True Leadership: Worth Every Dollar

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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.

Will America win or lose?
(Nasdaq: SBUX  ) founder and CEO Howard Schultz commemorated this week's Independence Day holiday by penning an open letter called "How Can America Win This Election?"

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 (Nasdaq: GOOG  ) , Citibank, and Gap's (NYSE: 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 (NYSE: HPQ  ) alone has managed to increase job cuts in the tech industry by tenfold with its 27,000 layoffs. IBM's (NYSE: 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 every Wednesday and Friday for Alyce Lomax's column on environmental, social, and governance issues.

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.

Read/Post Comments (6) | Recommend This Article (26)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 06, 2012, at 5:59 PM, TMFDarwood11 wrote:

    "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. "

    Okay, you are entitled to you opinions. But how, exactly, has Starbucks "bettered the lives of Americans...?"

    A "barista" earns $8.73 per hour. That's $18,158 per year, which is above the poverty level of a single family. Wow! if a couple works at Starbucks as baristas, they will earn about $39,000 a year and will be well above the Federal poverty level. Of course, they'll spend most of their earning on food and rent, but if they are healthy or avoid medical care, which is to say, if they successfully avail themselves to the nearby hospital emergency room, they should so very well!

    Oh, perhaps, my spouse, who drinks our home ground and blended coffee, is disadvantaged and should shuffle over to the neighborhood Starbucks to get a latte?

    Am I cynical? You bet I am. If the author thinks my life is better because of Starbucks, then I do have to wonder about one's priorities.

    There are many places to purchase "fair trade" coffee. And I do.

  • Report this Comment On July 06, 2012, at 9:53 PM, skypilot2005 wrote:


    Howard Schultz Won't Give to Politicians, While Starbucks Shells Out $860K to Influence Them

    “The pledge by Starbucks CEO Howard Schultz to no longer contribute to presidential or congressional campaigns drew a lot of sympathetic publicly for him and his corporation last year. But while Schultz's money boycott was aimed at persuading pols to tackle the deficit, his company was quietly spending hundreds of thousands of dollars to persuade the same politicians to pass costly laws benefiting Starbucks' bottom line.”

    Mr. Schultz is a billionaire.

    You wrote:

    “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.”

    I don’t know about holding this guy out as a role model.

    But, that’s just me.

    Fool On,


  • Report this Comment On July 07, 2012, at 1:25 PM, lowmaple wrote:

    Is Schultz perfect or is Buffet. No but compare them to some of the blood sucking CEOs and others, they are Saints!! And what is wrong about being rich. We are all striving to become richer. Remember, compared to most of the world most average Western citizens are rich living off our good fortune being here.

  • Report this Comment On July 08, 2012, at 8:13 PM, matthewluke wrote:

    Bipartisanship is overrated. Not only is it overrated, but history has shown us that bad things (truly awful things) can happen when politicians start agreeing with each other.

  • Report this Comment On July 10, 2012, at 6:27 PM, dockofthebay wrote:

    Judging by the preceding comments, it appears that there is much truth in the old saw that "no good deed goes unpunished."

  • Report this Comment On July 14, 2012, at 2:19 PM, gamblegold wrote:

    all publicly traded corporation top-line executives are overpaid. their wealth grows at far faster rates than the people lower down in the corporation or the shareholders do. they make their wealth off the blood and sweat of others without bothering to reward them at the same rate they reward themselves.

    this is wrong. it doesn't matter if we like 'our guy' or not. it is not justifiable in a civil society and the ends do not justify the means. period.

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