Ethics and Compliance Paper
FIN/370
July 14, 2011

Ethics and Compliance Paper
Introduction
Starbucks boasts that they serve the best coffee possible to meet their mission to inspire and nurture the human spirit, one person, one cup, and one neighborhood at a time. Starbucks has grown from one store in Seattle founded by two teachers and a writer in 1971 to more than 17,000 stores throughout the United States and overseas companies. Of these, 53% are directly owned by Starbucks and the rest in franchised contractor leases. This amazing feat brought three people together, each using $1,350, and borrowing $5,000 to make over a billion dollar per year successful business 40 years later. The name Starbucks was their original name in reference to the coffee-loving first mate in Moby Dick, and the design was from the two-tailed siren mermaid. Most recognize the Starbucks brand as a house-hold name and should also know that they are proud and committed to their coffee knowledge, customer service, and product expertise. They call their employees partners and offer Starbucks internal programs such as comprehensive health coverage and equity in the company. Every Starbuck’s employee knows he or she is a visual symbol of the company and needs to work as if each store was hid or her own. Starbucks also adheres to the requirements of the Security Exchange Commission (SEC), which is a publicly traded company known as SBUX. The aim of this paper is to discuss the roles of ethics and compliance of Starbucks, the procedures put in place to ensure ethical behavior, and identify the processes that Starbucks use to comply with SEC regulations. Additionally, this paper will include the evaluation of Starbucks’ financial performance over the past two years using financial ratios on the data analyzed in the last two annual reports and SEC filings to conclude its organization’s financial health.
The Role of Ethics and Compliance in Starbucks Starbucks continues to project a strong opinion that managing a company ethically and morally correct is vital to the success of that business. Starbucks continually promotes an internal culture that inspires and treats each employee as a partner. The Starbuck’s mission also projects pride, morality, and is simply to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time (Starbucks, 2011). Starbucks’ business ethic and compliance is more than just a program to show the public it helps protect the health, culture, and reputation of its company. The ethics program called the Standards of Business Conduct, is in the employee handbook, and designed to support the Global Business Ethics Policy (Starbucks, 2011).
Starbucks Procedures to ensure Ethical Behavior Starbucks has several programs, customer service, and required educational training to ensure ethical behavior is taken seriously. The Starbucks employee handbook clearly spells out the expected partners’ ethical and moral behavior. Starbuck is also committed to protecting those who report unethical acts against retaliation from the workplace and any other individual. The chairperson and Chief Executive Officer (CEO) Howard Schultz stated that each partner is personally responsible for supporting the core values of Starbucks, which include ethical, moral, and legal conduct. Starbuck’s code of conduct also supports the business ethics and compliance by ensuring periodically training is given in these sensitive areas. This provides another communication channel for partners to voice their concerns and helps keep the open door policy open. This also assists Starbucks in maintaining a high standard of employees, customer service, and a large profitability to report to the company stakeholders. Starbucks also believes their Global Responsibility strategy and commitments are embedded in the company’s business strategy, which also benefits the customers, suppliers, partners, and community members. This also can be seen in the attached financial reports and following analysis.
Organization Processes Used to Comply with SEC Regulations The SEC protects investors, maintains orderly, fair, and efficient markets as well as facilitates capital formation. Starbucks has policies in place to assist the SEC auditors with their auditing. Starbucks is audited on their bookkeeping and all other records relating to their financial information. Starbucks is also audited on management functions, human resources, legal services, broker-dealer investment advisor and banking services as well as other services not related to the audit. These are some of the pre-approval audit categories the SEC checks into. Starbucks is also on a routine audit by various state taxing jurisdictions during the fiscal year. Starbucks always conducts audits in accordance with the standards given by the auditing company. Deloitte and Touche is an outside company that does auditing for companies including Starbucks (N.A.).
Financial Performance Using Financial Ratios According to the ratio charts developed it shows that from 2008 and 2009 the current liabilities and assets have increased substantially from 1.78 to 6.94. The total difference is 5.16, which increased from 2008. The current liabilities and assets is the largest increase in ratio compared to debt and return on equity. Return on equity has slighting decreased from 2008 to 2009 and debt has decreased since 2008 to 2009. The following ratios were calculated using the attached 2008 and 2009 financial and SEC filing reports:
2008:
Current ratio=current assets/current liabilities=5,672.6/3181.7=1.78
Debt ratio=total debt/total assets= 7456.6/5672.6=1.31
Return on equity=net income/common equity=315.5/2490.9=0.17
2009:
Current ratio=current assets/current liabilities=5576.8/2531.1=6.94
Debt ratio=total debt/total assets= 5632.6/5576.8=1.01
Return on equity=net income/common equity=390.8/3045.7=0.13
The ratio chart developed shows the minimal points of change in Starbucks with millions of dollars in the company. Starbucks has assets in stock and real estate; however, they do violate principle three of cash, not profit is king (Keown, 2005).
Organizational Financial Health Trends Between 2003 and 2008, Starbucks revenue rose steadily as did their opening of new stores. However, in 2009 those numbers dropped slightly because and more Starbucks stores are opening and there have been instances in which a new store front will open within a block of an already existing store front. The purpose of this was to saturate the market but in turn it could be smothering it instead. Smaller coffee chains are beginning to grow, not quite as big as Starbucks yet, and theses smaller chains have store fronts popping up in more places. It’s A Grind and Pete’s Coffee are two coffee companies that have decided to take on the conglomerate world of coffee, becoming more popular in the last several years and swaying people to change their preference of coffee chain. The economy its self was in the middle of a depression fall. People were struggling for money and had to drop their coffee habits. Recently the prices of coffee went up at Starbucks, meaning there was an increase in need for coffee, cups, etc, and for a new financial plan to earn money for the company. Starbucks has also implemented free WiFi for their customers in hopes it will bring in more business from the corporate world and local educational facilities.
Conclusion
Starbucks is an excellent company to work for because of its ethical and moral values. In fact Starbucks has been voted and won many awards in this area to include the following: • One of the World’s Most Ethical Companies, Ethisphere – 2007‐2010 • Most Ethical Company, European Coffee Industry, Allegra Strategies – 2009‐2010 • One of the 100 Best Corporate Citizens, Corporate Responsibility Officer/Business Ethics – 2000‐2010 • One of the Global 100 Most Sustainable Corporations in the World, Corporate Knights – 2010 • One of The 100 Best Companies to Work For, FORTUNE – 1998–2000, 2002–2010 • One of the Most Admired Companies in America, FORTUNE – 2003–2010 • One of the Best Places to Work for LGBT Equality, The Human Rights Campaign – 2009‐2010 (Starbucks, 2011)
As evidenced in the attached financial statement and SEC filing extracts, Starbucks could continue making a profit, adding stores to both their own market as well as their franchised contractors around the world (Attachment A). The Company maintains disclosure controls and procedures designed to ensure that material information required to be disclosed in the Company’s periodic reports is filed or submitted as required under the Securities Exchange Act of 1934. The present financial posture of Starbucks is strong with approximately 20% annual profit gains, although the company has had some decline growth and revenues (AP, 2011). The company has intentions to close several stores because of the current economy and has tried to reduce cost to keep competitive (Starbucks, 2011). Starbucks continues to excel in customer service areas to include ethics and compliance making it strong competitive company.
References
AP (Associated Press), (2011). Starbucks’s Profit Gains 20% By THE ASSOCIATED PRESS Published: April 27, 2011. Retrieved from http://topics.nytimes.com/top/news/ business/companies/starbucks_corporation/index.html
Attachment A, (2011). Starbucks 2008 and 2009 Financial Report and SEC filing extract. Retrieved from http://www.starbucks.com (p. 20-21).
Keown, A. J., Martin, J. D., Petty, J. W., & Scott, D. F. (2005). Financial management: Principles and applications (10th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.
N.A. (n.d.). About Deloitte. Retrieved 07 13, 2011, from Deloittle: https://www.deloitte.com/ view/en_GX/global/about/index.htm
Starbucks.com, (2011). Retrieved from http://www.starbucks.com/about-us/company- information

Attachment A

STARBUCKS
CORPORATION
(In Millions, except earnings per share)
|Item 6. |Selected Financial Data |

In millions, except earnings per share and store information
The following selected financial data are derived from the consolidated financial statements. The data below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Risk Factors," and the consolidated financial statements and notes. | | |

|(2) |Fiscal 2010, 2009, and 2008 results include pretax restructuring charges of $53.0 million, $332.4 million, and $266.9 million, respectively. |

|(3) |Includes only Starbucks company-operated retail stores open 13 months or longer. For fiscal year 2010, comparable store sales percentages were |
| |calculated excluding the 53rd week. |

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