Starbucks Executive Chairman Howard Schultz on 'Real Biz With Rebecca Jarvis'

Schultz talks "Upstanders" season 2, tax policy, whether he's running for office and the future of retail.
33:42 | 10/10/17

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Transcript for Starbucks Executive Chairman Howard Schultz on 'Real Biz With Rebecca Jarvis'
Everyone I'm Rebecca Jarvis the ABC news chief business technology economics correspondent welcomes real is and I am here in my office. Witten others and the executive chairman of Starbucks. Howard Schultz welcome thank you don't want to reckon I like we're doing things in my office this time usually the conversation is in your it's great to be here and especially in the sitting pretty usual well I'd let you figure that. You have to differentiate yourself as you know so well from your own history you know it's great I love being here and of the senate. Sell your story begins here in Brooklyn yes you grew up in the projects burst in your family to graduate from college. You buy six Starbucks locations in 1987. And then sped. Future decades multiple future decades running the company as chairman and CEO now you're executive chairman passed up the reins as CEO earlier this year and today you're talking about the second season. Ops enters this video project that you have initiated to really hotly the good things that are going earning communities and the incredible things. That everyday people arguing why this project Wyatt second round why. Well for some thank you for having me it's a great framework of what is were doing and why. I'm sure you agree that the lack of Sid that civility. And the tone now Ledee in the country that this coming out of Washington. Is really not the true side of the American. Dialogue in the American conversations so last year we really created experiment which was we went out and to try and find. Ordinary Americans doing extraordinary things and we found hundreds of people and we put that on the Starbucks app. And a few months later we discovered that sixty million people. Watch those stories sixty million people yet and so the question is why what happened. And really what happened was we shine a light on a sense of humanity and compassion and empathy and human kindness. And people were drawn to it so naturally we wanted to do it again and I think. This year the launch of the series today it's even more relevant given that the tree all in the division that exist. In the country and unfortunately much of it coming from Washington so. We've had an extraordinary experience meeting these people and last night we had an event where we showed every episode to a live audience. We had many up standards here. And I you know what I have discovered. In West Virginia and Montana. In South Carolina is people. Demonstrating every single day the true spirit of the country's true promise of America. And we need a more compassionate society and I think people are longing for these kind of stories. A special mullah especially in light meals and were Alter a stick and I think. Recognize authenticity when they see it in these are true stories which we didn't invent them. We're not prescribing them we just sharing it with the American people there's no Starbucks advertising and so Starbucks placement. It's not about marketing economist selling more coffee it's really about just telling the American story. And by the way anyone out there who has a question for Howard were gonna make sure that there are there's China into this conversation for your questions so feel free rape comments if you have a question. So these are real stories how did Starbucks buying all the people. Well my partner and all this is Raj each undersea Koren who was a Washington Post correspondent for many years seasoned professional journalists. I think after last year it wasn't difficult people have been submitting stories to us all year long. And we could have done thousands. And the hard part was getting it down to eleven. And their business so many stories I mean we met this woman Mary school in Montana as an example. Who against all odds is bringing Syrian refugees to Montana. We met a doctor in Miami who against all odds spent five years creating free needle exchange. In a state that did not have that legislation. I could go on and on but I think every story has a deep sense of vulnerability. And also if you you see in these stories the difference of opinion. That certain people in certain groups have but despite the differences there was a opportunity to listen. There's an opportunity for civility in even though people might disagree. We did not have the vitriol that we see taking place in Washington DC. It seems to me you've always been an outspoken. You're always outspoken CEO of start at young and end it's kind of rare that you would see that from a public company's CEO. But it strikes me that. In the current air we are hearing a much more outspoken class of executives and in particular executives from. Public companies do you think the role of CEO has changed in the last decade or two decades and why do you think that this. While forty years ago at a public Starbucks meeting Cherilus meaning I I said that I thought there was a need. For the role and responsibility of a public company and business leaders to change and to redefine a responsibility. Not only to creature over profit and and make money but also for social impact. I think the rules of engagement in our country. The crucible that the country is facing in the American people are facing. Is putting. More responsibility on public CEOs to demonstrate to their employees. And their customers. That we stand for something beyond making money and we we need America to be healthy. And as result of that I think people are speaking up speaking out on issues that are important them. I don't think it's across the board. But I think it's very very important that all of us. In the sense B of standards and not be bystanders and recognize that we all have a role to play and in our democracy and we have we have to. Make sure that would being heard and the next place for that happened is in November mid term elections. Which I mean it we've talked about this before. But weight tock and you talk about actions that you talk about politics used satellite that kind of person who might be thinking about how her. X no the united I think about politics but I have no intention of running for public office and I think about politics as I'm concerned about. The knee that we have for true authentic leadership in the country and. You believe that you can make. A bigger impact as executive chairman of the Starbucks or as the CEO the company then. In political office. I think that my role and responsibility. In the fact that almost a hundred million people we come through throughout Starbucks stores and weren't 75 countries. And that does agree to a level of trust in the equity of Starbucks brand gives me the opportunity. To do these kinds of things. I'm not running for political office and I feel I'm in the best possible position I am right now on into the things and. I don't look. The current state of affairs in terms of how companies are are looking at there workforce in terms of how others treat their employees. Starbucks has taken a number of initiatives also the scholars program where you're actually helping. All of your employees get a college education at ASU if they wish to four year college degree for free for free. Firfer. There are not many companies I mean you're revealing what he's doing Matt and there really aren't that many companies. That are doing these kinds of things what is holding corporate America back at this point. From doing that kind of thing with there employed. Law obviously. Starbucks is on a proxy for every company and I think. Wall Street puts a lot of pressure on companies to make money on a quarterly basis. Or been on a monthly basis. I think our history for many many years as a public company for 26 years has been the balance profit with social impact. And that started with health insurance equity in a form of stock options. Free college tuition hiring veterans hiring refugees. Do we all kinds of things that we felt worse in keeping with the culture and values of our company. There are many companies who do a number of very good positive things for their communities and there. Employees what I've what I've been seeing though is. That if you want to build a great enduring companies in this kind of operating environment. Where. The web basically has created such transparency. Where everything about you in your company is known. That the kind of companies that are going to succeed. Are those companies whose values are compatible. With your customers. In for us the brand of Starbucks has been built by or people who Wear the green apron the intimacy of that relationship. So we as a company many years ago kind of inverted how we built our brand it wasn't customer facing war marketing. It was basically investing in our people on as managers saying in order to exceed expectations of our customers we have to exceed the expectations of our people first. I've been asked to speak so many colleges and other companies and and I speak about that these kinds of things not to prescribe or other companies can do but. I know for fact that our financial performance which has been so good for many years. Is directly link in the kind of policies we've had in advancing the value creation for of people. In in thinking I'm Wall Street yes. We have these proposed tax cuts on the table for a corporate America. Potentially a really sizable cut in what companies pay in taxes and then there's the repatriation. If that happens. What will accompany like Starbucks tea with the savings. Is it going towards. Buybacks and dividends or is it going to be invested in the employees in. Raises ending in new types of things for the employees new benefits for the employees. Well look let me begin by saying that. The corporate tax cuts that is being spoken about now. I would take a different approach and that is you can't have a corporate tax cuts without having any transformation. In complete tax reform. And if there's going to be a corporate tax cut that is connect and to the national debt. Which could be 25 trillion dollars. In the next two years. Then I think it's a mistake so you think tax cut for corporations right it was as if it's if it is isolated. And it's not part a complete overhaul. The need for complete transform and of tax reform I don't agree with it. Which would basically mean. If it was going to work you would have to raise taxes somewhere. In order to compensate for that without adding the deficit. Yeah and I think you know we've we've we've got a significant problem of 22 trillion dollars. Sitting on the balance sheet of America I mean it's or any company in the world that could survive with that kind of debt the interest you know. And so. You you just you can't. Isolate tax reform by starting with corporate tax cut and leaving it there. And I guess you know this is the the problem we have in that we we can't seem to. Move away from ideology. And really kind of have all the representatives. Of congress. In the current administration really literally walk in the shoes of the American people and recognize that there has to be a real balance. In a real level of compassion to the kind of reform that we need. So if the tax cuts do happen as our proposed right now yes. How do corporations spend that money how in your view do you expect corporations. To. Give raises to their employees with those savings I am the unemployment rate is four point two you know that's or already near historical was. But do you see the majority of companies in America using those savings to invest back in their employees and their company is. Or do you see them doing more of what has already happened over the last eight years or so which is primarily stock buybacks and it. It's now become an aunt's again and in the long form if you don't mind. Let me say this the the current. Level. Enthusiasm. And optimism that exists in the stock market today. In that in my view is not a proxy. For the US economy. And so a continuing to drive corporate profits. As a result of a corporate tax cut. Is not going to advance the economic issues of inequality in America. And when you have almost five million young kids mostly African American Latino or not working and not in school. When you have one out of six people going hungry. Every night in America. So. Again the corporate tax cut. Is a good thing to do if it's part of an over riding. Approach to. Transforming the tax code. And it would do we might hope that most companies if there is going to be a corporate tax cut. Would not use that primarily. To increased corporate profits I would hope that they would use it. In ways that would advance the air employees to work we need to do in our communities. And building a better society Hewitt help. I mean that's that's what I would be doing. Hopefully start us we'll do that understood it there's no doubt my monitor service would do. When it comes to your career and that choices that you made along the way how much of your trajectory and is especially in those early years as CEO of Starbucks. How much of that trajectory do you think was based on. This larger mission statement verses the focus on the core business that is. Selling Cochran to people all over the world. Well I think like. All of us in life our life experience. As a child or young adult has defined us in my life experience growing up in public housing and and literally seen fracturing of the American dream and hopelessness in the spares a young kid. Defined how I would see the world and basically. The company that I try to build. Is a company that my father never got a chance to work for that would respect and dignify everyone. And if a look at that in the broader way in terms of the promise of country. Regardless of the color of your scan earlier sexual orientation or gender or station life. You should of axis of the American dream and we've tried to build the kind of company. That everyone has gotten a piece. The value creation of Starbucks so early on. When we were a small company and even we were not even making a profit. We were telling people that we were gonna get health insurance and equity in the form of stock options to every employee and people so that's going to be dilutive to shareholder value. And my argument then and certainly it's proven now there's no that's going to be an investment in our people that's gonna give a greater value. Two shareholder values of Starbucks stock is up almost 20000%. Since we went public in June of 1992 and not because we're. We're smarter than anyone else oral we've got a better business mind but I think our business proposition. Things we've tried to do. Is directly linked to our financial performance and also say in going back here questions about what's CEOs might do what they should do. We all have to recognize that financial performance is a price of admission we have to we have to perform. But when she performed the question is. People want to be part of something larger than themselves and are urged to attract a retaining great people. It's pretty shallow goal just to say we're visits to make money and that's that's who we here do. People don't wanna be part of just that they want to do something that advances the cause of humanity. And that's we're trying to do today and around the world who we have 3000 stores in China we just gave. Critical care health insurance to the parents of our employees in China. And so it's not just what we're doing here in America to were doing around the world. And you know the fact that we've hired 151000 veterans. Retired 40000 opportunity used in the last street years. These are things that we're not promoting these are things that are not part of a press release but it is the DNA the values and culture of Starbucks it drives her success. What do you say to. The companies out there that the CEOs and executives out there who are on board with the mission they like what they're hearing. But they don't think that they can make the case to they're bored they don't think that they can make the case to their shareholders. What I see is that. We'd all be better off if there was a longer view. What is were trying to do not just a short term focus. You you have to build trust with Wall Street if you are public company and you've got to create. An understanding with them and you have to perform but. Would you go public if it Starbucks today it was a private company you don't. Would you still think about taking it public or would you consider state cracked it given the pressure sure Wall Street but I'm. We would still go public and I I think. You know we've had a pretty. Over time charm public life one because we performed any other is because we've been very transparent with the street about what is we're trying to do and and how we're going about our business. But being a public company today vs 25 years ago is very different in terms of the pressure the short term mentality. And the depression to perform in the moment. But what really talking about his leadership. And the kind of leadership that builds trust and confidence with multiple constituencies. We talked about automation in the past and how much that is changing and potentially even much more so going to change our workforce and one of the things that struck me in our last conversation. Was this idea that Starbucks. He's the people. So while a number of retailers and a number of of restaurants and bars are all trying to find ways. To do the same thing with fewer people. You talk to me about this idea that no Starbucks is the people we don't want it to you what we do with your people. Well let me say this I think. And I don't think any company in any industry. Can survive today. Without being a tech company in side your company. It just it's impossible to be relevant today. Without having the engineering capability in the tech capability. To drive your business having said that. The environment inside a Starbucks stories based on people humanity the emotional connection. But if you look at the investments we've made in digital and mobile. And all the things we've done on mobile page that is really driven our business. And you'll see a lot more than that the be the launch of standards today's we're in the content business now. I which is an engineering feat unto itself. Not only in terms of the creative side but integrating that into our mobile and doing that with partners so. We're not can replace our people but we're gonna take full advantage of innovation and do everything we can. To make sure that Starbucks maintains its relevancy with our customers. And that means being relevant where they live where they work with their play and making sure I'm people's device on their phone at the Starbucks experience is alive and while on that is ten days. I spent a day at Carnegie Mellon in Pittsburgh about a month ago. I drove in a I think I was in that seat in a driver Lewis Carr. I saw a a up close I saw a robotics. And in the world is moving at light speed. It was. It was it would if it was it was a real it was like. I don't think it's ready for prime time but it's coming out. Just if I say five years. Five years for profit would be no not a whole row but I think they'll be a number of drivers 1005 use invited I don't know anything. About that world other than I was in a car I drove in Pittsburgh. I united increment fires out. Yeah that's a little bit of that but and that there was so ornery on the wheeled god forbid swimming and that you have to it was fascinating to see and again I want to I want to be as curious as possible. So that Starbucks days ahead of the growth curve and all of these areas. And I think every company must recognize. You know you you've got a fraction status from look at her office were having me give you be doing something like this two years ago. I really mean I mean literally I mean this is group there are. History if you could only see the rest of yeah professional aspect of the pool while most it would take credit. I think I notice after an I was invited her it was a few weeks ago. Our. I was entering a pajama party. Buddy is a credit to you think you're doing these things and I think it's fun I think it's like yeah I'm glad and I'm glad it. Like about it by the way de Beers. There's so many different aspects. Numbers it's relaxing. Well as for you getting. Yeah it was the biggest surprise at. The base unexpected day. What we may eleven episodes that are about 56 minutes long so now. However. It is really hard. Two films six minutes. And takes a lot more I was shocked by that the editing process and but the quality of this production what we've done is extraordinary. But it wasn't that it was really a. The the people's willingness and interest in telling their story. And being hurt. And also how respect for people were that we came to them. That we went to West Virginia who went to South Carolina went to Montana. And we we we just said we've we want to shuttle landing your story. It's just beautiful is really moving. Something I personally faces a journalist and I know a lot of other people. In the field feel this way to you people asked for certain types of stories the onions as we want to hear these stories like ups ignorant. But then when it comes to what people actually click. From. A lot of it is the salacious. You know a lot of it is whatever headline grabs your attention whatever you can consume like. You know packet of sugar OI got my six and the next thing. Did you ever face any concerns like that about this project means sixty million views this incredible figure yes and I'm sure a lot of people would have said to you. Beforehand. There's no way you're gonna get that kind of action on your common. I think the truth is of stand as one was kind of an experiment we do know what to expect. We certainly had a lot of naysayers saying this as it makes sense why do in this. But the truth is we have a built an asset and that people are paying. Twenty million almost thirty million people are paying with their phone Starbucks of weakening. Content into your phone while your pain. Yeah it is a great opportunity you're gonna click and watch and once said. Once people do that it went viral so we had a captive opportunity. And innocent Starbucks is a network. In a very non traditional sense. But I also think. If you make it easy for people. They're very interested and they are longing. For truth authenticity. And not everyone is looking for war. The Latin you know the next rumor or as he sits salacious story I think people want. To be inspired me. I I absolutely unit that that's why I'm committed to having these covers and that's why I'm committed to doing my part here is no limits. I want to make sure we're answering your questions out there as well and Taylor tells me she's getting some great ones that Taylor you can read a mop. Well. Great question Brentson just order what can hear Taylor does behind the camera and she just read an opt. How Starbucks Howard continuing to change and develop with the times. I think the best example that is. The amount of people today who are. Coming in to star rocks in pre ordering. Through their for the mobile. And it's incredible to me that that in that did not exist eighteen months ago millions of Starbucks customers every day. Are not owning pre ordering but we're telling them when they pre order. When it's gonna be ready and we're also prompting them a U when a car or are you walking in here is the closest store. So these are the kind of things that we're doing also I think in the months to come they'll be a level personal position where. Will know that what would drink you like him will be kind of suggesting things that are. Probably compatible with your case profile. I think the be more content coming as a result of the success of votes to Anders. And I think. You know we are. Doing things at the Starbucks rose street which in Seattle the next one opens in China. We're building the super premium brand will be opening one in New York. Imbedded in these were in their groceries is a mechanism to pay that is not true it cash register. So is its apple like in a sense. So our payments cyst. The exchange of information between our customers and ourselves is changing. And I think store design and the elegance of Starbucks. The transparency of Wear a poppy comes from. In less than a year you'll be able going to star bookstore. Point your phone addict at a coffee bag and we'll tell you exactly where it's from and we'll show you a story of the coffee. And of these the kind of things that I think a. After they are that you yes OK you know nineteen customers are coming to expect them. It's an interesting point eight. Obviously not it connected at all to start that's what this morning Good Morning America we talked about Wal-Mart they have this new. Returned mechanism where basically you can scan your items when they're apt and then you bring it and it's the thirty back in exchange for his multiple minutes and exchange. So it does strike me that. All companies that play the game that Starbucks plays anything where there's a customer service aspect you it. Speed and knowing what the customer wants prior to the treatment if something is really really key to be six. I think that's all true but our own research also suggests that as a customer. There is great value. In a emotional human experience. And it giving about the success to start Rex has had over these many years. It's the sense of community and the third place between home and more home and work and we don't want we don't want technology to strip that away. We want technology to be complementary. To that. So you're never gonna go walk into a Starbucks store and not be greeted. By people who have knowledge about coffee and want to do everything they can to enhance your experience in the store. More questions. I. Actually yeah and actual locations. We are testing. A number of concepts. It's interesting that people know know that we've we've we like to test things under the radar. So we are testing new food concepts. In a number of cities and we think there's a big idea. For Starbucks and meal replacements and more food so the answer to that is. We're experimenting with the test looks very positive and you probably will see more food a storm what type of very high quality the organic natural food. That is. Value prized and fresh. With the new supply chain system. And we believe that our customers would like this he Starbucks create. A food environment that they can take home and eat for dinner is an example. An analyst yeah cash payments and future. I would not be surprised of cash was payments. Becomes the standard over time not immediately. But I think it is no doubt that that's were it. It. Why just mentioned who in the building of this new super premium brand Starbucks reserve so there's. Large grocery in Seattle which is like the Willie Wonka of coffee. The next one opens in Shanghai December 5 and and we come to New York on the corner of ninth and fifteenth next to the Chelsea market. And then were opening in Italy for the first time a year from today. A year from today and what is the ninth and fifteenth in New York I think August September VT are. It. RC you're the executive chairman now what is the difference between being executive chairman vs CEO chairman of the Starbucks company. Well as CEO I'm. I'm I'm operating a company which deterred the leadership team and the direct reports of the company or. Remote recording to me. Today the only group that reporting to me of the new registries in new. Brand and massive social impact agenda. So I'm staying out of the way Kevin Johnson is. The new CEO he's done a fantastic job. And I'm caring the flag of Starbucks around the world and doing the things that I think are important. To preserving and enhancing the promise of America. I know you believe it happened. This is not a question to undercut him ya but is there ever a day it where you wish you could be CEO again. No the Disco and now Kevin in my office with Kevin is connected so we see each other a law. No I do not wish. On any day that I'm the CEO and very happy in the Roland. Do you wait company later you know I'm my own life or end with a program for 5450. The other ashamed of yourself an additional fifteen minutes or less. I'm still you know Mike my body clock has not changed at my body can't does not know that I'm not the CEO. You wake up at 415 you do your right you make yourself copy is that is that. I read three papers. I'd do my work make a French press a coffee if my wife and I and I'm I'm I'm out the door. And and sure there people were watching right now familiar star acts order. But for those you haven't heard the start at the start ups or a depending on the time of the day but this morning Tokyo espresso market. You expressed. Our ourselves thank you so much for joining us I think you for having leave to your pajama party I'm happy to be here. Fully clothed and and where people. Editors this season dot star Rick dot com. The mobile obviously. Amazon prime. Video is streaming in do resuming with FaceBook. But it's sort of stuck comes of this place what mobile. Howard so thank you so much thank you very much race. Q&A great questions to all of you I'm really glad you guys road and feel free to leave more questions we'll have Howard back. Hopefully to answer additional questions in the future and were also working reason we've had these minor violence here is that we're working on turning this also in to a podcasts a look at that. We'll make sure to post it here on FaceBook when we do you. Thank you so much Allan by the way speaking of podcasts. Today the no limits podcast is out with a new episode expose him a Saint John she is the new chief brand officer. At Guber. A really interesting role she was a former apple executive everyone in her family told her not to take that role. She did anyway what is she doing for the company why did she take it. All those questions answered in this week's episode of no limits check it out wherever you listened to your podcasts. And have a great day.

This transcript has been automatically generated and may not be 100% accurate.

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