Starbucks Corporation is asking the SEC for the go-ahead to exclude a shareholder proposal about cage-free eggs in China and Japan from its next proxy statement. The coffee company’s AGM is scheduled for March 12, 2025.
The Humane Society of the United States (HSUS) has filed the resolution, which asks the company to ‘disclose details of its implementation plans and timelines for reaching its cage-free egg commitment in China and Japan.’
In its supporting statement the society quotes Starbucks’ Form 10Ks as stating ‘the ongoing relevance of our brand may depend on making sufficient progress toward our social and environmental program goals’ including those related to ‘animal health and welfare.’ The HSUS also quotes the company as stating that one of its objectives is ‘to exclusively use 100 percent cage-free eggs and egg products in company-operated stores globally.’
The society alleges that, although Starbucks discloses progress toward that goal in some regions, in China and Japan – two of its biggest markets – ‘cage-free egg production is limited and supply is not yet widely available.’
The HSUS writes: ‘But now it seems the company may have finally developed plans for moving forward there. In June 2024, an organization called Global Food Partners announced it worked with Starbucks to develop “cage-free implementation roadmaps for China and Japan” to enable the company to “set [its] implementation plans and advance their cage-free commitments in both markets by [its] deadline.” Yet Starbucks hasn’t disclosed details of these roadmaps or any related deadlines.’
The society adds: ‘Especially since animal welfare is a “primary focus’ for Starbucks, its brand relevance may depend on progress toward its animal welfare goals, and the use of cage-free eggs is linked to highly material factors like food quality and safety, we think the company should simply disclose its new plans for achieving its goal in China and Japan.’
Governance experts will be looking at how the SEC makes such decisions on whether companies may nix proposals – particularly those with an ESG focus – under the Trump administration and a new commission chair next year. The agency’s division of corporation finance issued guidance that made it more difficult for companies to omit proposals in 2021, an approach that has been opposed by some companies, anti-ESG activists and lawmakers. Starbucks published its 2024 proxy statement in late January so is unlikely to be affected by any potential changes in policy, however.
Arguments to exclude
Starbucks has asked for no-action relief to exclude the proposal on the grounds that per Rule 14a-8(i)(7) the resolution directly relates to the company’s ordinary business operations, seeks to micromanage its ordinary business operations and does not focus on a significant policy issue that transcends those ordinary business operations.
‘The proposal relates to the company’s ordinary business operations insofar as it implicates the company’s decision-making regarding its marketing, sales efforts and brand positioning,’ Starbucks writes.
‘Moreover, the [HSUS] supporting statement suggests that the implementation of its proposal is meant to address risk by emphasizing that the company’s “brand relevance may depend on progress toward its animal welfare goals”…There is no function more ‘core’ to ordinary business management than marketing and public relations… [T]he proposal addresses [Starbucks’] advertising and public presentation, namely the company’s positioning of its sourcing of eggs, which the supporting statement explicitly links to the company’s brand relevance.’
Starbucks also argues that the proposal relates to its ordinary business operations in that it pertains to the company making decisions about its supply chain. ‘Limiting the company’s ability to source the ingredients necessary to produce its products would hinder management’s fundamental ability to run the company’s day-to-day operations,’ the company writes.
Starbucks also argues that the HSUS proposal does not focus on a significant social policy issue that transcends its ordinary business. ‘The proposal is not focused on matters of animal health (i.e. whether the chickens are caged) – and in fact the supporting statement itself states that Starbucks has a public goal for “all of our products to meet high quality and ethical standards,” leaving no doubt that the proposal’s primary focus is on the company’s marketing and advertising of its products and its decision-making regarding supply chain.’
Starbucks was approached for comment.
Ben Maiden
Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...
