Weekly Walk of Fame: Starbucks

The Weekly Walk of Shame series usually examines things that just aren't right in the world of finance and investing. Today, though, we're replacing the "Shame" with "Fame." Feel free to spread the love in the comments section below.

Today's subject: Despite its recent difficulties, Starbucks (Nasdaq: SBUX  ) still spends more money on employee health care than on coffee. Given corporations' tendency to cut costs in tough times -- sometimes at the expense of workers' happiness and well-being -- CEO Howard Schultz's adherence to the principle that Starbucks baristas should have health-care benefits is cause for applause.

Why you should cheer: Last week, Fortune magazine revealed how Starbucks' Schultz, in the midst of attempting to turn around his company, stood up to a shareholder's suggestion to boost profits by cutting health-care benefits. According to the article, Schultz denied the request, and told the shareholder to sell the shares if he felt so strongly about it. (The unnamed shareholder reportedly did end up reducing his position.)

Many companies did slash various worker benefits amid the worst of the recession. This past April, The Wall Street Journal noted that those axed extras have been slow to return. As recently as October 2009, a Society for Human Resource Management survey of 371 companies revealed that 39% were somewhat or very likely to cut benefits in the following six months.

Though health-care coverage is an expensive cost for many employers, some corporate leaders have refused to waver on that line item, including Whole Foods Market's (Nasdaq: WFMI  ) John Mackey and Costco's (Nasdaq: COST  ) Jim Sinegal. Conversely (and ironically), health insurer Wellpoint (NYSE: WLP  ) cut health-insurance benefits for its own workers last October.

What now?
Responsible shareholders should applaud corporate leaders who resist pressures to boost short-term profit at the expense of good, solid business principles. Howard Schultz's admirable stance is a wonderful example. If workers feel like their employer cares about them, they're much more likely to do a great job, and extend their happiness to customers. That's a big plus for both long-term profitability and sustainable competitive advantages.

Standing by employees is nonetheless a difficult road for corporate leadership to take. It takes courage to stand up to pressure for short-term sales and profit. Earlier this year, I sent Google (Nasdaq: GOOG  ) on a Walk of Fame for a principled stand by Sergey Brin.

Starbucks isn't perfect, of course. Last year was painful for the coffee giant, filled with layoffs and other cost-cutting moves. And as much as I respect Howard Schultz as a solid leader who has built a fantastic company, I couldn't get behind his "discretionary bonus" last year, or his increased perks at shareholders' expense.

Still, let's give some credit where it's due. Schultz could have easily cut this benefit to prop up short-term earnings, but he didn't. Healthy workers are a healthy decision for publicly traded companies.

Costco and WellPoint are Motley Fool Inside Value picks. Google is a Rule Breakers selection. Costco, Starbucks, and Whole Foods Market are Stock Advisor recommendations. The Fool owns shares of Costco. Try any of our Foolish newsletters free for 30 days.

Alyce Lomax owns shares of Starbucks and Whole Foods Market. The Fool has a disclosure policy.


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