Starbucks Corporation CORPORATE SOCIAL RESPONSIBILITY ...

Integrating Corporate SocialResponsibility (CSR)At Starbucks, our commitment to goodgovernance, ethical conduct and socialresponsibility is core to our way of doingbusiness, and strongly aligned with our driveto create and increase shareholder value. We arealso committed to maintaining our relationshipswith stakeholders and gaining their input andfeedback on issues of mutual importance.The Business CaseStarbucks defines CSR as conducting business in ways thatproduce social, environmental and economic benefits forthe communities in which we operate and for the company’sstakeholders, including shareholders. A few of the tangiblebenefits are:• Attracting and retaining our partners – We believeStarbucks commitment to CSR leads to higher thantypical levels of satisfaction and engagement amongour partners.• Customer loyalty – Studies have revealed that customersprefer to do business with a company they believe to besocially responsible, when their other key buying criteriaare met. We believe customer loyalty has been a drivingforce behind Starbucks phenomenal growth and longtermsuccess.• Reducing operating costs – Many environmentalmeasures, such as energy-efficient equipment or lighting,involve initial investments, but deliver long-termenvironmental and cost-saving benefits.• Strengthening our supply chain – To have a sustainablebusiness, we need a reliable and responsible supplier basethat can keep pace with our growth. Starbucks invests inmeasures to ensure our suppliers have the opportunity todo so.• License to operate – Having a strong reputation as asocially responsible company makes it more likely we willbe welcomed into a local community.Corporate GovernanceStarbucks board of directors holds management accountableto operate and manage the company according to strongethical and governance principles. The board currently has 11members, eight of whom meet the independence requirementsof NASDAQ. ® All three committees of the board arecomprised of independent directors and have specific charters:Audit and Compliance; Compensation and ManagementDevelopment; and Nominating and Corporate Governance.There are well-defined criteria for the selection of new boardmembers, foremost being a clear demonstration of their ownpersonal integrity and ethics. Board diversity is sought interms of members’ personal and professional backgrounds,gender, race, ethnicity or other differentiating characteristics,enabling a wider range of opinions and perspectives to beconsidered. Of the 11 members of Starbucks board, one isLatino, two are African American (one of which is female),and one other female also serves on the board.In fiscal 2006, one independent member of the boardresigned, stating that increased demands on his time arisingfrom his new position as president and chief executive officerof a large media company would make it difficult for him tocontinue to serve on the Starbucks board. The vacancy createdby his resignation has not yet been filled.For stability and continuity, among other reasons,Starbucks has historically had a classified board. However,Starbucks has questioned whether a classified board reducesaccountability of directors because of the limits it places onshareholders’ ability to evaluate and elect the board annually.The board requested that the Nominating and CorporateGovernance Committee once again consider the merits of adeclassified board in fiscal 2005. Based on the Nominatingand Corporate Governance Committee’s recommendation,the board approved an amendment to our Articles ofIncorporation, which provides for the annual election ofall directors, and then recommended to our shareholdersthat they approve this change. Starbucks shareholdersapproved the change at the company’s 2006 AnnualShareholders’ Meeting.Committee charters, our governance principles, ourdirector nominations policy (including criteria for boardmembership) and profiles on each board member are availableat Starbucks.com. In addition, specific information regardingdeclassification of the board can be found in Starbucks fiscal2005 proxy statement, also available at Starbucks.com.Business EthicsUpholding our strong ethical corporate culture is paramountto Starbucks success. Starbucks Business Ethics andCompliance (BEC) program provides guidelines in theStandards of Business Conduct to help partners make ethicalbusiness decisions, facilitates legal compliance and ethicstraining, and provides mechanisms for partners to voiceconcerns. Partners are urged to report any related concernsthrough the Business Conduct Helpline. (More information isavailable on page 65.) Starbucks also maintains an Auditlinefor third parties, such as vendors, investors, and customers, toreport possible accounting and/or auditing irregularities. TheAuditline is available to Starbucks partners as well. In NorthAmerica the program is well established, having been in placeS T A R B U C K S A N D C O R P O R A T E S O C I A L R E S P O N S I B I L I T Y 10