will play a key factor in how they operate with regard to doing good for people.

“President Trump made a terrible mistake when he lowered the corporate tax rate from 35 to 21 percent and did not take advantage of the opportunity for a comprehensive tax reform and infrastructure development,” said Schultz. “The problem with the 21 percent is that it did not include any incentive to do anything for your people, for the communities you serve, for retraining or for education.”

“If I was president corporate tax rate would be higher,” noted Schultz. “There would be an opportunity to get a lower tax rate if you do the right thing for your employees, including what’s necessary.”

Doing good is good for business

Schultz pointed to Starbucks as an example of a successful business that has worked to do more for people while simultaneously growing the business.

“I have a track record of the last almost 40 years of doing it and demonstrating that you can do both: You can create shareholder value and you can create value for your people,” said Schultz. “By doing good things for your people your customers are going to build a large reservoir of trust around the equity of the brand because they want to support a company whose values are their own.”

Schultz noted: “Any business today that is in business just to make money is going to be shallow. It’s not enduring. You’re not going to attract and retain great people. But those businesses that achieve the proper balance between profit and humanity and understand that the gifts of business is to lift people up and create opportunities for everyone, that is a system that I embrace, that is a system that I am for.”

“I have succeeded in America because of the American system,” said Schultz. “For everyone in this room who is an entrepreneur who is trying to be successful your success should be celebrated—not vilified. But with success comes responsibility.”

Culture is the key to a global brand

“The most important decision was cracking the code on creating ownership for everyone in the company,” said Schultz. “We did that when we were private and losing money.”

The company gave stock to everyone at Starbucks, including part-time people. Employees were allotted 14 percent of their base pay in the form of stock options. Each year, employees got a grant of 14 percent of their base pay, per Schultz.

“What it did was demonstrate if you’re going to give ownership to every single employee you’re going to create a culture, a set of values, a set of principles in which everyone is facing in the same direction,” said Schultz. “There’s going to be less attrition, higher performance, and what occurred in terms of the success of the company is directly linked to the fact that we were all owners in the company.”

Schultz noted: “The secret of Starbucks is not that we’re roasting the highest quality coffee in the world, or the real estate and design. The secret is the culture and values and guiding principles of the company, the level of behavior and how people are treated. We’re not perfect. We make mistakes. We employee 400,000 people and have 30,000 stores but we’ve demonstrated over a 40-year period that culture really does matter and that has been the secret sauce of the company.”

@KristinaMonllos Kristina Monllos is a senior editor for Adweek.