True Leadership: Worth Every Dollar
Jul 6th 2012 2:49PM
Updated Jul 6th 2012 4:26PM
This column generally focuses on what's wrong with corporate leadership in America these days. But today, I've decided it's time to discuss a more positive topic for a change. Sometimes, a chief executive officer is worth the big bucks because he or she exhibits qualities that exemplify true leadership.
Here's a snippet:
Let's tell our government leaders to put partisanship aside and to speak truthfully about the challenges we face. Let's ask our business leaders to create more job opportunities for the American economy. And as citizens, let's all get more involved. Please, don't be a bystander. Understand that we have a shared responsibility in solving our nation's problems. We can't wait for Washington.
At Starbucks, we are trying to live up to our responsibility by increasing our local community service and helping to finance small-business job creation with Create Jobs for USA. Our company is far from perfect, and we know we can do more for America. But we need your help. We need your voice.
Starbucks' Indivisible campaign is meant to "put citizenship over partisanship." Schultz is correct to criticize political leaders on this topic, but everyday Americans should think long and hard about his words, too. Ideological arguments aren't generating progress, just anger. Rational conversations and reasonable behavior will get us a lot further.
Fortune talked to Schultz about the campaign. Schultz explained that the Create Jobs for USA effort has raised more than $11 million in direct funds and has created more than 4,000 jobs in 44 states. He said that Google (NAS: GOOG) , Citibank, and Gap's (NYS: GPS) Banana Republic concept have thrown in to help with this campaign.
As for Starbucks itself, it recently put a ceramics manufacturing plant in Ohio back to work by commissioning some made-in-America mugs emblazoned with the Indivisible logo. Meanwhile, even though a new roasting plant would have cost Starbucks about 15% to 20% less had it been placed in Central America or Asia, the decision was made to locate the plant in Augusta, Ga., creating 200 American jobs.
In other words, Starbucks is in some cases making the judgment call that it will put principle -- and America -- over short-term profit.
Pay's not a problem when leadership's there
I frequently criticize overpaid CEOs and policies such as merging the chairman and CEO roles. The truth is, one could absolutely call Schultz -- who happens also to be both chairman and CEO of Starbucks -- overpaid, and I'm quite sure many do.
In 2011, Schultz's total compensation was $16.1 million, well above the median pay level for corporate CEOs last year of $9.6 million.
However, as a longtime Starbucks fan (and shareholder), I can't really complain much about Schultz. He's built a phenomenal business that has bettered the lives of many Americans over the years. Although mom-and-pop coffee shops complain about Starbucks' competition, Starbucks opened up the market for gourmet coffee to begin with. There weren't a whole lotta lattes being poured before Starbucks introduced mainstream America to better cups of joe.
Starbucks has bettered the lives of many of its workers, particularly through benefits like health care benefits. The cafe giant has provided job opportunities to individuals in communities that often lacked them, and taught its employees many important skills such as managerial acumen.
Nobody's perfect; Starbucks had its difficult phase, during which Schultz was forced to return to the CEO role, close stores, let go many baristas, and rethink the business. However, Schultz's book Onward documented that phase, and showed he's a manager who is capable of humility, regret, and learning from mistakes. Last but not least, Schultz navigated an impressive turnaround.
Leadership for the long run
Schultz is calling on America's CEOs to ponder the idea that their leadership positions should be about more than simply generating a short-term profit. When so many Americans are out of work, the future of the American economy will suffer as more jobs are lost and more companies stumble under skeleton crews and brain drains.
Today's job report and continued evidence of our sluggish economy underline the danger we face. Take Business Insider's recent report that Hewlett-Packard (NYS: HPQ) alone has managed to increase job cuts in the tech industry by tenfold with its 27,000 layoffs. IBM's (NYS: IBM) lending a "helping hand" has reduced its workforce by 1,800 people in 2012.
Companies like these don't make me think of enhanced profitability over the long haul. They make me think of the negative ripple effects of corporations that mercilessly cut costs while lacking true vision.
Schultz is right to shake us all up, remind us that our actions can help or harm overall economic well-being and that no man (or company) is an island. Hopefully more American CEOs will get the message that their business decisions can affect Americans' well-being in more ways than they may realize.
Thinkers, doers, and entrepreneurs who care about more than tomorrow's bottom line make the best long-term investments, and Schultz's recent stand shows why he's worth every penny.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's column on environmental, social, and governance issues.
At the time this article was published Alyce Lomax owns shares of Starbucks. The Motley Fool owns shares of Starbucks, Citigroup, Google, and IBM. Motley Fool newsletter services have recommended buying shares of Google and Starbucks, as well as creating a synthetic long position in IBM and writing covered calls on Starbucks. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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