Our Letter to Starbucks

November 15, 2023

Laxman Narasimhan, Chief Executive Officer
Mellody Hobson, Chairman of the Board

Starbucks Corporation
2401 Utah Ave. S, Suite 800
Seattle, Washington 98134

Via email, FedEx, and Strive.com

RE: Strive Asset Management Engagement with Starbucks

Dear Mr. Narasimhan and Ms. Hobson,

We write on behalf of Strive Asset Management’s clients who are Starbucks shareholders.
For more than fifty years, Starbucks has won over coffee lovers in America and around the globe with its handcrafted beverages, warm service, and welcoming atmosphere. As investors, however, we are concerned that Starbucks has overexposed itself to the risks of doing business in China, without adequately considering those risks or disclosing them to shareholders. We therefore write to ask that Starbucks reevaluate its position with an objective eye on risk exposure and mitigation strategy and disclose its assessment with Starbucks shareholders.

Starbucks Has Significant Exposure To China Risk

As you know, Starbucks has been a participant in the Chinese market for decades. In 2022, however, Starbucks unveiled a strategy to “accelerate[] growth” in China, already its second largest market outside the United States, by “opening one new store nearly every nine hours in China for the next three years.”¹ This unprecedented growth strategy would increase Starbucks’s China-based stores by 50 percent, from 6,000 to 9,000 locations.²

Even at the time, market watchers had concerns, citing huge sales declines during the COVID-19 lockdowns, flagging consumer spending, and increased competition from local coffee brands.³ In the past year, however, Starbucks’s all-in-on-China strategy appears riskier than ever.

Just a handful of these risks are outlined below:

Geopolitical risk. First and foremost, Strive is concerned that Starbucks has not sufficiently considered the financial risk of basing its growth strategy on a country with significant and rising geopolitical tensions with the United States.

After Russia invaded Ukraine, Starbucks (like many other American businesses) responded by closing all its Russian locations. For Starbucks, that amounted to 130 stores.4 What if in 2025, the day after Starbucks opens its 9,000th location in China, the CCP decides to invade Taiwan—a possibility that grows stronger with each passing day? Will Starbucks shutter all 9,000 shops? The answer to that question is material from an investment standpoint.

Further, recent developments reveal that Starbucks may not have a choice. A review of Chineselanguage research papers by Reuters recently showed that the CCP has been busy preparing for how to treat U.S. companies in the event it decides to invade Taiwan. And the recommendations are bleak: “If the U.S. implemented Russia-style sanctions on China, Beijing should freeze U.S. investment and pension funds and seize the assets of U.S. companies,” Reuters described one such article.5 When potential seizure of assets is on the table, temporary store closures seem mild. Yet it is not clear that Starbucks has adequately considered this risk as it continues to pour investments into China.

Political interference by the CCP. Starbucks is also vulnerable to political interference by the Chinese Communist Party (CCP) more broadly, including punitive, anti-American action by the Chinese government. The CCP sees all private businesses as an arm of the Communist Party, meaning no private business is truly private. Rather, all companies—and particularly U.S. companies—are forced to either promote the political goals of the CCP or face dire repercussions.

Starbucks has been no exception. To the contrary, Starbucks’s “support for Chinese initiatives goes well above the norm.”⁶ Since gaining entry into the market, Starbucks has directly built rural infrastructure and poured millions into its own foundation in the country dedicated to “party building” and supporting the CCP’s social priorities. ⁷ Starbucks has also donated to Chinese organizations committed to advancing “reunification of the motherland,” a euphemism for ending Taiwan’s independence from China.

Its ties to the CCP run deep: Starbucks hosted a gala dinner honoring Xi Jianping in Seattle in 2015, after which Starbucks founder and longtime CEO Howard Schultz lauded President Xi’s speech, praising “the uplifting words you shared that day” about the “Chinese dream.”8 President Xi returned the favor, as the CCP named the Starbucks CEO one of the 100 foreign figures who “helped the world better understand the CCP.” 9 And when Beijing sought help to fight the Trump Administration’s decision to raise Chinese tariffs, President Xi wrote to Starbucks’s CEO directly to ask him to lobby the administration to reconsider, an unprecedented move demonstrating the CCP’s hold on American businesses.¹⁰

But the CCP’s friendship is a fickle one, as the CCP is not afraid to turn on companies it views as a threat to the regime or its political priorities. The penalties can be as swift as they are severe. When H&M challenged China’s use of forced labor in Xiangjiang, the CCP erased the company from China’s internet, leading to a 40 percent drop in share price. ¹¹ When an NBA general manager tweeted support for Hong Kong, the CCP retaliated by halting game broadcasts. ¹² Sometimes, the CCP retaliates not based on anything the company did, but something its home country did. After South Korea proposed the installation of a missile defense system to counter threats from North Korea, for example, China forced Korean-owned Lotte Marts to close 75 of 99 of its China-based stores, citing violations of “fire safety regulations.”¹³ After Lithuania allowed Taiwan to open an embassy, China suspended imports of Lithuanian beef, dairy products, alcohol, and wood over an alleged “lack of documentation.”¹⁴

In recent months, concerns have escalated. The CCP has raided the Chinese offices of a U.S. consulting firm, detained Beijing staff at a New York-based due diligence firm, and arrested a Japanese pharmaceutical worker accused of spying.¹⁵ U.S. Secretary of Commerce Gina Raimondo cited these raids in her trip to Beijing in September, explaining they were of “great concern” and explained that American businesses need “predictability, due process and a level playing field” from China. But diplomatic pressure from the U.S. is unlikely to suffice. The problem has gotten so severe that many underwriters have stopped issuing new insurance policies against the political risks of doing business in China, much as they stopped insuring Russia-based political risk for businesses following the country’s invasion of Ukraine.¹⁶ The Wall Street Journal recently reported, “Underwriters’ exposure in China, and the wide range of political risks that could materialize there, add to their nervousness. Of the 60 or so insurers that offer political-risk insurance, only four or five are still offering it for China,” and that the few still offering coverage have slashed coverage levels. ¹⁷ As geopolitical tensions continue to rise, and the Biden Administration continues to restrict American investments in China, corporate executives and market watchers anxiously await Beijing’s next move.

Starbucks itself has begun to feel the pressure. Over the past two years, Starbucks has found itself subject to multiple high-profile controversies. It has been criticized in state-sponsored television for charging more for coffee in China than in the U.S., leading to “excessive profits.”¹⁸ It has also been subjected to several investigations over food and safety issues, including the alleged sale of expired foods.¹⁹ These investigations have resulted in significant fines and negative press in the CCP-run media. As one piece ominously warned, “The higher you stand, the harder you fall.”²⁰ Given Starbucks’s breakneck pace of store openings in China, Starbucks does not appear to be heeding this advice.

Flagging consumer confidence and spending amid the Chinese economic downturn. As the Chinese economy struggles to regain its footing after the COVID-19 reopening, consumer spending has plummeted.

Many of Starbucks’s prospective customers simply do not have the extra cash to spend. Youth joblessness is at an all-time high—so high, in fact, that Beijing authorities have decided to stop publishing the numbers.²¹ Even more are underemployed, with Beijing advising recent college grads to “eat bitterness” (i.e., expect to endure hardship) by moving to the countryside to take agricultural jobs rather than seek coveted, high-income jobs in the city.²² Local governments have also cut benefits to retirees, leading to rare protests earlier this year.²³

Other customers are cutting back given fears of an economic recession. “A growing lack of faith in the future of the Chinese economy is verging on despair. Consumers are holding back on spending,” the New York Times reported in August.²⁴ “Households have suffered an enormous, and possibly permanent, loss of confidence in both their future income prospects and the safety and value of their main financial asset, housing,” the Wall Street Journal echoed.²⁵ And neither Chinese citizens nor experts seem confident that the Chinese economy will rebound anytime soon.²⁶ When consumers are not confident in the economy, they tend to save rather than spend;²⁷ and almost always, the spending they cut first is discretionary spending—that is, their morning lattes.

These factors are likely to impact Starbucks. As Morgan Stanley explained in May, China’s lackluster consumer spending spells trouble for Starbucks.²⁸ CNN analysts have also identified Starbucks as one company “in the firing line if China’s economy stalls further.”²⁹ Accordingly, Starbucks’s increasing reliance on the Chinese market for its growth strategy may provide some short-term gains, but it comes with significant risk that Starbucks’s China sales will suffer if consumer confidence does not recover.

Competition from local brands. Starbucks also faces increasing pressure from local brands that benefit from anti-American sentiment among Chinese consumers as well as CCP efforts to boost homegrown companies.

Consumer preferences are rapidly shifting. In the past, Chinese consumers were willing to pay a premium for foreign brands, considering them of higher quality and prestige.³⁰ That is no longer true. According to a 2020 survey, 85 percent of respondents said they preferred local brands to foreign brands, up from 60 percent in 2016 and just 15 percent in 2011. ³¹ And the number one reason Chinese consumers choose local brands was “patriotism,” which shows how public preferences and the CCP’s influence are often intertwined.³²

The CCP also uses a heavy hand to favor domestic over foreign companies, including by raising tariffs on imported goods like Starbucks’s U.S.-roasted coffee beans while granting massive support—financially, regulatorily, and otherwise—to local competitors.³³ As the U.S. Secretary of Commerce has warned, these strategies “result in an uneven playing field,” harming U.S. companies trying to compete in China. ³⁴

For Starbucks, local competition is an urgent concern. In May, China-based Luckin Coffee overtook Starbucks as China’s largest coffee chain with over 6,500 stores.³⁵ Its growth is fueled by its popularity: In 2022, Luckin Coffee was ranked the most popular coffee chain in China, while Starbucks ranked third.³⁶ Starbucks also faces fierce competition from Cotti Coffee, a company that has taken China by storm, now operating over 5,000 locations following its launch in October of last year.³⁷ And several new market entrants are trying to follow suit.³⁸ Even more troubling is that these local competitors have swallowed up market share by undercutting each other on prices, catering to Chinese consumers with financial anxiety.³⁹ Coupled with anti-American consumer sentiment—sometimes directed at Starbucks itself⁴⁰ —Starbucks’s loss of dominance in China is cause for significant investor concern.

While Strive would be concerned about a sudden loss of market share anywhere in the world, such concerns take on increased significance in China, given that there is no such thing as free market competition in the communist nation. To the contrary, the CCP has aggressively pursued a “made in China 2025” program that leverages subsidies, tariffs, PR campaigns on state-owned media, export controls, and other tools to favor local businesses and drive out foreign competition.⁴¹ While that specific campaign is ostensibly only focused on certain technology and national security-related sectors (which would not normally include consumer goods and specialties like coffee), it demonstrates that there is no such thing as free-market capitalism in communist China.

Strive is far from alone in its concern over growing Chinese interference favoring local brands. The European Union, for example, recently launched an investigation into Beijing’s subsidies for local electric vehicle makers, which has allowed them to sell below cost and increase market share at the expense of Western competitors.⁴² China also heavily subsidized solar panel and wind turbine production, to the point that once-dominant foreign firms saw their market share shrivel.⁴³ All told, the Chinese government directs hundreds of billions of dollars annually to favored domestic companies—through below-market land sales, tax breaks, subsidies, below-market loans, and other vehicles—and does so at a far greater rate, relative to its GDP, than other countries.⁴⁴ In China, Starbucks cannot simply outcompete the competition.

These Risks Are Largely Undisclosed To Shareholders, Which Itself Presents A Material Risk

Despite the gravity of these risks, Starbucks has doubled down on its commitment to China in recent weeks. As reported by Yahoo Finance, former Alibaba executive Wei Zhang recently replaced CEO Howard Schultz on Starbucks’s board, “an appointment seen as reemphasizing the company’s commitment to China.”⁴⁵ And just last month, Starbucks announced its intention to “continue to deepen our investment and reinforce our unwavering long-term commitment to the China market.”⁴⁶

Yet Starbucks has shied away from disclosing China-related risks to investors in any meaningful way. Instead, Starbucks includes less than a page describing China risk in its 144-page annual report, using broad, one-line risk disclaimers like “escalating U.S.-China tension and increasing political sensitivities in China” and “changes in economic conditions in China and potential negative effects to the growth of its middle class, wages, labor, inflation, discretionary spending and real estate and supply chain costs.”⁴⁷ Such cursory descriptions are deficient, as they leave shareholders with little to no ability to evaluate Starbucks’s exposure to China risk.

These deficiencies become particularly apparent when Starbucks’s minimal China disclosures are compared to its robust disclosures on ESG issues. In April, Starbucks published an 82-page “Environmental and Social Impact Report” detailing its “investments in Environmental, Social and Corporate Governance (ESG) strategies,” including “extensive data on our progress” and dozens of tables with year-over-year metrics on various, specific ESG measures.⁴⁸ It talks in detail about “climate risks facing the coffee industry,” “the risks of child labor and cocoa-driven deforestation,” and “social risks within the supply chain, including animal welfare,”⁴⁹ but includes not a word about the risks of operating in a country that engages in forced labor by ethnic minorities or about the risks of operating in China more generally. Starbucks’s issuance of its ESG report demonstrates that its corporate focus is on stakeholders rather than shareholders. This focus is misplaced.

It also introduces legal risk. Critically, the Securities and Exchange Commission already requires publicly-traded companies like Starbucks to provide this information to shareholders. Publiclytraded companies are required to file annual reports, which must include “under the caption ‘Risk Factors’ a discussion of the material factors that make an investment in the [company] speculative or risky.”⁵⁰ The company must further “explain how each risk factor affects the [company] or the securities being offered.”⁵¹ And it must do so in plain English, so that a reasonable investor would be able to assess the risk.⁵² These risk factors must be updated quarterly. And once disclosed, companies must continually “capture[] and assess[]—from a disclosure perspective—certain information related to these risk factors” to ensure “the disclosures it ma[kes] to investors in connection with these risks [are] fulsome and accurate.”⁵³ Making generalized, blanket disclosures does not suffice.

Further, failure to comply with the law can result in SEC investigations, fines, and civil lawsuits, sometimes costing companies tens of millions of dollars or more. Starbucks’s failure to provide meaningful disclosures on China risk is therefore troubling not only as a practical matter, but a legal one.

Starbucks Owes Its Fiduciary Duties To Its Shareholders, Not The CCP, And Not Conflict-Ridden Money Managers

We understand you may feel justified in withholding assessments of China-related risks given that your largest shareholders have not been demanding it. The three largest asset management firms in the world—BlackRock, Vanguard, and State Street—constitute Starbucks’s three largest shareholders. ⁵⁴ And each of them voted against asking Starbucks to produce a China risk report at the company’s most recent annual meeting.⁵⁵

But these asset managers, “the Big Three” are not the actual owners of Starbucks, their clients are: the capital owners who invest in BlackRock, State Street, and Vanguard funds. These investors depend on Starbucks to fulfill their fiduciary duties to maximize the company’s longterm value to fund their retirements, purchase homes, and pay for their children’s education. Starbucks’s refusal to disclose China risk cannot be reconciled with the fiduciary duties it owes to its shareholders. Starbucks’s shareholders have a right to understand their exposure to these financially material risks, as well as how Starbucks intends to mitigate them.

Such a claim may at first seem counterintuitive. The Big Three certainly hold themselves out as Starbucks’s shareholders; at a minimum, they claim the authority to act as agents speaking on behalf of the clients they represent. But this legal fiction does not (or at least can no longer) withstand scrutiny.

Under Delaware law, a corporation’s directors and officers owe their fiduciary duties to one constituent alone: its shareholders.⁵⁶ The reason for this is clear: Shareholders are the owners of the company, who have risked their own capital in the enterprise and have a vested interest in seeing that investment grow⁵⁷ But asset managers are not the owners of the capital they manage; nor are they merely agents for the owners whose money they manage. Rather, they themselves are fiduciaries, required to act in the interest of their clients to maximize their returns. BlackRock, for example, offers its popular iShares ETFs through the iShares Trust, a trust formed under Delaware law.⁵⁸ The trust has its own board of trustees, who are obligated to act on behalf of the trustees’ beneficiaries, who are the investors in BlackRock funds.⁵⁹

From this premise, there are several legal theories that demonstrate that Starbucks has a legal obligation to act to maximize value for the end owners of its stock, not the asset managers who purport to represent them. Many jurisdictions, for example, recognize that the beneficiary of a trust has standing to enforce obligations owed by third parties, even if the trustee declines to sue. ⁶⁰ In addition, Delaware recognizes a cause of action for aiding and abetting a fiduciary duty violation, ⁶¹ meaning that companies that follow the directives of fiduciary-breaching asset managers⁶² may find themselves liable for furthering the breach. In addition, regardless of what any shareholder desires—majority or minority, via an asset manager or otherwise—Delaware companies like Starbucks that are incorporated as for-profit corporations have a legal duty to maximize long-term financial value alone.⁶³

Here, there is strong reason to doubt that these large asset managers are acting with their clients’ best financial interests at heart. The Big Three will not ask American companies to issue China risk reports because they too are beholden to China.⁶⁴ BlackRock made headlines for lobbying Washington D.C. on the CCP’s behalf while seeking CCP approval to launch mutual funds in China.⁶⁵ Last year, State Street attempted to placate the CCP by excluding American investors from a Hong Kong listed fund that included Chinese companies.⁶⁶ When the House Financial Services Committee held a hearing on the risk China poses to U.S. investors, no one from Wall Street was even willing to testify. ⁶⁷ When the House Select Committee on the Chinese Communist Party sought testimony, many financial firms demanded anonymity first. Encouraging American portfolio companies to take a closer look at China risk is not a risk many asset managers are willing to take. But Starbucks should not mistake these firms’ self-interested approach to mitigating China risk with that of Starbucks’s actual shareholders.

While other asset managers are conflicted when it comes to China and the CCP, Strive has no such tension. From day one Strive has been clear that we will never do business in mainland China. We know that China risk is investment risk. As such, Strive voted in favor of the shareholder proposal seeking an annual report on the company’s operations in China that the Big Three opposed. If the company’s management were to follow through on the proposal’s main asks, shareholders would have a much greater understanding of the company’s handling of material geopolitical risks. This transparency is vital to inform investment decisions and allocations. The board’s recommendation that shareholders vote against the proposal was devoid of a serious analysis of the material issues at hand.

Speaking on behalf of the many actual owners of Starbucks represented by the signatory of this letter, we respectfully urge the company to:

• Undertake a full and clear-eyed assessment of its exposure to China-related risk,
• Develop a comprehensive strategy to mitigate any identified, financially-material risks associated with the company’s operations in or with China,
• Disclose this assessment to Starbucks’s shareholders, including sufficient detail for them to be able to meaningfully assess Starbucks’s China strategy, and
• Commit to disclosing any and all China-related material risks and mitigation strategies to Starbucks’s shareholder on an ongoing basis, updated no less than quarterly, until such time as Starbucks’s Board determines that the company’s operations in China no longer present any financially-material risks to shareholders.

¹ “Starbucks Opens its 6,000th Store in China,” Starbucks Stories, September 26, 2022, https://stories.starbucks.com/press/2022/starbucks-opens-its-6000th-store-in-china/.

² “Starbucks Enters New Era of Growth Driven by an Unparalleled Reinvention Plan,” Starbucks Stories, September 13, 2022, https://stories.starbucks.com/press/2022/starbucks-enters-new-era-of-growthdriven-by-an-unparalleled-reinvention-plan/.

³ Dan Strumpf, “Starbucks Plans 3,000 New China Stores despite Sinking Sales from Covid Policies,” Wall Street Journal, September 14, 2022, https://www.wsj.com/articles/starbucks-plans-3-000-new-chinastores-despite-sinking-sales-from-covid-policies-11663148638.

⁴ Derek Saul, “Starbucks Will Exit Russia, Close 130 Cafes,” Forbes, May 23, 2022, https://www.forbes.com/sites/dereksaul/2022/05/23/starbucks-will-exit-russia-close-130- cafes/?sh=50caf87295be.

⁵ Eduardo Baptista, “China Weighs Options to Blunt U.S. Sanctions in a Taiwan Conflict,” Reuters, October 20, 2023, https://www.reuters.com/world/asia-pacific/china-weighs-options-blunt-us-sanctions-taiwanconflict-2023-10-20/.

⁶ Clint Rainey, “China First: The Untold Story of How Starbucks Has Cozied up to the Communist Party in Pursuit of Explosive Growth,” Fast Company, November 15, 2022, https://www.fastcompany.com/90807718/starbucks-in-china-the-untold-story.

⁷ Rainey, “China First.” While Starbucks removed its webpages about “party building” following a reporters’ inquiries in late 2022, it has never disavowed that the foundation is focused on party building, nor has Starbucks stated that it will discontinue such CCP efforts in the future.

⁸ “Video: Howard Schultz Speaks at China’s Tsinghua University,” Starbucks Stories, April 14, 2017, https://stories.starbucks.com/stories/2017/starbucks-howard-schultz-speaks-at-tsinghua-university-inchina/.

⁹ “The Chinese Dream Is a Dream of the People — President Xi Jinping Shares Stories of Liangjiahe in Seattle,” China Daily, October 4, 2021, https://www.chinadaily.com.cn/a/202110/04/WS615e6c54a310cdd39bc6d50c.html.

¹⁰ Isaac Stone Fish, “Beijing Wants U.S. Business Leaders to Plead Its Case. Here’s Why They Shouldn’t.”, Washington Post, January 18, 2021, https://www.washingtonpost.com/opinions/2021/01/18/beijingwants-us-business-leaders-plead-its-case-heres-why-they-shouldnt/.

¹¹ Stu Woo, “China Disappeared H&M from Its Internet, Splitting Fashion Industry Group,” Wall Street Journal, May 22, 2021, https://www.wsj.com/articles/chinas-campaign-against-h-m-divides-fashionindustry-group-11621686650.

¹² James T. Areddy and Alastair Gale, “China, NBA Standoff Deepens Over Basketball Executive’s Tweet,” Wall Street Journal, October 8, 2019, https://www.wsj.com/articles/chinese-state-broadcaster-drops-twonba-games-11570522782.

¹³ Fergus Hunter et al., Countering China’s Coercive Diplomacy (Canberra: Australian Strategic Policy Institute, February 17, 2023), https://www.aspi.org.au/report/countering-chinas-coercive-diplomacy.

¹⁴ “China Halts Lithuania Beef, Dairy and Beer Imports amid Taiwan Row,” BBC News, February 11, 2022, https://www.bbc.com/news/business-60343316.

¹⁵ Nathaniel Taplin, “Beijing’s Bain Raid, Espionage Law Are Self-Sabotage,” Wall Street Journal, April 28, 2023, https://www.wsj.com/articles/beijings-bain-raid-espionage-law-are-self-sabotage-40f87276.

¹⁶ Elisabeth Braw, “Your Business in China May Be Uninsurable,” Wall Street Journal, August 7, 2023, https://www.wsj.com/articles/your-china-business-may-be-uninsurable-political-risk-coverage-222f15dd.

¹⁷ Braw, “Your Business in China.”

¹⁸ Laurie Burkitt, “Starbucks Is Criticized by Chinese State Media for Higher Prices,” Wall Street Journal, October 21, 2013, https://www.wsj.com/articles/SB10001424052702303902404579148871471212170.

¹⁹ “Starbucks Plans Food Safety Checks in China after Expiry Violations,” Reuters, December 13, 2021, https://www.reuters.com/markets/commodities/starbucks-shuts-two-china-outlets-after-reports-theyused-expired-ingredients-2021-12-13/; “Starbucks Apologies after Latest Food Safety Scandal,” Global Times, December 15, 2021, https://www.globaltimes.cn/page/202112/1241519.shtml?id=11.

²⁰ “Why Did Starbucks’ ‘Gold Standard’ Lose to the ‘Hidden Rules’?”, Healthy Lifestyle, December 14, 2021, http://health.people.com.cn/n1/2021/1214/c14739-32307090.html.

²¹ Larissa Gao, “China, Facing Record Youth Unemployment, Says It Will Stop Releasing Data about It,” NBC News, August 15, 2023, https://www.nbcnews.com/news/world/china-suspends-data-youthunemployment-rcna99929.

²² Claire Fu, “China Suspends Report on Youth Unemployment, Which Was at a Record High,” New York Times, August 15, 2023, https://www.nytimes.com/2023/08/15/business/china-youthunemployment.html.

²³ Keith Bradsher, Daisuke Wakabayashi, and Claire Fu, “Thousands of Chinese Retirees Protest Government Cuts to Benefits,” New York Times, February 15, 2023, https://www.nytimes.com/2023/02/15/business/wuhan-china-protests.html.

²⁴ Daisuke Wakabayashi and Claire Fu, “A Crisis of Confidence is Gripping China’s Economy,” New York Times, August 25, 2023, https://www.nytimes.com/2023/08/25/business/china-economy-confidence.html; see also David Rennie and Don Weinland, “China’s Consumer-Confidence Dip,” August 29, 2023, in Drum Tower, produced by The Economist Group, podcast, https://www.economist.com/podcasts/2023/08/29/chinas-consumer-confidence-dip (“Chinese consumers are not spending.”)

²⁵ Nathaniel Taplin, “China’s Economic—and Social—Contract is Fraying,” Wall Street Journal, August 15, 2023, https://www.wsj.com/articles/chinas-economicand-socialcontract-is-fraying-70f03f44.

²⁶ Stella Yifan Xie, “China’s Economic Recovery Weakens,” Wall Street Journal, July 31, 2023, https://www.wsj.com/world/asia/chinas-economy-stutters-forward-as-growth-concerns-linger-1be8acb2.

²⁷ Tanner Brown, “China Needs Consumers to Spend More. They Probably Won’t.”, Barron’s, June 17, 2023, https://www.barrons.com/articles/lvmh-stock-luxury-china-economy-dfa7c5d9.

²⁸ Evelyn Chang, “Chinese Consumers Won’t Return to Pre-Covid Spending Soon — A Problem for Starbucks, Morgan Stanley Says,” CNBC, May 29, 2023, https://www.cnbc.com/2023/05/29/morgan-stanleystarbucks-wont-benefit-from-chinas-post-covid-recovery.html.

²⁹ Nicole Goodkind, “US Stocks Are in the Firing Line If China’s Economy Stalls Further,” CNN, June 8, 2023, https://www.cnn.com/2023/06/08/investing/premarket-stocks-trading/index.html.

³⁰ Hyomi Jie, Bob Chen, and Mark J. Hamilton, “Chart Room: Chinese Consumers’ Growing Preference for Local Brands,” Fidelity International, July 9, 2020, https://www.fidelityinternational.com/editorial/blog/chart-room-chinese-consumers-growing-preferencefor-local-brands-c4ffc7-en5/; see also Daniel Zipser et al., 2023 McKinsey China Consumer Report (New York: McKinsey & Company, December 2022), https://www.mckinsey.com/china-consumer-2023.

³¹ Yihan Ma, “Preferred Origin of Brands among Consumers in China 2020,” Statista, September 21, 2022, https://www.statista.com/statistics/1183456/china-preference-of-local-and-foreign-brands/.

³²Chris Wang, Shine Hu, and Ye Chen, Survey Report: Chinese Consumers’ Purchase Preference on Foreign and Local Brands (Hangzhou: ChemLinked, May 14, 2021), https://resource.chemlinked.com.cn/market/articles/file/a-survey-report-on-chinese-consumers-purchasepreference-on-foreign-and-local-brands.pdf.

³³ Shoshanna Delventhal, “Apple, Nike, Starbucks May Be Hit in Trade War,” Investopedia, March 23, 2018, https://www.investopedia.com/news/apple-nike-starbucks-could-be-hardest-hit-trade-war/.

³⁴Gina M. Raimondo, “Remarks by U.S. Secretary of Commerce Gina Raimondo on the U.S. Competitiveness and the China Challenge,” U.S. Department of Commerce, November 30, 2022, https://www.commerce.gov/news/speeches/2022/11/remarks-us-secretary-commerce-gina-raimondo-uscompetitiveness-and-china.

³⁵Michaelle Toh, “Luckin Coffee is Back and Bigger than Starbucks in China,” CNN, May 25, 2022, https://www.cnn.com/2022/05/25/investing/china-luckin-coffee-earnings-q1-2022-intl-hnk/index.html.

³⁶ Felipe Cabrera, “Luckin vs Starbucks in China - Part 1,” LinkedIn, April 17, 2023, https://www.linkedin.com/pulse/luckin-vs-starbucks-china-felipe-cabrera/.

³⁷ “China’s Cott Coffee Opens First International Store in South Korea,” World Coffee Portal, August 14, 2023, https://www.worldcoffeeportal.com/Latest/News/2023/August/China-s-Cotti-Coffee-opens-firstinternational-sto.

³⁸ Evelyn Cheng, “Starbucks Faces More Competition from Local Beverage Brands in China, Its Biggest Market outside the U.S.,” CNBC, April 28, 2023, https://www.cnbc.com/2021/04/28/rising-competition-forstarbucks-in-china-from-hey-tea-and-others.html.

³⁹ Claire Fu and Daisuke Wakabayashi, “‘Whichever Is Cheaper’: Inside China’s New Thrift Economy,” New York Times, October 11, 2023, https://www.nytimes.com/2023/10/11/business/china-consumerspending.html.

⁴⁰ Michelle Toh, “Starbucks Battles Another Backlash in China over ‘Misunderstanding’ with Police,” CNN, February 16, 2022, https://www.cnn.com/2022/02/16/business/starbucks-china-chongqing-controversyapology-intl-hnk/index.html.

⁴¹ Lingling Wei, “Beijing Drops Contentious ‘Made in China 2025’ Slogan, but Policy Remains,” Wall Street Journal, March 5, 2019, https://www.wsj.com/articles/china-drops-a-policy-the-u-s-dislikes-at-least-inname-11551795370.

⁴² Camille Boullenois, Agatha Kratz, and Reva Goujon, “Opening Salvo: The EU’s Electric Vehicle Probe and What Comes Next,” Rhodium Group, October 23, 2023, https://rhg.com/research/opening-salvo-the-euselectric-vehicle-probe-and-what-comes-next/.

⁴³ Strive Asset Management, China Risk as Investment Risk: Business Risk for U.S. Companies (Columbus: Strive Asset Management, October 25, 2023), https://www.strive.com/documents/FG/strive/news/628805_China_Risk_- _US_Companies_final.pdf, 1.

⁴⁴ Rob Garver, “Report: China Spends Billions of Dollars to Subsidize Favored Companies,” Voice of America, May 24, 2022, https://www.voanews.com/a/report-china-spends-billions-of-dollars-to-subsidize-favoredcompanies-/6587314.html.

⁴⁵ Brooke DiPalma, “Starbucks: Why Howard Schultz’s Departure Could ‘Open the Door’ for Expansion in China,” Yahoo Finance, September 20, 2023, https://finance.yahoo.com/news/starbucks-why-howardschultzs-departure-could-open-the-door-for-expansion-in-china-151327623.html.

⁴⁶ “Starbucks China Coffee Innovation Park: Now Roasting,” Starbucks Stories, September 18, 2023, https://stories.starbucks.com/press/2023/starbucks-china-coffee-innovation-park/.

⁴⁷ Starbucks Corp., Annual Report (Form 10-K) (November 18, 2022), https://www.sec.gov/Archives/edgar/data/829224/000082922422000058/sbux-20221002.htm, 20.

⁴⁸ Starbucks Corporation, 2022 Global Environmental and Social Impact Report (Seattle: Starbucks Corporation, April 20, 2023), https://stories.starbucks.com/stories/2023/2022-starbucks-globalenvironmental-and-social-impact-report/, 2.

⁴⁹ Starbucks Corporation, Impact Report, 37, 42, 70.

⁵⁰ Code of Federal Regulations Title 17, 17 C.F.R. § 229.105.

⁵¹ Code of Federal Regulations Title 17, 17 C.F.R. § 229.105.

⁵² Code of Federal Regulations Title 17, 17 C.F.R. § 230.421(d).

⁵³ Activision Blizzard, Inc., Exchange Act Release No. 96796 (February 3, 2023), https://www.sec.gov/files/litigation/admin/2023/34-96796.pdf.

⁵⁴ “Starbucks Corporation (SBUX) Stock Major Holders,” Yahoo Finance, accessed October 13, 2023, https://finance.yahoo.com/quote/SBUX/holders/.

⁵⁵ Vote information was retrieved from each company’s U.S. Securities and Exchange Commission’s annual N-PX filing.

⁵⁶ See Leo E. Strine, Jr., “The Dangers of Denial: The Need for a Clear-Eyed Understanding of the Power and Accountability Structure Established by the Delaware General Corporation Law,” Wake Forest Law Review 50 (2015): 761, https://ssrn.com/abstract=2576389.

⁵⁷ Milton Friedman, “A Friedman Doctrine‐-The Social Responsibility of Business Is to Increase Its Profits,” New York Times, September 13, 1970, https://www.nytimes.com/1970/09/13/archives/a-friedmandoctrine-the-social-responsibility-of-business-is-to.html.

⁵⁸ iShares Trust, Certified Shareholder Report of Registered Management Investment Companies (Form NCSR) (October 5, 2018), https://www.sec.gov/Archives/edgar/data/1100663/000119312518294306/d617786dncsr.htm.

⁵⁹ See Delaware Code, Title 12, § 3801 (“[T]rustees of a statutory trust that is registered as an investment company or regulated as a business development company under the Investment Company Act of 1940 (15 U.S.C. § 80a-1 et seq.) shall have the same fiduciary duties as directors of private corporations for profit organized under the general corporation law of the State); see also iShares U.S ETF Trust, Agreement and Declaration of Trust (June 21, 2011), https://www.sec.gov/Archives/edgar/data/1524513/000119312513155206/d520280dex99a.htm.

⁶⁰ For example, see Matter of the Arb. Between Mary Louis Sauls, No. 96-01995, 1997 WL 282504, at *2 (Apr. 26, 1997) (Delaware arbitration award allowing trust beneficiary to directly sue third party, rejecting argument that “a beneficiary of a trust cannot sue a third party if the trustee is available to bring such an action”); St. Martin’s Episcopal Church v. Prudential-Bache Secur., Inc., 613 So. 2d 108 (Fla. 4th DCA 1993) (holding beneficiary had standing to sue securities dealer for improper trading regardless of whether trustee decided to sue).

⁶¹ For example, see Morrison v. Berry, No. CV 12808-VCG, 2020 WL 2843514, at *14 (Del. Ch. June 1, 2020).

⁶² Marlo Oaks and Todd Russ, “A Historic Breach of Fiduciary Duty,” Wall Street Journal, May 15, 2023, https://www.wsj.com/articles/a-historic-breach-of-fiduciary-duty-shareholder-proposals-proxy-adivsoryclimate-43baa5ba.

⁶³ Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 182 (Del. 1986).

⁶⁴ Silla Brush and Daniel Flatley, “Wall Street Bosses Want Anonymity to Talk China with Congress,” Bloomberg, September 12, 2023, https://www.bloomberg.com/news/articles/2023-09-12/wall-streetbosses-want-anonymity-to-talk-china-with-congress#xj4y7vzkg.

⁶⁵ Lingling Wei, Bob Davis, and Dawn Lim, “China Has One Powerful Friend Left in the U.S.: Wall Street,” Wall Street Journal, December 2, 2020, https://www.wsj.com/articles/china-has-one-powerful-friend-leftin-the-u-s-wall-street-11606924454; see also Vivek Ramaswamy and Mike Pompeo, “China’s Threat to Taiwan Semiconductors,” Wall Street Journal, October 10, 2022, https://www.wsj.com/articles/investingsilicon-semiconductors-chips-taiwan-invasion-tsmc-china-intel-blackrock-asset-manager-11665408814.

⁶⁶ Clarence Leong, “State Street Loses Hong Kong Role After U.S. Blacklist Controversy,” Wall Street Journal, March 29, 2022, https://www.wsj.com/articles/state-street-loses-hong-kong-role-after-u-s-blacklistcontroversy-11648559031.

⁶⁷ Taking Stock of ‘China, Inc.’: Examining Risks to Investors and the U.S. Posed by Foreign Issuers in U.S. Markets, 117th Cong. 56 (2021), https://www.congress.gov/event/117th-congress/houseevent/114186/text.