May 10, 2018
Atlantic Council

“The Role and Responsibility of a Global Company”


Introduction:
Frederick Kempe,
President and CEO,
Atlantic Council

Moderator:
David Ignatius,
Novelist and Columnist,
The Washington Post

Featuring:
Howard Schultz,
Executive Chairman,
Starbucks Corporation


Location: Atlantic Council, Washington, D.C.

Time: 1:30 p.m. EDT
Date: Thursday, May 10, 2018


FREDERICK KEMPE: What a pleasure. Good afternoon. My name is Fred Kempe. I’m president and CEO of the Atlantic Council.

This is a great treat, the man who will win our Distinguished – or will be given our Distinguished Business Leadership Award this evening. He’ll be given it by a Congressional Medal of Honor winner, with whom he has a close relationship, someone who’s inspired him a lot with some of the good work he’s done on veterans. We’re so looking forward to this tonight.

But here we have a chance to hear from you at a little bit more length, a little bit more depth about “The Role and Responsibility of a Global Company.” So, on behalf of the Atlantic Council, I’m honored to welcome Executive Chairman of the Starbucks Coffee Company Howard Schultz. (Applause.) (Laughter.)

You mean you’re very anxious to get me offstage. (Laughter.)

So we’ve been talking a lot about the Atlantic Council about how we’re at a turning point of history. Maybe 1919, 1945, 1989 – end of World War I, World War II, end of the Cold War – maybe you can go back to 1815, the Congress of Vienna. In an increasingly interconnected and globalized society at this inflection point of history, businesses and non-state actors are playing roles of greater importance than they ever had in history on the global geopolitical stage. Now more than ever, corporations have both the capacity and the responsibility to take on global challenges to forget a more secure and prosperous future for all.

One of the most visible symptoms of this inflection point that’s been written about a lot is a public backlash and populist backlash in many cases, an electoral backlash, against the structures and institutions of global business and commerce. Many feel that globalization’s financial rewards have been concentrated too densely. Many are in opposition to open markets and freer trade.

In a remarkably prophetic piece for the Harvard Business Review back in 2011, Howard made the case that global corporate citizens had both a self-interested obligation and an ethical responsibility to make a positive change for the communities they engage with – to invest in the people, the structures, and the social and physical infrastructure that allow for businesses to thrive. Under Howard’s visionary leadership Starbucks has embraced this philosophy, from an investment in its own people – including an unprecedented commitment of tuition-free college for any Starbucks employee – to a community engagement strategy that focuses on improving education, employment, health care, safety, and overall daily life for the communities that Starbucks serves.

Not dissimilar to the Atlantic Council’s next generation efforts aimed at fostering a next wave of global leaders, Starbucks’ virtuous cycle starts with hiring people who, with the right opportunities, can drive change in their neighborhoods and communities. To this end Starbucks has announced its determination to hire 100,000 opportunity youths by 2020, 25,000 military veterans by 2025, and 10,000 refugees over the next five years. And this exemplary ethos extends beyond the storefront to the very supply chain that has filled your cups with such excellent coffee if you had any outside today.

I myself am a collector of Starbucks cups. I particularly like the international ones with the larger print on them. And I’m going off to South Korea next week for several purposes, but I don’t yet have my Seoul or South Korea cup, and I’m wondering how long it’s going to be before I get my Pyongyang cup. (Laughter.)

So your work includes collaborating with local NGOs in coffee-growing regions that have experienced working with farming communities; supporting agricultural training; microfinance; biodiversity; and improving levels of health, nutrition, and water sanitation. Whoever thought that that kind of thing could grow out of the coffee bean.

Amidst all this, Starbucks remains a company of tremendous growth. In China alone Starbucks is opening a new location every 15 hours.

Howard one described Starbucks as a performance-based company driven through the lens of humanity. That’s an apt description. Through his actions, Howard has reimagined the role and responsibility of a global company. In everything he touches he embodies the quintessence of business leadership. And it’s an honor to have us with us this afternoon and this evening, when we will present him with the Atlantic Council’s Distinguished Business Leadership Award, our highest honor for business leaders. And we always try to find people that we describe as businessmen statesmen, and that indeed is Howard Schultz. So thank you for taking time out of your schedule.

I’d also like to extend a special thanks to our exceptional moderator and a dear friend, the renowned Washington Post columnist, extraordinary author – buy all his books; go on Amazon right now. There’s no Amazon conflict of interest here. I think you can – you can go buy his books. (Laughter.) David Ignatius, we are so privileged to have you guide us through this fascinating conversation.

And, with that, I’m going to ask a video to roll, a brief video on – that highlights the sense of community that Starbucks is working to cultivate. After that our guest will come to the stage. (Applause.)

(A video presentation is shown.)

(Applause.)

DAVID IGNATIUS: So thank you so much to Fred Kempe for inviting – (audio break) – have a(n) almost ridiculously long history. We first met in 1981, when we were both reporters for The Wall Street Journal. Fred’s been one of my close friends ever since, and I love watching what he’s done with the Atlantic Council. It’s really an astonishing story. So thank you, Fred, for bringing us together.

It’s really fun to have a chance to talk with Howard about a subject that I don’t write about enough, business. Once upon a time, when Rajiv Chandrasekaran, who works with Howard, worked for me, I was a business editor at The Washington Post. An Italian diplomat I told this to once said: You must be joking. And, you know, it was obviously improbable, but it’s great to have a chance to come back and talk with one of the really dynamic business leaders in the world.

And, Howard, I want to ask you to begin our story the way almost every story begins, which is how we grew up – the world that shaped us and formed us and gave us our ambitions and quirks. As I’ve read a little bit about your story, you grew up in a – in a Brooklyn that was, you know, not always an easy place to be. Times were sometimes tough for your dad. Little parts of this story almost sound like a Brooklyn version of “Hillbilly Elegy.” It’s a tough, tough world sometimes. And maybe you could talk about what that boyhood was like for you and when you began to think: I want to be in business. I want to – I want to try to have my own slice of business to make my way in the world.

HOWARD SCHULTZ: Well, thank you. Thank you for being here today. I know you’ve got a long day yourself. And thank you for inviting me here today and for the award tonight.

Like many of you here, my childhood experience shaped my life in ways that I probably had no idea at the time. But I grew up in public housing in Brooklyn, New York. My dad was a World War II veteran, came back from the war and had aspirations about the American dream. But for a number of reasons, it did not present itself. And something happened to me at the age of seven that really did shape my life and have a deep-rooted level of imprinting on how I would see the world. My father was a truck driver delivering cloth diapers, before the invention of pampers. And in 1960, on a cold winter day, fell on a sheet of ice, broke his hip and ankle. And in 1960, if you were a blue-collar worker, you were pretty much dismissed. There was no workman’s compensation. There was no health insurance. And I watched, at the age of seven, the fracturing of the American dream and the hopelessness and despair of what would happen to a family that basically was in big trouble.

Now, I never could imagine at the age of seven that that experience was going to shape how I would ultimately see the world, and never dreamed that I would one day create a company – let alone be part of a company – that would have a set of values. But in many ways, what I was trying to do was build the kind of company that my father never got a chance to work for. So the business idea of Starbucks, which obviously is based on coffee, is much more than that. And in fact, when we wrote the original business plan, it was to achieve the fragile balance between profit and conscience. And that resulted in two very important life-changing benefits that would shape the values and the culture of the company. And that was comprehensive health insurance – over 20 years before the Affordable Care Act for every single employee – and then equity in the form of stock options that everyone would be an owner.

And I think what we were really trying to do and demonstrate was that success would be best when it was shared. And even though we were a private company at the time, and, you know, Starbucks was not Starbucks, I had this strong belief that we had to create dignity and respect for people at all levels of the company. And that began to, in many ways, create the equity of the Starbucks brand, almost from the inside out, in which the experience would define the brand for the customer based on how people were treated. And the essence of that was asking our managers and our leaders, if you exceed the expectations of our people, they will exceed the expectations of our customers. I never imagined that we’d have 28,000 stores around the world, because when we did that we had less than 50. And it was just an idea that I thought, and all of us thought at the time, that we wanted to build a different kind of company. And, in my case, a company that was threaded to my experience as a kid where my father, I felt, was devalued as a high school dropout, World War II veteran, and just did not have the respect of his employer.

MR. IGNATIUS: I want to come back to how you – how you built the company and the values you’ve tried to embed in your company but ask you before we go any further about the flipside of the boyhood that you just described, where you made clear the benefits to you as a person of having things not so easy and seeing through your father’s story some important things about life. You’re now living the flipside of that. You’re living a life of great wealth in a community that’s generated so much wealth. I’m just curious about how you cope with that, you know, consequence of that success. You and your family, the people you know are surrounded by everything people could dream of. How do you keep – not your employees now, but the people closest to you – anchored in good values, when it’s so easy to be kind of dazzled by the success and the money that comes with it?

MR. SCHULTZ: Well, with my wife and kids in the front row I’m going to answer this question very honestly. (Laughter.) First of all, I give her all the credit. But I think our kids are growing up and have grown up in a family of privilege. Let’s not – you can’t deny that. I grew up in a family that had very little. But the thread of my family as a young boy and the thread of our family that we raised over the last 30 years or so is directly linked to a set of guiding principles and a set of values. And those values are based on the fact that success is not an entitlement. It has to be earned. And I would say that is true in business and it’s certainly been true in our family. And I think as soon as we were in a position to understand the value of what we created, we understood that we had to pay it forward.

And I think the work that we’ve done on the Family Foundation side – in which the kids are threaded into it and Sheri, my wife, runs – is all about two things currently. And that has been the pursuit of trying to address the opportunity youth crisis in America – where there’s almost 6 million kids who are not in school and not in work, many kids of color – and then the initiative of trying to do everything we can to help post-9/11 veterans, which fortunately enough for us came as a result of Secretary Gates sitting on the Starbucks board. But the short answer to your question, I think, is just living a life of understanding what our responsibility is to our community, to the world we live in.

And I also think we can’t deny the fact that we are living in a time where there are, you know, very large, systemic problems in the country that we feel very strongly that we have to address as citizens. And we’re also living in a time when I think, not only in this administration but in past administrations, where I don’t think the government has done enough to address these systemic issues. And as a result of that, we have felt very strongly that business and business leaders needed to play a more active role in contributing back to their – to the life and responsibility of their employees, the communities we serve, and the foundation that we establish as a family.

MR. IGNATIUS: I just should note that investing in newspapers is a great way to reproduce – (laughter) – family values. We have – we have the Graham family, obviously, and the Sulzberger family. And now, happily, at my newspaper we have Jeff Bezos and MacKenzie, and their family. So, you know, anybody out there who’s wondering what’s a good way to keep the family together – (laughter) – so I want to ask –

MR. SCHULTZ: Good plug for The Washington Post. (Laughter.)

MR. IGNATIUS: Well, it’s my – you know, we have – we have an owner we love. But I do worry that there are newspapers that are really struggling that would love to have a good steward. A good owner. (Laughter.) So I want to ask you about how you built this amazing, and in some ways unlikely, business that’s Starbucks. I mean, when I was a boy, yeah, let’s be honest, a cup of coffee was 25 cents at the 7/11. I mean, that’s the way you thought about coffee. And it was, you know, either really good – I mean, if you went to Dunkin’ Donuts – or it wasn’t so. So you had the idea that it could be something quite different. And I’d love it if you just told the basic foundation story of how that came to you. And then talk about how you grew up that, how you scaled the business in such an extraordinary way. But just talk about how this crazy idea came to you in the first place.

MR. SCHULTZ: Well, there’s two separate stories that relate to kind of the genesis of the idea, and then the fragile nature of how close I came to losing it. So if you don’t mind, I’ll try to frame that.

MR. IGNATIUS: Please.

MR. SCHULTZ: And it’s very timely, because we were in Milan over the last few days getting ready to open our first Starbucks in Italy in September. So in 1983, I took my first trip as a young man to Italy. And like many people who have gone to Italy, I was captured with the Italian coffee bars and the romance and the theater of espresso. But what really caught my attention was the sense of community that existed inside of all of these coffee bars, and what I began to realize and label as this third place between home and work. So I raced back to America to convince a group of people that I had seen the light, and there was an opportunity to do something quite extraordinary. Now, I’m not the founder of Starbucks. I was an employee of the company. And I had to convince the founder to embrace my idea, and I thought I was a pretty good salesman at the time and he basically turned me down cold and said, not interested.

So the long story short is I left the company to form my own Italian coffee bar business with a name that no one could pronounce called Il Giornale, and then Starbucks got into financial trouble and the founder came to me and said, you would be the right steward to acquire the rights of Starbucks, which had six stores at the time, for $3.8 million. That was the good news. The bad news is I didn’t have any money. (Laughter.)

So he gave me a 60-day exclusive to go find the $4 million of equity and after about 30 days came to me and said, how are you doing raising the money. And I didn’t want to lie to him. I had to tell him the truth. I said, I’m halfway there but I’m still confident I’m going to find the rest, and he said to me, well, we have a problem.

And the problem was that another investor showed up and offered him an all-cash deal with no due diligence and a quick closing, and he said, I think I’m going to have to take it. And I said, wait a minute. You told me I had an exclusive. You weren’t going to tell anybody. And it turned out that an investor of mine in Il Giornale went behind my back and was going to steal the company from me, and worse than that, this was, like, one of the titans of Seattle.

So I was in – I was crushed. I came home. I probably cried to Sheri. I said, we’re going to lose everything – lose our whole dream – it’s over – I don’t know what to do. And I shared this story with a friend of mine who was a young attorney in Seattle and he says to me, you’ve got to come talk to the senior partner. I said, sure – who is it. And he gave me a name I’ve never heard, and he said, Bill Gates, Sr. I never heard of Bill Gates, Sr., and Bill Gates, at the time, was not Bill Gates. Bill Gates, Sr., was Bill Gates. (Laughter.)

So at 8:00 o’clock in the morning I went to see Bill Gates, Sr., for the first time, who, at the time, was in the prime of his career and was just a – I mean, he was the lawyer in town. He’s a 6’7” just giant of a man, and I sat down and I humbly told him exactly the story and he said, I’m just going to ask you two questions – is everything you told me true and have you left anything out. And I said, everything is true, Mr. Gates – I’ve left nothing out, and he says, come back in two hours. I said, OK, I will.

So I came back in two hours – this is a true story – and the irony of this is that I told this story for the first time publicly a year ago at the Microsoft CEO Summit with Bill Gates – the Bill Gates – sitting at the front row – Richard, you were there – and because I wanted to protect the person who did this terrible thing to me.

So I go to Bill Gates back to the office at 10:00 a.m. and he says, we’re going to take a walk, and I said, where are we going. And he says, we’re going to go see the man. My heart was racing. I didn’t know what was going to happen, and we stormed into this guy’s office and he’s sitting at his desk and Bill Gates is leaning over, all 6’ 7” of him, and basically points a finger at him and says, you should be ashamed of yourself – this is what’s going to happen. You’re going to stand down, Howard’s going to buy the company and we’re going to never going to hear from you again – do you understand.

I was just, like, oh, my God. Now, this is the way business is done. (Laughter.) You know, I learned such a great lesson, although I wasn’t Bill Gates. So we walk out and I said to Mr. Gates, what just happened, and he said, Howard, you’re going to – you’re going to buy Starbucks and everything is going to be fine. And I said, Mr. Gates, I got to tell you one thing – I’m $2 million short, and he says, we’re going to find the money and my son and I are going to invest. And if it wasn’t for Bill Gates, Sr., there’d be no Starbucks. (Applause.)

MR. IGNATIUS: That’s great. That’s the nicest Seattle –

MR. SCHULTZ: Yeah.

MR. IGNATIUS: – tycoon story I ever –

MR. SCHULTZ: That’s a true story.

MR. IGNATIUS: – I ever – so one of the things that I’m curious about is the way that you grew this business. I think the number is currently 28,000 Starbucks locations and, you know, it’s a truism of business that sometimes companies grow faster than they really can afford to grow – that they just outpace their capital, their ability to manage, and so trying to run it as fast as they can they just fall over.

And it’s been fascinating to see the way in which you somehow, although you were very fast growing, never stumbled and I wonder if you’d just explain a little bit to us how you managed such rapid growth and what you learned about how to scale a business from this Starbucks experience.

MR. SCHULTZ: Well, first off, I must share with you that I do not have a business degree. I did not go to any Ivy League school. I think I might have taken one accounting class. So this is not something I understood how to do. A lot of it was instinctive but, really, it was just surrounding myself with great people who had likeminded values who had a shared vision about building a different kind of company.

But I’d start off by saying this, that, metaphorically, we decided we were going to build a hundred-story skyscraper and, in effect, a national brand, and in order to build that hundred-story skyscraper, we realized early on we had to build the foundation and the question is what was the foundation. And it was the culture and the values of the company that was going to be the secret sauce – that we were going to build a company that was going to be defined by an experiential feeling inside our stores and the brand was going to be the people who wear the green apron.

So everything was about them. Growth and success generally covers up lots of mistakes and so one of the things we decided to do, which was both cultural and also growing the company the right way, is that we decided we were not going to franchise – that we were going to own and operate every store so that we can control the experience and also establish the culture.

And then, I think, the two kind of planks were sourcing and roasting the highest quality coffee in the world and then doing everything we could to elevate the experience of our people. But if you can think about this question, if you were all given the opportunity to invest in a company that was going to give equity and health care to a company that was private with Italian names that no one could pronounce, sold in a paper cup at two to three times more than the average price across the street, many of you probably would have said no.

But what we learned along the way was that it wasn’t the coffee that we were selling. It was the experience and this sense of community. And once we started expanding from city to city and then country to country, we learned – we didn’t know – that there was a universal acceptance to this sense of humanity – that people were longing for a place to go, longing for community, longing to be among other people and that coffee was a catalyst to conversation. And we never imagined that we would have a global enterprise but we also realized along the way that these values were universal and the feeling in our store was universal.

The other thing I would say is that as the Web became so viable in everybody’s life, the issue of transparency – and what I mean by that is that the consumer knows so much about your company and knows so much about you, and we learned very early on that the consumer wants to make choices and wants to support those companies whose values and attributes are compatible with their own.

The other thing I’d say is that social impact is not corporate social responsibility – that we integrated social impact and what we do every day strategically in the business. We did not create an adjacency of corporate social responsibility away from the company. We integrated it into the strategy.

So everywhere we went, the social responsibility of the company was not writing a check, was not a PR event, wasn’t marketing. It was really infused and integrated in everything we would do, and a great example of that, even many, many years later, is why is Starbucks opening up stores in Bedford-Stuyvesant, in Prince George County, in Ferguson and St. Louis?

We’re not doing that because – you know, an institutional shareholder once asked me, are you – is Starbucks in the charity business. No, we’re not in the charity business but we’re in the business of building a different kind of company and not every decision is an economic one. And I think that’s another mistake that companies make, is that there is so much focus on the income statement, on the balance sheet, and on quarterly earnings. And we learned a long time ago that we have to make a deposit in the large reservoir of goodwill, and in doing so make our people and our customers proud.

That’s kind of a long-winded answer, but – and this has – this has threaded into every place we’ve gone, including places like China, which everyone thought we would never succeed in.

MR. IGNATIUS: So let me just push you on this question of business social responsibility, business social impact. When you talk about it, I am sure it sounds to this Atlantic Council audience powerful, admirable, something that we – that we want and support. When the CEO of Home Depot talks about his idea of business social impact, much more conservative view, different set of criteria, a lot of people get anxious: What are you doing imposing your values? So how do we figure out in a – in a diverse world where, as we can see, this is a country that’s pretty divided, that business activists stay within what’s a sensible and proper limit, and don’t impose their values through trying to be – have social impact?

MR. SCHULTZ: Well, I don’t think we’re trying to impose our values and I don’t think we’re trying to make a political statement. But I think the question is, what is – what is our responsibility?

So I’m going to go to a place that you might not expect, and that is let’s talk about race in America and specifically what happened to us two-and-a-half years ago when we – when we attempted, and to many in the public failed, when we elevated race in terms of our stores, and then what happened the last few weeks in Philadelphia, if you don’t mind.

MR. IGNATIUS: Do. So tell us that, first the “race together” story and why it failed, and then we’ll get to Philadelphia.

MR. SCHULTZ: So we all can remember with – I think with horror and shame what we witnessed as Americans in watching Trayvon Martin and Eric Garner and others be murdered, and there was great unrest in the country. And this is not in any way to criticize or in any way pit one group versus another, especially those people who wear the uniform of policemen every day. But the truth of the matter is that racial divide was really, I think, on the rise during that time two-and-a-half years ago, and certainly today we have a significant divide in the country as well.

We looked at that and I decided that we should have a companywide meeting, unscripted just like this, where we would just talk about race, racial divide, unconscious bias, and give everyone in our company a companywide forum to share. And people, without any retribution, without any concern, shared their pain, their bias. A young woman, white woman, stood up and said my family were members of the KKK and this is language I’ve heard in my own life I didn’t know was wrong. And we heard African-Americans talk about the fact that they feel all the time that they are not being valued and the system is – the playing field is not equal, not level. So we went – we went around the country and we had these meetings almost in every major city amongst Starbucks people.

And then our people started asking us: We’ve had all these meetings; what is Starbucks going to do? And so we got together and we said, what if our goal and our objective is to elevate the national conversation, the national discourse around race? We know this is a third rail. We know how difficult it is. But let’s have the moral courage – we probably did not have the moral authority, but let’s have the moral courage to try to elevate the conversation.

And I must tell you, we spent two-and-a-half hours as a board not talking about sales or revenue or markets as a board – with Mellody Hobson, African-American; Olden Lee, African-American; Senator Bradley; Secretary Gates; and other people in that boardroom – talking about how risky this would be, but at the same time how necessary. And as Starbucks, who has stores in every community in America and is serving 100 million people a week, the impact we could have could be incredible.

So we leaned into it, and we asked our people to write “race together” to try and elevate the national conversation. And what happened, we had – we were totally unprepared for. Within two hours, the entire initiative was basically hijacked by social media – hijacked by hate, by anonymous people who just pretty much stole the narrative. And we were not prepared to respond in any way that would redirect the conversation to what it is we were trying to do.

And then, unfortunately, there were issues about whether or not we were putting our people in harm’s way because a lot of hate came out. So within 24 hours, despite our best efforts and the courage I thought that we displayed, we shut it down. And we did not shut it down because we thought we were wrong to do it. We shut it down because we thought our people were going to be in danger. And that’s a whole ‘nother issue with regard to, I think, the systemic issue and the divide in the country.

MR. IGNATIUS: Before you go on to Philadelphia, I want to make sure that we stay with this long enough to get you to draw the lesson of that experience. As you describe it, it was – it was, you know, a courageous response to an absolutely, you know, crucial national problem, and yet you got – you got burned and, as you say, felt you put your people in danger. We all have had the experience of just the sudden viral nature of social media that can hijack anything. So what’s the lesson for you as you look back on that?

MR. SCHULTZ: Well, first –

MR. IGNATIUS: Go ahead.

MR. SCHULTZ: I think the first issue is the elephant in the room in America is leadership – true leadership, authentic leadership, moral courage, moral authority, and what it means to lead. But leadership is very easy to define when the wind is at your back, so easy. Just go ahead and do it because you’re going to be rewarded. But a true leader and true servant leadership is defined when the odds are against you, when there’s great pressure, and the headwinds are right in your face.

So, in a speech in Milan two days ago, I was asked: Who’s the leader in the world today? And it took me five minutes to kind of think about it. And I said, you know, as a Jewish person, the true servant leader in the world today is the pope – the pope. He’s the one kneeling, washing the feet of a peasant. He’s the one saying who am I to judge.

But the issue is leadership. And we elected, as a company, to lead – to lead a national conversation.

Now, the lesson about what happened is we’re living in a world today where fiction becomes truth in a nanosecond. And that could not – that situation could not happen at Starbucks today because we’ve got 100 people in social media who are ready to respond to false accusations at the company. And we need that muscle memory and that discipline, and every organization does. And certainly a lot of people today are being accused of things, and whether it’s true or not I don’t know, but social media can be both a friend and a foe.

The other thing I’d say is this. From the time we had 11 stores and 100 people in the company to today, where there’s 28,000 stores and 350,000 people, I have tried to do one thing very consistently, and that is in every management meeting we have and in every board meeting I think about a metaphor of two empty chairs. One chair is empty with a Starbucks person and one is a Starbucks customer. And I try and just privately, quietly ask myself: Is this decision going to make them proud? And if the answer is yes, I know I’m on the right side of it. If the answer is no, because we’re making a decision that is financially going to be good for us or short term in nature, we shouldn’t do it. And I think leadership has to be defined by these kinds of elements of ethics and integrity, and doing the right thing despite the arrows that might come.

MR. IGNATIUS: Well, that’s a perfect transition to asking you about this incident several weeks ago in Philadelphia, where two black customers ended up getting arrested. An incident that, again, went viral, exploded throughout the – throughout the media. You responded decisively and have called for all your employees to think about this with you. But walk us through the event itself, how you reacted to it, why you think it happened despite your efforts to be in the forefront of dealing with racial issues, and then how you chose to respond to it in terms of this company-wide effort.

MR. SCHULTZ: The first thing I have to say is that Starbucks Coffee Company – the company, the management, and me personally, not the store manager – are culpable and responsible. And we’re the ones to blame. And we took responsibility for that. I think it was shocking to us that this could happen in a Starbucks store. And it was reprehensible. I mean, we could not imagine this could happen. The experience we created in our stores over the last 30, 40 years in terms of this third place, and all the customers that we have linked to the systemic issues in our society today around race, mental health, the opioid crisis, homelessness – all of these issues and all these society problems are integrated into Starbucks stores, because our stores are public environments.

Now, our stores are not public bathrooms, but they’re used as such. In this particular case, two African-American gentlemen came in the store – like millions of other people – to sit down and have a meeting. And one of them asked to go to the bathroom. And we have a – kind of a loose policy around you should be able to use the bathroom if you buy something. And it’s really the judgement of the manager. And in this particular case, she asked the gentleman: Are you a customer? And he said, no. And they go into a conversation. And one thing led to another. And she made a terrible decision to call the police.

The police came, en masse, and in 10 seconds handcuffed the guys – thank God they didn’t resist – and they were arrested. And we were absolutely wrong in every way. The policy and the decision she made – but it’s the company that’s responsible. And when this happened, we flew en masse to Philadelphia. We stayed there for days. And we did everything we could to demonstrate contrition, to immediately go on social media and national TV and apologize and have conversations with local clergy and all of the people we needed to talk to in Philadelphia to – for them to understand the level of compassion and empathy we had for the situation.

And we were talking offstage, I had two public events that I had to think about whether or not I should do following Philadelphia. One was I was scheduled with Sheri to go to Montgomery, Alabama to the opening of Bryan Stevenson’s new equal justice museum and memorial. And knew that every major civil rights leader in the country was going to be there. And whether or not I should go. The second is I had a public appearance to speak at Morehouse College. And I was advised: Don’t go to Morehouse. It’s – you’re not going to be treated well there. And I think you should cancel that.

I went both to Montgomery, and I absolutely went to Morehouse. And I did speak there. And it was tough. And I must say, as a white person – Caucasian person – I felt the pain and I felt the concern that young African-Americans have, and especially young African-American young men have, about the opportunities in America. And if the country is going to achieve its true promise – its true promise, it can’t be for a select few. And we can’t leave millions of kids behind. And there has to be a sense of healing. And there has to be a new national purpose and a new national renewal.

And I think the other issue I would say is – and it’s not about Starbucks – but we’re all – every one of us is being inundated every day with a level of disrespect and devaluing of language. And I think one of the concerns I have is how we’re all becoming desensitized to it, as if this is the norm. This is not the norm. We are better than this. And we have to understand, this is a moment in time and this is a time where we just reject at every level the dismantling of these values that we hold so true. (Applause.)

MR. IGNATIUS: So that’s a powerful description of crisis and how you reacted to it. Before we leave the Philadelphia incident, I’m just curious what guidance you’re giving and will give May 29 to your store managers? I mean, I’m assuming that you still feel that Starbucks can’t be a kind of public bathroom, and something like your policy – you got to buy something to use your facilities, you know, you’re not going to throw that overboard. And I’m wondering what do you tell your manager? If you get into a fight that’s worrying – worrying to you, worrying to your customers – what do you do? What are the situations in which it’s OK to call the police? So how – I’m sure your managers are struggling to think, what’s our guidance from the boss? What are you going to tell them?

MR. SCHULTZ: Well, first off, I think we decided that we’re going to close our stores for an entire afternoon, and every store in the country. And since the Philadelphia incident, we have been working diligently inside the company and with outside resources to create a curriculum of training, because I think it’s fair to say that most people have some level of unconscious bias, based on our own life experience. And so there’s going to be a lot of education about how we all grew up and how we see the world and how we can be better. And that curriculum and that education is the beginning, not the end, of an entire transformation of our training at Starbucks which, in addition to everything we do operationally, will stay inside the company.

We’re also going to open-source it and make it available to every other company. And we’re producing a documentary with an award-winning filmmaker, Stanley Nelson, who made the Freedom Riders, to make sure that people understand, this is not a marketing thing. We’re deeply committed to this. In terms of the policy, we the first thing we want to make sure is that regardless of your station in life, the color of your skin, your sexual orientation, your gender, your ethnic background – everyone is welcome at Starbucks. And in terms of the bathroom, we’re going to have to make sure that – we don’t want to become a public bathroom, but we’re going to make the right decision 100 percent of the time and give people the key, because we don’t want anyone at Starbucks to feel as if we are not giving access to you to the bathroom because you are less than. We want you to be more than.

And this is in conjunction with the NAACP and the Legal Defense Fund, Bryan Stevenson, Heather McGhee, Anna Deavere Smith, Common, and many others who have come to our aid to support us because of how important this is not, not only for our company but for the country. This will be the largest kind of training of its kind on perhaps one of the most systemic subjects and issues facing our country.

MR. IGNATIUS: Absolutely fascinating story. We’ll all watch and see what happens on May 29th.

So I want to ask about another extraordinary part of your company, and that’s your growth overseas, in particular in China. I think you have roughly 3,000 stores now in China. And I’m curious about China, because for a lot of American businesses China has been a really tough place to make money and be successful. I mean, people have gone to China – I first went to China in 1984. And people have gone to China over and over again with stars in their eyes, the greatest market ever, how can we lose? And they’ve come away just shaking their heads, unable to really get the profits out, having trouble running the business, having their intellectual property stolen. What have you figured out that so many American and I have to say now global businesses have not figured out in China? Why is this working for you? And, to be honest, what are your problems in doing business in China?

MR. SCHULTZ: Yeah. Well, I’m laughing because for nine consecutive years we suffered through everything you described and we lost money for nine consecutive years. And we made the same mistake not once, not twice, but three times, and I’m the one who made it. (Laughter.) However, you know, being a public company, Wall Street had given up Starbucks in China for dead and was really pressuring us to leave China because it was never going to work. But there’s going to be 600 million middle-class in China, and we just believed that we would persevere somehow.

Personally, the mistake we kept making was we kept shipping off U.S. managers to run the China business because we know better. And every U.S. manager that we sent over to China had all the resources and all the understanding, except they didn’t understand the Chinese market. You’d think we’d get that, at least after the first time.

But after the third time, we said we need a local Chinese team. And we were extraordinarily fortunate and lucky, and it’s such an anomaly in China, in that the person who is the CEO of China is a woman, named Belinda Wong. And she said I’ll take the job if you leave me alone – (laughter) – and I will take the job if you decentralize China from the rest of the U.S. business. So we didn’t do it right away, but we began a process of giving her lots and lots of autonomy, to the point now where it is a completely decentralized business.

But there was a turning point in the entire business, and I owe it to Jack Ma. So I’ve known Jack for 20 years and I know Jack before he was Jack. And he asked me about 10 years ago to come speak at an Alibaba event, and there’s thousands of Chinese at the meeting. It’s just incredible, you know. I’m just – and I’m looking out in the audience, and the people look a little old. You know, this is a tech company. And I’m speaking to them and I get offstage, and I say, Jack, I got to ask you something: Are you hiring seniors? (Laughter.) What’s the deal? And he said, no, no, no, those are the parents of our employees, the parents. I said, what do you – what do you mean, the parents? And he said, we invite the parents to lots of our meetings. Great idea. I’m going to steal that. (Laughter.) So we started having annual meetings of the parents of our employees in China.

Now, I’m in – I’m in Seattle and I’m announcing with great enthusiasm to other people in Seattle, Americans, we’re going to – we’re going to have an annual meeting of parents in China. They thought I was nuts. (Laughter.) They said, if you did that in New York, you know how many parents would come? Five. (Laughter.)

So we had our first meeting, and not unlike the Alibaba meeting parents, aunts and uncles, grandparents, they all started showing up. And these meetings were not to talk about the growth and development of Starbucks or our success. It was to celebrate the family and celebrate their kids. That began a turning point of our business in China.

And then last year Belinda came to us and said: You gave comprehensive health insurance to every person who works for Starbucks in America, but we don’t need that in China. We need something else. We need health care for the parents of our employees. I said, OK, what – how does that work? And she said, we need government approval, we need an insurance partner. I’ve been to the government. I have an insurance partner. I want to do it.

So I went back to China about a year ago and we announced that we were the first company in the country, Chinese or otherwise, to give health insurance to the parents of our employees. Now, this is not in our economic interest in terms of the bottom line, but I promise you that the foundation that I talked about earlier – about the culture and values of the company – this is what our business is about. And innovation in a business more often than not is focused solely on the customer, and I would submit that innovation has to be a two-way street: focus on the customer and innovate around your people. And this has been the success of Starbucks around the world.

MR. IGNATIUS: I think maybe one moral of that story is hire Belinda Wong. But –

MR. SCHULTZ: There you go. (Laughter.)

MR. IGNATIUS: So – (laughs) –

MR. SCHULTZ: Hire her, but difficult to manage. (Laughter.)

MR. IGNATIUS: So you have been hugely successful around the world. China is an example, but there are lots of others. And as you know better than probably almost anybody, cultures around the world are different. There is not a single homogenous culture. And so if you’re running a global business, there’s certain things you have to be attuned to while at the same time holding onto your brand, your Starbucksness. And I’m curious how you do that, where you compromise and where you don’t. How do you get that balance right?

MR. SCHULTZ: What we learned – we’re in 77 countries, and what we learned, basically, most countries do not want a Starbucks that has been designed or reflects a – the local culture so much that it doesn’t look like a Starbucks. So most of the stores are designed in the same image as stores you would see here in D.C. The difference is primarily on the food side.

So most of the food in every country has been designed to be as locally relevant as possible, and in every country there are different preferences. But the stores pretty much look the same and the coffee is 100 percent consistent. There’s no change in terms of the recipe.

So for – in terms of our success around the world, I think it goes back to the concept of the third place and the sense of community and people longing for human connection is as relevant in all the countries that we’ve opened as it is here in the U.S. And I think that has been an anomaly for us because most Western retail companies have had to change pretty much dramatically to succeed, but we have not.

MR. IGNATIUS: So I want to ask a couple more questions from up here onstage, but then I do want to go to the audience for 10 or 15 minutes for your questions. So I’m going to turn to you.

Let me ask you a question that I know has been asked often and there’s a lot of curiosity about. And that is: What’s next for Howard Schultz after Starbucks?

MR. SCHULTZ: Good question. (Laughter.) I’ve obviously been asked that a number of times, but I – my focus really is doing everything I can on Starbucks. The opening of Starbucks Italy to me is, you know, the crowning moment for our company and my personal career. And then I think the role of citizenship is where I will spend a great deal of my time over the next few years, both in terms of doing everything I can leveraging the platform of Starbucks as a citizen, and then the work of the family foundation with my wife, Sheri, and our children. But I think citizenship is going to be my calling and should be the call to action for most of us, given the environment that we are living in.

MR. IGNATIUS: So just to take this one step further, one aspect of citizenship is politics. (Laughter.) And so there’s always been some curiosity about whether you’d ever think about running for political office, one office in particular. But I’ll just ask the general question.

MR. SCHULTZ: I’m going to stay with citizenship. (Laughter.) That’s what I’m committed to and I think that’s where I belong at this time.

MR. IGNATIUS: So let me ask a political question, but not about you. You talked earlier when we were talking about the issue of race, but more generally about where the country is, about just how divided a country we are. And that’s something each of us feel, I think, almost every waking minute sometimes. I want to ask you how you think that’s happened to our country. We used to think of America, you know – that America is the country that was united. We just dreamed how lucky we were to be Americans, this happy country on a hilltop. Sometimes it doesn’t feel that way. And I’m curious why you think that’s happened and how much damage you think has been done to what’s fundamental in our – in our political culture.

MR. SCHULTZ: This is a difficult question and I think it’s a very important one. And probably a few things I’ll say maybe later I will regret, but I’m going to say it anyway.

The American people are much better than our political class. And I know I’m sitting in Washington, D.C. and I’m saying something that – and I’m not criticizing the people, it’s just the political class of both parties – and this has occurred before the current administration – have not walked in the shoes of the American people. And I don’t know when it began to happen at such an acute level where ideology just became the reason for being, but the core purpose and reason for being of the political class has changed dramatically. And I think that began to change the feeling in the country.

I also think that we are sitting today on the precipice of $21 trillion of debt. And we are spending about $400 billion in interest on that debt. And it’s not a subject that is a very sexy subject and it’s not a subject that is in the political narrative, but perhaps the greatest threat to the country – to the domestic viability of the country and our children and their children – is that debt.

So my feeling about the American people and the optimism I have about the American people – the kindness, the goodness, and the things that we see in our stores and every community – is alive and well. But we are being kind of talked to in a way in which we’re not getting as much truth and authenticity in terms of really what’s happening and what’s needed. So we have to deal with some very serious things and we have a lot of work to do. And unfortunately, that work has not been going on for a long time.

And I think at some point the American people have to ask a very important question, and that is: What kind of country do we want to live in? And I think it’s fair to say that most of us – and this is not a political litmus test; it’s an American litmus test – most of us recognize that there’s something not quite right, and it hasn’t been right for a while. And the resiliency of the promise of the country and the American spirit and the foundation of that has got to be rekindled, and we’ve got to hold Washington accountable in ways we haven’t in a long time.

And we have to remember one thing that somehow we have forgotten: It’s a government for the people. We’re the people. And other than what happened in Parkland and those kids showing up in Washington, D.C. and demonstrating such passion and conviction and moral courage, we haven’t seen much of that for quite some time. And that should be a great example and a great lesson to us about the voices that we need to redirect the country so that we are as proud of it today as the Greatest Generation was 75 years ago.

MR. IGNATIUS: I think that’s a perfect moment – (applause) – to turn to the audience and ask you folks for your questions.

Yes, ma’am?

Q: Do I need a mic, or?

MR. IGNATIUS: And you do need a mic. And if you just briefly introduce yourself, keep your questions short so we can get a lot of them in. Thank you.

Q: OK. My name is Lori Watsman (ph). I’m sorry, I just got back from New Orleans and my voice is hoarse.

But all the same, I’ve been a shareholder of Starbucks for a very long time. I love so many things about it. And my question is about I know that you’re expanding the Chinese market – what, 5,000 by the year 2021? – and there’s going to possibly be a larger number. Like, that may – you know, you may get more aggressive with that. And I was just curious if you could speak a little bit more about that.

MR. SCHULTZ: Yeah. I’ve said publicly that I think the growth and the footprint of Starbucks China will probably outpace the footprint of the stores in the U.S. And whenever I’ve said that I’ve been challenged about, well, aren’t you worried about U.S.-China relations and what’s going on? And my answer to that is we’re going to take the long view. There will always be cyclical changes, both in the Chinese economy and some of the political issues that will go on. But our growth in China I think is here to stay, and I think we’ve got a great, great opportunity that will be significant and will reward our shareholders. And I think it’ll be more than 10,000 stores.

Q: (Off mic.)

MR. SCHULTZ: Yeah.

MR. IGNATIUS: This gentleman here in the fourth row. Sir? Yes. There’s a mic coming just behind you.

Q: Alexander Kravitz (ph) from Inside Iraq. Thank you. This has been inspiring, and I mean inspiring.

I’m originally from El Salvador, so I first want to thank you for the work you’re doing with small coffee growers in El Salvador.

MR. SCHULTZ: Thank you.

Q: I have two questions. One is on the Philadelphia issue. I commend you for the actions you have taken. But there was another side to the arrests, and that was a policeman. I mean, to me, it seems unreasonable, you know, how they could be arrested for just being there. And I’m wondering if there is anything that you think should be done on that side, you know, in terms of sensitivity training and other measures to prevent or to change this kind of behavior.

And then the second question for the sake of Fred Kempe, when might you see – when might he get a Starbucks cup with a Baghdad sign – name? (Laughter.) Thank you.

MR. SCHULTZ: Going back to three years ago when we did “race together,” I went around the country and I met with police chiefs of large urban cities to understand from their perspective the challenges that policemen have every single day. And we did meet with the police chief and the district attorney in Philadelphia.

I don’t want to criticize the incident because I – again, we are responsible. But I think six policemen showed up – six. The transcript of the 9-1-1 call from the manager to 9-1-1 did not say these gentlemen were black or African-American. They said – she said there were two people who refused to leave the store. And somehow, between the 9-1-1 call and the police showing up, it escalated. I don’t think the police in this particular case are immune from the situation. But it did happen in a Starbucks store and we were the ones who made the call which should not have been made.

But, again, sensitivity training, I think from what I understand, in almost every major municipality in the country there has been a lot of training around unconscious bias and the racial divide. And I’m hopeful – I’ve also tried to create a situation where we have meetings of police officers in the community, which we call Coffee and Cops, in many stores around the country to try and bring police into our stores in a very nonthreatening way where people in the community can talk to them. But there’s no question that we have significant work to do in this country around the racial divide and racism.

MR. IGNATIUS: And what about Starbucks Baghdad? And what about, I should ask, Starbucks Pyongyang?

MR. SCHULTZ: You know, we’ve got a lot of work to do – (laughter) – we just – and we’ve got a lot of countries. I’m hopeful and optimistic that one day we will be there. They’re certainly great markets, but they’re not markets, unfortunately, that are ready for Starbucks.

MR. IGNATIUS: So, yes, ma’am, sitting directly behind he gentleman who just asked the question.

Q: I’m Faye Walker Droman (ph), Atlantic Council member. I normally come here for JCPOA, so this is such an outstanding discussion to listen to and you are such an inspiring gentleman.

My question to you is, do you have any program at Starbucks to employ children with special needs? I know some of the stuff that they do, it’s very technical and you don’t want them to be around hot coffees, but there are other areas that you can employ them. And I wonder if you have any program at your company for them. Thank you.

MR. SCHULTZ: Thank you for the question. Yes, we do. We have a number of Starbucks partners throughout the country and throughout the world that have special needs, and we have a whole program about that. And after this I can give you someone’s card, depending on the city that you’re talking about, and help you with that. We’ve had great success. And I don’t know if we have time – I probably don’t have the time – but I’ll tell you just a very, very quick story, where I was told one day to go to a store that was not a store I would normally go to. And I said, why? And they said, don’t ask why, just go there. And I went there. And as I’m walking into the store, the customers of the store are having a birthday party for a special needs person who captured the heart of the entire store. And I walked into that. And I’m talking to my daughter, that was Courtney. And it’s wonderful.

MR. IGNATIUS: So the gentleman here with the glasses. Yes, you, sir. And then over here.

Q: Gusev Tyler (ph) from the Heimlich Bell (ph) Foundation.

I have two questions. They are related. The first one would be, you were say that coffee is a catalyst for community. Do you think that a chairman to average Starbucks worker pay ratio of about 250 is a catalyst for community? And second question is, is paying taxes part of your corporate responsibility?

MR. SCHULTZ: I think I know where this question is going. So there’s no question that the responsibility of every company is pay their fair share of taxes. If you’re speaking specifically of the U.K. – is that what you’re speaking about? We – for those of you who are – don’t know the situation, there was quite a lot of negative press about Starbucks not paying its fair share of taxes in the U.K. And the reason for that is we were not profitable in the U.K. And as a result of that, there was a great debate about whether or not that was true or not. So that’s that story.

On the issue of pay, this is how we’ve looked at pay. We look at total compensation. First off, we pay above minimum wage in every market that we’re in in the entire world. But we also look at it in terms of total compensation. So equity in the form of stock options, comprehensive health insurance, and then this year is the third year which we’re giving free college tuition paid – a four-year degree paid for every person who works in Starbucks in the U.S. And we’re going to bring that program to markets across the world. So, you know, these are sensitive issues which I understand very well.

But, you know, we’re employing 350,000 people. And we have the lowest attrition rate to any retailer in our sector. And the reason for that is I think the currency of trust that exists between us and our people. We’re not perfect. We try our best to make everybody happy, and we certainly are being truthful in the issues that are important to us and multiple constituencies. Thank you.

MR. IGNATIUS: The gentleman here, please, and then we’ll come to the woman in the second row. And then you, sir.

Q: Hi. Bill Clifford with the World Affairs Councils, and a former reporter.

Since our discussions in Tokyo many, many years ago, one of the things I’d like to commend you on is the consistency word that you used in your comments, and how your values, your social impact, and, of course, your business and success – growth and success. You’ve been consistent, I can vouch. Disruptions, talk about the disruptions of technology to your two empty chairs of customer and worker. The disruptions on the working side, the future of work, and how technology also affects community. Thank you.

MR. SCHULTZ: Thank you for that. I think the issue is, for all of us, to ensure the fact that we are establishing the dignity of work. And the dignity of word, what does it mean? Less than a year ago, we were presented with an opportunity to basically bring in things that are robotic. Sheri and I went and visited Carnegie Mellon. We saw things there we just could not believe in terms of what’s coming very soon. There’s no doubt that we could have machines running Starbucks in ways that would reduce labor. But it also would dilute the experience for our customers. And it would not be who we are as a company. We’re a people-based company, based on humanity. So we don’t want to yield to the pressure of doing things that would be economically beneficial, but would take away and strip away from the value of the experience, the visual essence of what we do.

Now, in terms of disruption, I think that’s a different question, because every single industry in the world – newspapers included, we’ve seen it – is facing a(n) incredible threat. And the threat is that the status quo of our collective and individual business is going to be under incredible threat. So any company or any business or product that’s going to embrace the status quo is on a death march, which means that you have to disrupt the marketplace in ways that will hold true to what it is you do.

And a good example for us with that is what we’ve done around recognizing that people are coming into our stores with a mobile device, and that we had an opportunity to create something quite unique, which was a mobile payment system and a loyalty program and integrated with content. And now almost 50 percent of the people who are in our stores are paying with their phone and pre-loading their phone with a digital currency, which is money. And if we didn’t have that, the level of convenience would not be as true as it is today. But the challenge is we don’t want that to become what we stand for. So I think the question is trying to balance being disruptive with maintaining your core purpose and reason for being.

And we can say the same thing about the country. The American system in many ways needs to be disrupted so that the millions of people who are being left behind or the 40 percent of American households that don’t have $400, that needs to be disrupted. And having a corporate tax cut of a rate to 21 percent was not disruptive in terms of the tax reform on a comprehensive basis that the country needed in order to create more value for people who are being left behind. I would have done it differently.

MR. IGNATIUS: The woman here in the second row, please. And then we’ll go next to this gentleman.

Q: Thank you, David. Mr. Schultz, a real pleasure to have you here. I am part of the Atlantic Council team. And I’m representative in Turkey. And I’m from Turkey myself.

You know, before my very quick question I have an incident, because I have a history with your company. I haven’t been that lucky. When you were a young person and when you have been inspired in Italy from the coffee bar that you ended up with this dream. And when I was a young college graduate many years ago, I actually wrote to Starbucks because I wanted to bring Starbucks to Turkey. And because when I first entered a Starbucks store in the U.S. after, you know, I finished college, I was so impressed. And I said, you know, this is the best thing I have ever seen in my life. You know, we need to have it in Turkey. And I wrote. And at that time, you were not giving any franchise. And so I was turned down. And –

MR. SCHULTZ: Sorry.

Q: You’re OK. That’s OK. (Laughter.) I’m afraid you don’t know that story. And I never shared it with you. But anyway, the bottom line is that the way – the reason that I was inspired then and still is the culture is that you are building, it is not a store – only a coffee store. You are embracing your customers. You’re – you know, just – and also employees that I heard today, and I’m impressed even more. So it’s a great story. So, anyway, I just wanted to share this, you know, with you, since I found the opportunity.

But my question is that, you know, about your business strategy in Italy, because that’s how the idea came up. So did you – did you come up with a new strategy when you opened the Italian stores? Because it is a country with a lot of coffee bars. So I’d like to hear on that. And also, the second thing is that Starbucks stores are really, you know, unique, you know, just given the culture or the customers as well. You know, just do you think you can also play a role, you know, to embed more democratic values in some of the countries that haven’t been that lucky in, you know, some parts of the world, you know, using your stores as a channel is my second question. Thank you very much.

MR. SCHULTZ: Well, first off, as you know, we are in Turkey and we’ve done very well. But I’m sorry that we didn’t come together. (Laughter.)

Q: (Off mic.)

MR. SCHULTZ: Yeah. In terms of Italy, I’ll just be very quick. We waited a long time to go back to Italy. And I just – I’ve – I knew we were going to go at some point, but I didn’t think we were ready. And so this has been a personal project of mine for the last, like, six years.

And we have a new format called the Roastery. So a Starbucks store is about 150 square meters, 1,500 square feet. The Roasteries are 4,000 square meters, 40,000 feet. They’re giant, and it’s like the Willy Wonka of coffee. And we’re opening that up at the most extraordinary location in Milan on September 7th. So you’re more than welcome to come. (Laughter.) I will personally buy you a cup of coffee. (Laughter.) And we’re coming to Italy not to teach the Italians how to make coffee. We’re coming with humility and respect, and we’ll see what happens. But I’m excited by it.

MR. IGNATIUS: I think it’s very brave to sell espresso in – (laughter).

Last question, you, sir.

Q: Last but not least, hopefully.

Mr. Schultz, thank you for taking the time to come and sit down with us today. My name’s Justin Brown. I’m the founder of a nonprofit called the HillVets Foundation, and we have something in common in that we both believe in the value in the leadership of our nation’s veterans, and frankly some of the veterans of the entire globe, those coalition partners of ours.

As you may know, the Atlantic Council was actually founded by a group of World War II veterans. Many of them may have served with your father. And they actually made the investment in our organization through the Take Point Initiative to help us bring veterans to our nation’s capital, place them on Capitol Hill and try to put them in stronger positions to be the future leaders of our nation. Through that, we’ve brought about 35 veterans here to D.C., and our next step is we’re actually trying to build that third home for our veterans here in our nation’s capital.

So my question to you is, is with 2 percent of staff on Capitol Hill being veterans, you know, other than if you were speaker of the House tomorrow, other than hiring a lot more veterans, what other changes would you make as you look at Congress as an institution and some of the challenges and leadership issues that we’re seeing today in our nation?

MR. SCHULTZ: With regard to veterans.

Q: No, I think in general. Tough question. I mean, I know you’d add some more veterans. But, you know, if you want to expand upon, you know, what led you to that –

MR. SCHULTZ: This is the extra credit problem.

Q: It is an extra credit problem.

MR. SCHULTZ: Well, since you started with veterans, let me just speak to that.

Q: Sure.

MR. SCHULTZ: I mean – and I think it is a leadership issue. It’s tragic in so many ways that we’re living in a country where the most trusted institution in America, which has been for years, is the United States military – it’s also the most trusted institution at a time in America where most institutions, including Congress and others are not trusted. And the tragedy is that the most trusted institution in America – the U.S. military – is also the VA – with approximately a $200 billion budget – is probably an organization that is under tremendous pressure in terms of its ability to meet the needs of veterans across the country. You know, I think if we could just isolate those two issues – the most trusted institution in the country and the VA – and ask ourselves isn’t there something wrong here – and there’s extraordinary people who every day are doing great work at the VA, and there are certainly people who are committed every day to exceed the expectations of the veteran. But the truth of the matter is, that agency for a long, long period of time, under multiple administrations, in which both parties in both political – both parties are complicit, have not met the litmus test. And I think that’s an unfortunately tragic example of the need for the kind of leadership that would make the country proud and certainly do what’s right.

And I would just close by saying it’s not enough for the American people to pay so much respect – as we should – for the U.S. military when they’re wearing the cloth of the nation. I can make the case that we have to do at least that much when they take that uniform off. (Applause.)

MR. IGNATIUS: So this has really been a treat. We need you to come back to Washington more often. I’m just going to leave that hanging – (laughter) – as a suggestion. But we’re really grateful to you for answering so many questions. And really, it was a very, very interesting hour and a half. Thank you so much.

MR. SCHULTZ: You made it easy for me. Thank you. (Applause.)

(END)

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