A Starbucks shareholder is suing the company’s top executives over a slew of race-conscious policies that the lawsuit says violate civil rights law and, by exposing the company to costly litigation, threaten the value of his actions.
The policies – which are all advertised on the coffee giant’s website – include $1.5 billion earmarked for ‘miscellaneous suppliers’ and a compensation package that ties executive pay to the company’s ‘BIPOC representation’ , for which Starbucks has set quantified objectives. The company also runs a “Leadership Acceleration Program” that is only available to minority employees, as well as a program that sets aside 15% of Starbucks’ advertising budget for minority-owned media companies.
The lawsuit, filed Aug. 30 by public interest law firm American Civil Rights Project, will present a new legal approach to challenging the race-conscious policies of public corporations. Typically, the plaintiffs in such cases are employees or job applicants who claim that the policies violated their civil rights. Here, however, the plaintiff is a conservative nonprofit, the National Center for Public Policy Research, which owns shares in Starbucks.
The group argues that the coffee giant’s programs endanger “Starbucks and the interests of all of its shareholders” – which the company’s executives have a legal duty to protect – by inviting “nearly endless” litigation over matters. civil rights claims that could force Starbucks to pay damages.
The lawsuit is part of a broader effort by shareholders to rein in corporate executives, who investors say are deliberately breaking the law as they seek to restore their credentials. The National Center for Public Policy Research holds stock not only in Starbucks, but also in JP Morgan, McDonald’s, Lowe’s and Coca-Cola. Along with other shareholders, he has threatened over the past year to sue the executives of every company that implemented race-friendly policies; the lawsuit against Starbucks top brass marks the first time the nonprofit has followed through on its threats.
Since the center is suing the Starbucks executives personally, any damages awarded will come out of the individual executives’ pockets, not the company’s coffers, a ploy designed to make other C-suites sweat.
The National Center for Research on Public Policy is quite outspoken about its goals. “We want to deter people from discriminating on the basis of race,” said Scott Shepard, an attorney for the group.
Starbucks declined to comment.
Lawsuit asks a Washington state court to declare Starbucks’ policies a violation of the Civil Rights Act of 1866, which prohibits racial discrimination in contracts, and Title VII of the Rights Act 1964, which prohibits racial discrimination in employment. However, he does not cite the violations themselves as grounds for damages; the allegation is that the breaches represent a breach of fiduciary duty, which in turn entitles shareholders to compensation.
The dispute comes as companies across the country reserve jobs, scholarships and bonuses for members of certain minority groups. Pfizer excludes whites and Asians from a lucrative nine-year scholarship program. Amazon is giving “Black, Latino and Native American entrepreneurs” an extra $10,000 to launch delivery startups. At Google, Microsoft and IBM, prestigious research fellowships have capped the number of non-minority students universities can nominate.
While some of these companies have been hit with traditional civil rights lawsuits — Amazon and Pfizer, for example — many have not. Such lawsuits would likely succeed on the merits, the lawyers told the Free Washington Beaconbut plaintiffs can be hard to find given that suing one’s employer is often a professional death sentence, especially when the lawsuit alleges anti-white discrimination.
“Finding the violation of the law is easy,” said Gail Heriot, a member of the US Civil Rights Commission and president of the American Civil Rights Project. “What’s hard is finding people sticking their necks out to say, ‘I’m having a hard time.'”
Heriot’s company believes shareholder lawsuits — and the high-profile threat they pose — can circumvent that problem. Shareholder groups like the National Center for Public Policy Research are “not sensitive to the kind of lobbying campaign any individual is,” said Dan Morenoff, executive director of the American Civil Rights Project, making it good candidates for reverse discrimination complainants. case.
If shareholder law becomes more commonplace, it is thought, all publicly traded companies will face a credible threat of legal action if they adopt racial quotas. “What this does is change the incentive structure of every C-suite in America,” Morenoff said.
This leverage effect has already paid off. Last year, the American Civil Rights Project sent open letters to Lowe’s and Coca-Cola on behalf of shareholders, threatening to sue the companies’ executives if they did not reverse their racial policies. The two eventually backtracked: In February, Coca-Cola told shareholders it had dropped racial staffing requirements for law firms working with the company, and in August, Lowe’s quietly dropped a promotional program that was only open to minority-owned businesses.
The lawsuit against Starbucks came after the company’s directors ignored a similar threat, telling the National Center for Public Policy Research that it was “not in the best interests of Starbucks” to withdraw their self-conscious policies. the race. Courts are generally reluctant to question business decisions made by corporate executives, Morenoff said, a potential downside of his group’s shareholder approach.
But even if the discrimination maximized the value of Starbucks stock, Washington state law still requires the companies to engage in “lawful business.” Starbucks’ race-conscious policies therefore constitute a breach of fiduciary duty whether or not they serve the company’s bottom line, according to the lawsuit.
Other status codes include nearly identical language. In Delaware, where most corporations are incorporated, corporate officers can be held liable for a “willful violation of the law”. Once they receive a notice that their policies are illegal – the purpose of demand letters – executives are theoretically liable.
Shareholder lawsuits have another advantage over conventional civil rights litigation: an employee or outside contractor can only challenge policies that directly discriminate against them, a legal concept known as standing. “It’s hard to find a single person who can challenge all of a company’s racist policies at once,” Morenoff said, let alone multiple people willing to challenge each anti-white policy individually. In contrast, a shareholder can challenge each discriminatory program all at once, on the grounds that each represents an independent breach of fiduciary duty.
That makes shareholders a particularly useful weapon against a company like JP Morgan, which has nearly a dozen race-conscious policies. The bank offers two different scholarships that exclude whites and Asians, one for black students and another for Hispanic students, as well as three different vendor diversity initiatives that discriminate on the basis of race, according to an open letter from the ‘American Civil Rights Project. It also has three race-conscious lending programs, one of which provides “$2 billion in small business loans to Blacks, Hispanics[,] and Latin American communities” – which the letter says violates the Equal Credit Opportunity Act and the Fair Housing Act.
“Civil rights lawsuits are the retail approach” to racial discrimination, Morenoff said. “Shareholder lawsuits are the wholesale approach.”
Implicit in this approach is a political argument: old-school American liberalism, with its emphasis on free enterprise and color-blind civil rights, has the resources to resist the progressive insurgency that has sprung up within it.
This faith is almost anachronistic on the right today, where a growing number of commentators see the “revival” as an unholy alliance between capitalism and civil rights law. Heriot herself has argued that companies have set up diversity bureaucracies to protect themselves from discrimination claims, which can cost companies millions in damages and legal fees. The bet his group is making is that the Civil Rights Act can be exploited against its own excesses, provided shareholders step in.
To this end, the American Civil Rights Project has sought to reframe racial discrimination as a kind of corruption. In its open letters and now its lawsuit, the group argues that the corporate officers are actually stealing money from their principals, using it to buy progressive cachet at the company’s expense.
“It benefits [the officers] personally to portray themselves as virtuous advocates of “inclusion, diversity and equity,” the lawsuit against Starbucks reads, “even if it harms the company and its owners – a classic example of insider trading (admittedly non-monetary). “