Starbucks

no. 1-0023

Starbucks Coffee Company*

On an overcast February afternoon in 2000, Starbucks CEO Orin Smith gazed out of his

office window in Seattle and contemplated what had just occurred at his company’s annual

shareholder meeting. In prior years, the meeting had always been a fun, all-day affair where

shareholders from around the country gathered to celebrate the company’s success. This

year, however, Smith and other senior Starbucks executives heard an earful from the activist

group Global Exchange. A human rights organization dedicated to promoting

environmental, political, and social justice around the world, Global Exchange criticized

Starbucks for profiting at the farmer’s expense by paying low prices and not buying “fair

trade” beans. Not only did the activists disrupt the company’s annual meeting to the point

that the convention hall security police asked the activists to leave, but they also threatened a

national boycott if the company refused to sell and promote fair trade coffee. Although

Smith strongly disagreed with using the shareholders meeting as a public forum, he knew

there was a strong likelihood his company could face serious reprisals if it did not address

the issues raised by Global Exchange.

Fair trade began after World War II as religiously–affiliated, non-profit organizations

purchased handmade products for resale from European producers. During the 1970s and

1980s, the concept evolved further into buying crafts from low-income, third-world

producers at a “fair” price and selling those products in Western markets.1 Fair trade was an

economic model based on fair labor compensation and mutual respect between producers

and consumers. By the late 1990s, the fair trade movement had gained a foothold in the

United States, and in early 1999, TransFair USA, a third party certification agency, launched

its Fair Trade Certified coffee label. During that summer, Global Exchange began a

campaign to educate consumers and the media about labor...