Howard Schultz took over as chief executive of Starbucks for a third time Monday — and immediately announced a very shrewd move.
Amid a wave of employee dissatisfaction and union activities, Schultz said Starbucks would immediately halt all stock buybacks and would instead channel the funds to workers and stores.
A stock buyback is when a company purchases its own shares. This reduces the number of shares in circulation and typically drives the stock price higher.
Stock buybacks are beloved by shareholders and executives — they get richer from the practice. Beyond that, buybacks do little for a business’ overall well being.
Schultz announced the buyback suspension in a letter to employees.
“This decision will allow us to invest more profit into our people and our stores — the only way to create long-term value for all stakeholders,” he wrote.
Starbucks announced in October that it planned to spend $20 billion on stock buybacks over the next three years. That’s now off the table.
The big question is how much of that cash will be devoted to workers and stores.
Schultz, in his letter, is clearly trying to convey to his workforce that he feels their pain — and intends to fix things.
“In the weeks ahead, I will be traveling, along with our leaders, to connect with partners in our stores and manufacturing plants around the world to understand your thinking and ideas about how to build this next Starbucks,” he wrote.
Schultz is returning to the big chair on an interim basis after Kevin Johnson announced last month he’d be stepping down as CEO. Johnson served as CEO since 2017.
Schultz has always been a savvy marketer, and he’s moving quickly to engage with disgruntled workers and signal changes to business as usual.
Not surprisingly, Starbucks’ share price fell by nearly 4% as investors realized, as far as shareholder enrichment goes, the new boss won’t be the same as the old boss.
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