Cracker Barrel GLBT Case

Cracker Barrel GLBT Case - The Cracker Barrel Restaurants...

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Unformatted text preview: The Cracker Barrel Restaurants John Howard University of York, United Kingdom Discrimination against lesbians and gays is common in the workplace. Sole propri- etors, managing partners, and corporate personnel officers can and often do make hiring, promoting, and firing decisions based on an individual’s real or perceived sexual orientation. Lesbian and gay job applicants are turned down, and lesbian and gay employees are passed over for promotion or even fired by employers who view homosexuality as somehow detrimental to job performance or harmful to the com— pany’s public profile. Such discrimination frequently results from the personal bi- ases of individual decision makers. It is rarely written into company policy and thus is difficult to trace. However, in January 1991, Cracker Barrel Old Country Store, Inc, a chain of family restaurants, became the first and only major American cor- poration in recent memory to expressly prohibit the employment of lesbians and gays in its operating units. A nationally publicized boycott followed, with demon- strations in dozens of cities and towns. Cracker Barrel was founded in 1969 by Dan Evins in his hometown of Lebanon, Tennessee, 40 miles east of Nashville. Evins, a 34-year-old ex—Marine sergeant and oil jobber, decided to take advantage of the traffic on the nearby interstate highway and open a gas station with a restaurant and gift shop. Specializing in down-home cooking at low prices, the restaurant was immediately profitable. ‘ Evins began building Cracker Barrel stores throughout the region, gradually phasing out gasoline sales. By 1974, he owned a dozen restaurants. Within 5 years of going public in 1981, Cracker Barrel doubled its number of stores and quadru- pled its revenues: In 1986, there were 47 Cracker Barrel restaurants with net sales of $81 million. Continuing to expand aggressively, the chain again grew to twice its size and nearly quadrupled its revenues during the next 5 years. By the end of the fiscal year,August 2,1991, Cracker Barrel operated over 100 stores, almost all located along the interstate highways of the Southeast and, in~ creasingly, the Midwest. Revenues exceeded $300 million. Employing roughly 10,000 nonunionized workers, Cracker Barrel ranked well behind such mammoth family chains as Denny’s and Big Boy in total sales, but led all US. family chains in sales per operating unit for both 1990 and 1991. As of 1991, Cracker Barrel was a well-recognized corporate success story, known for its effective, centralized, but authoritarian leadership. From its headquarters, 2|I 2 I 2 SECTION [V Perspectives on Diversity: Cases Cracker Barrel maintained uniformity in its store designs, menu offerings, and operating procedures. Travelers and local customers dining at any Cracker Barrel restaurant knew to expect a spacious, homey atmosphere; an inexpensive, country— style meal; and a friendly, efficient staff. All were guaranteed by Dan Evins, who re- mained as president, chief executive officer, and chairman of the board. THE POLICY. NO LESBIAN OR GAY MPLOYEES In early January 1991, managers in the roughly 100 Cracker Barrel operating units received a communique from the home office in Lebanon. The personnel policy memorandum from William Bridges, vice president of human resources, declared that Cracker Barrel was “founded upon a concept of traditional American values.” As such, it was deemed “inconsistent with our concept and values and. . .with those of our customer base, to continue to employ individuals. . . whose sexual preferences fail to demonstrate normal heterosexual values, which have been the foundation of families in our society.” Throughout the chain,individual store managers, acting on orders of corporate officials, began conducting brief, one-on-one interviews with their employees to see if any were in violation of the new policy. Cheryl Summerville, a cook in the Douglasville, Georgia, store for 31/2 years, asked if she were a lesbian, knew she had to answer truthfully. She felt she owed that to her partner of 10 years. Despite a his- tory of consistently high performance evaluations, Summerville was fired on the spot, without warning and without severance pay. Her official separation notice, filled out by the manager and filed with the state department of labor, clearly indi- cated the reason for her dismissal: “This employee is being terminated due to vio- lation of company policy. The employee is gay.” Cracker Barrel fired as many as 16 other employees across several states in the following months. These workers, mostly waiters, were left without any legal recourse. Lesbian and gay antidiscrimi- nation statutes were in effect in Massachusetts and Wisconsin and in roughly 80 US. cities and counties, but none of the firings occurred in those jurisdictions. Federal civil rights laws, the employees learned, did not cover discrimination based upon sexual orientation. Under pressure from a variety of groups, the company issued a statement in late February 1991. In it, Cracker Barrel management said, “We have revisited our thinking on the subject and feel it only makes good business sense to continue to employ those folks who will provide the quality service our customers have come to expect.”The recent personnel policy had been a “well-intentioned overreaction.” Cracker Barrel pledged to deal with any future disruptions in its units “on a store~ by-store basis.” Activists charged that the statement did not represent a retraction of the policy, as some company officials claimed. None of the fired employees had been rehired, activists noted, and none had been offered severance pay. Moreover, on February 27, just days after the statement, Dan Evins reiterated the company’s antagonism toward nonheterosexual employees in a rare interview with a Nashville newspaper. Lesbians and gays, he said, would not be employed in more rural Cracker Barrel locations if their presence was viewed to cause problems in those communities. HOWARD The Cracker Barrel Restaurants 213 w THE BOYCOTT: QUEER NATIONALSVERSUS GOOD OL’ BOYS The next day. when news of Cracker Barrel employment policies appeared in the The Wall Street Journal, New York Times, and Los Angeles Times, investment ana- lysts expressed surprise. “I look on [Cracker Barrel executives] as pretty prudent businesspeople.” said one market watcher. “These guys are not fire-breathing good ol’ boys.” Unconvinced, lesbian and gay activists called for a nationwide boycott of Cracker Barrel restaurants and began a series of demonstrations that attracted ex- tensive media coverage. The protest movement was coordinated by the Atlanta chapter of Queer Nation, which Cheryl Summerville joined as cochair with fellow cochair Lynn Cothren. an official with the Martin Luther King. J r.. Center for Non-Violent Social Change in Atlanta. Committed to nonviolent civil disobedience, lesbian and gay activists and supporters staged pickets and sit-ins at various Cracker Barrel loca- tions, often occupying an entire restaurant during peak lunch hours. ordering only coffee. Protesters were further angered and spurred on by news in June from Mobile. Alabama. A 16-year-old Cracker Barrel employee had been fired for effeminate mannerisms and subsequently was thrown out of his home by his father. Demon- strations continued throughout the summer of 1991. spreading from the Southeast to the Midwest stores. Arrests were made at demonstrations in the Detroit area; Cothren and Summerville were among several people arrested for criminal trespass at both the Lithonia and Union City. Georgia, stores. Reporters and politicians dubbed Summerville the “Rosa Parks of the movement,” after the woman whose arrest sparked the Montgomery.Alabama. Bus Boycott of 195571956. Support for the Cracker Barrel boycott grew, as organizers further charged the company with racism and sexism. Restaurant gift shops. they pointed out. sold Con- federate flags. black mammy dolls. and other offensive items. The Cracker Barrel board of directors. they said. was indeed a good ol' boy network. made up exclu- sively of middle-aged and older white men. In addition, there was only one female in the ranks of upper management. M THE RESOLUTION: NEW YORK ATTEMPTSTO FORCE CHANGE Meanwhile. New York City comptroller, Elizabeth Holtzman, and finance commis- sioner. Carol O‘Cleiracain. at the urging of the National Gay and Lesbian Task Force. wrote a letter to Dan Evins. dated March 12. 1991. As trustees of various city pension funds, which owned about $3 million in Cracker Barrel stock. they were “concerned about the potential negative impact on the company’s sales and earn- in gs. which could result from adverse public reaction.”They asked for a “clear state- ment” of the company's policy regarding employment and sexual orientation. as well as a description of “what remedial steps, if any. [had] been taken by the com- pany respecting the employees dismissed." Evins replied in a letter of March 19 that the policy had been rescinded and that there had been “no negative impact on the company’s sales.“ Unsatisfied. the city of New York officials wrote back. again inquiring as to the status of the fired workers. 2 I 4 SECTION IV Perspectives on Diversity: Cases They also asked that the company put forth a policy that “would provide unequivo- cally“ that discrimination based on sexual orientation was prohibited. Evins never responded. Shortly thereafter, Queer Nation launched a “buy one” campaign. Hoping to gain additional leverage in company decision making, activists became stockholdw ers by purchasing single shares of Cracker Barrel common stock. At the least, they reasoned, the company would suffer from the relative expense of mailing and pro- cessing numerous one-cent quarterly dividend checks. More importantly, they could attend the annual stockholders meeting in Lebanon,Tennessee. In November 1991, company officials successfully prevented the new share- holders from participating in the annual meeting. and they used a court injunction to block protests at the corporate complex. Nonetheless, demonstrators lined the street, while inside, a representative of the New York City comptroller’s office an- nounced the submission of a resolution "banning employment discrimination against gay and lesbian men and women,” to be voted on at the next year’s meeting. The resolution was endorsed by the Philadelphia Municipal Retirement System, another major stockholder. Cracker Barrel refused any further public comment on the issue. THE EFFECT: NO DECLINE IN CORPORATE GROWTH The impact of the boycott on the corporate bottom line was negligible. Trade mag- azines reiterated the company’s claim that neither sales nor stock price had been negatively affected. Indeed, net sales remained strong, up 33 percent at fiscal year- end 1992 to $400 million, owing in good part to continued expansion: There were now 127 restaurants in the chain. Though the increase in same-store sales was not as great as the previous year, Cracker Barrel at least could boast growth, while other chains blamed flat sales on the recession. Cracker Barrel stock, trading on the NASDAQ exchange, appreciated 18 percent during the first month after news of the scandal broke, and the stock remained strong throughout the next fiscal year, splitting three—for—two in the third quarter. Dan Evins had good reason to believe that the firings and the boycott had not adversely impacted profitability. One market analyst said that “the feedback they get from their customers might be in favor of not hiring homosexuals.” Another even ventured that “it’s plausible . . . the majority of Cracker Barrel’s local users support an explicit discriminatory policy.” Such speculation was bolstered by social science surveys indicating that respondents from the South and from rural areas in particular tended to be less tolerant of homosexuality than were other Americans. Queer Nationals looked to other measures of success, claiming at least partial victory in the battle. Many customers they met at picket lines and inside restaurants vowed to eat elsewhere. Coalitions were formed with a variety of civil rights, women’s, labor, and peace and justice organizations. Most importantly, the media attention greatly heightened national awareness of the lack of protections for les- bians and gays on the job. As the boycott continued, increasing numbers of states, HOWARD The Cracker Barrel Restaurants 2 l 5 counties, and municipalities passed legislation designed to prevent employment dis- crimination based on sexual orientation. THE OUTCOME: STAND-OFF CONTINUES As the November 1992 annual meeting approached, Cracker Barrel requested that the Securities and Exchange Commission make a ruling on the resolution offered by the New York pension fund administrators. The resolution, according to Cracker Barrel, amounted to shareholder intrusion into the company’s ordinary business operations. As such, it should be excluded from consideration at the annual meet- ing and excluded from proxy ballots sent out before the meeting. The SEC agreed, despite previous rulings in which it had allowed stockholder resolutions regarding race or gender based employment bias. Acknowledging that frivolous stockholder inquiries had to be curtailed,the dis— senting SEC commissioner nonetheless expressed great dismay: “To claim that the shareholders, as owners of the corporation, do not have a legitimate interest in man— agement-sanctioned discrimination against employees defies logic.” A noted legal scholar warned of the dangerous precedent that had been set: “Ruling an entire area of corporate activity (here, employee relations) off. limits to moral debate efw fectively disenfranchises shareholders.” Thus, the stand-off continued. Queer Nation and its supporters persisted in the boycott.The Cracker Barrel board of directors and, with one exception, upper man- agement remained all-white, all-male bastions. Lynn Cothren, Cheryl Summerville, and the other protestors arrested in Lithonia, Georgia,were acquitted on charges of criminal trespass. Jurors ruled that the protestors’ legitimate reasons for peaceably demonstrating superseded the company’s rights to deny access or refuse service. Charges stemming from the Union City, Georgia, demonstrations were subsequently dropped. Meanwhile, within weeks of the original policy against lesbian and gay em- ployees, Cracker Barrel vice president for human resources William Bridges had left the company. Cracker Barrel declined comment on the reasons for his departure. By 1996, Cracker Barrel annual net sales reached a billion dollars.The company still had not issued a complete retraction of its employment policy, and those em— ployees fired were never offered their old jobs back. In contrast, for a year’s work, chairman Dan Evins pulled in over a million dollars in salary, bonus, awards, and stock options; president Ronald Magruder, over four million. As of Cracker Barrel‘s fiscal year—end, July 30, 1999, a total of 11 states and the District of Columbia offered protections for lesbians and gays on the job, both in the public and private sectors. With a total of 396 restaurants and 58 Logan’s Road~ house affiliates in 36 states, Cracker Barrel now operated in six of those states with protections: California, Connecticut, Massachusetts, Minnesota, New Jersey, and Wis- consin. (The other states with antidiscrimination statutes are Hawaii, Nevada, New Hampshire, Rhode Island, and Vermont.) Moreover, plans for expansion seemed des— tined to take the company into areas even less receptive to employment discrimination. As one business editor had correctly predicted, “Cracker Barrel isn’t going to be in the South and Midwest forever. Eventually they will have to face the issue—like it or not.” 2|6 SECTION IV Perspectives on Diversity: Cases THE PROPOSAL: FEDERAL LEGISLATION Discussion Questions References In 39 states it is perfectly legal to fire workers because they are gayeor straight. For example, a Florida bar owner recently decided to target a lesbian and gay clien- tele and so fired the entire heterosexual staff. Queer activists boycotted, and the bar eventually was forced out of business. Still, for the vast majority of Americans, em- ployment discrimination based on sexual orientation remains a constant threat. The vast majority of Americans, 80 percent, tell pollsters that lesbians and gays should have equal rights in terms of job opportunities. 111 every region including the South, among both Democrats and Republicans, solid majorities support fed- eral legislation to remedy the situation. Nonetheless, despite several close votes in Congress, the Employment Non~Discrimination Act, or ENDA, has yet to be passed into law. Although there are no federal laws to prevent discrimination based on sexual orientation, protections do exist for workers on the basis of religion, gender, na- tional origin, age, disability, and race. Citing these civil. rights statutes, the NAACP is supporting a group of employees and former employees in a classfiaction lawsuit against Cracker Barrel. The suit alleges that the company repeatedly discriminated against African-Americans in hiring, promotions, and firing practices. Further, AfricanuAmerican workers are said to have received less pay, to have been given inferior terms and conditions of employment, and to have been subjected to racial epithets and racist jokes, including one told by Dan Evins. As this book goes to press, the case is yet to be decided. 1. How could Cracker Barrel’s policy statement have been well-intentioned? 2. What benefits did Cracker Barrel achieve by ridding itself of lesbian and gay employees? What were the disadvantages? 3. How should the perceived values of a customer base affect companies’ per sonnel policies? In a large national corporation, should personnel policies be uniform across all operating units or should they be tailored by region accord— ing to local mores? Atlanta Journal-Constitution, 6, 11 July lion’s Restaurant News, 1 April l993;2, 3 April 1992;29 March 1992; 4, 1991, 14. 18, 20 January 1992; 9 June 1991;3, 4, 5 March 1991. Carlino, Bill. “Cracker Barrel Profits Surge Despite Recession.” Nation’s Restaurant News, 16 December 1991, 14. . “Cracker Barrel Stocks, Sales Weather Gay—Rights DiSpute.” Na— Cheney, Karen. “Old-Fashioned Ideas Fuel Cracker Barrel’s Out—Of—Sight Sales Growth and Profit Increases.” Restaurants & Institutions, 22 July 1992,1623. Cracker Barrel Old Country Store, Inc. Annual Report, 1999. HOWARD The Cracker Barrel Restaurants 217 . Annual Report, 1996. . Notice of Annual Meeting of Shareholders to Be Held on Tuesday, November 26, 1996; 25 October 1996. . Third Quarter Report, 30 April 1993. . Second Quarter Report, 29 Jan u— ary 1993. . First Quarter Report, 30 October 1992. . Annual Report, 1992. . Securities and Exchange Com- mission Form 10-K, 1992. . Annual Report, 1991. . Securities and Exchange Com- mission Form 10-K, 1991. .Annual Report, 1990. “Cracker Barrel Hit by Anti—Bias Protests.” Nation’s Restaurant News, 13 April 1992, 2. “Cracker Barrel Sued for Rampant Racial Discrimination in Employ- ment.” NAACP Press Release. 5 Oc— tober 1999. “Cracker Barrel’s Emphasis on Quality a Hit with Travelers." Restaurants and Institutions, 3 April 1991, 24. Dahir, Mubarak S. “Coming Out at the Barrel.” The Progressive, June 1992,14. “Documented Cases of Job Discrimina- tion Based on Sexual Orientation." Washington. DC: Human Rights Cam— paign.1995. Farkas, David. “Kings of the Road.” Restaurant Hospitality, August 1991, 118—22. Galst, Liz. “Southern Activists Rise Up.” TheAdvocate, 19 May 1992, 54457. Greenberg, David. The Construction of Homosexuality. Chicago: University of Chicago Press, 1988. Gutner,Toddi. “Nostalgia Sells.” Forbes, 27 April 1993, 102—3. Harding, Rick.“Nashville NAACP Head Stung by Backlash from Boycott Sup- port." The Advocate, 16 July 1991, 27. . "Activists Still Press Tennessee Eatery Firm on Anti-Gay Job Bias." The Advocate, 9 April 1991, 17. Hayes, Jack. “Cracker Barrel Protesters Don’t Shake Loyal Patrons.” Nation’s Restaurant News,26 August 199'1,3,57. . “Cracker Barrel Comes Under Fire for Ousting Gays.” Nation’s Restaurant News, 4 March 1991 , 1, 79. "Investors Protest Cracker Barrel Proxy Plan." Nation ’s Restaurant News, 2 N o- vember 1992,14. Larry King Live. CNN television, aired 2 December 199] . Oprah Winfrey Show. Syndicated televi- sion. aired January 1992. Queer Nation. Documents on the Cracker Barrel Boycott. N.p., n.d. “SEC Upholds Proxy Ruling.” Pensions and Investments, 8 February 1993, 28. Star, Marlene Givant. “SEC Policy Re— versal Riles Activist Groups.” Pen- sions and Investments, 26 October 1992.33. The (Nashville) Tennesseean, 27 Febru- ary 1991. 20/20. ABC television, aired 29 Novem- ber 1991. Walkup, Carolyn. “Family Chains Beat Recession Blues with Value, Service.” Nation’s Restaurant News, 5 August 1991,100.104. The Wall Street Journal, 9 March 1993; 2 February 1993; 26 January 1993; 28 February 1991. Wildmoon. KC. “ON Members Allowed to Attend Cracker Barrel Stock— holder’s Meeting." Southern Voice, 10 December 1992, 3. . "Securities and Exchange Com- mission Side with Cracker Barrel on Employment Discrimination.” South- ern Voice, 22 October 1992, 1. . “DeKalb Drops Most Charges Against Queer Nation." Southern Voice, 9 July 1992, 3. ...
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Cracker Barrel GLBT Case - The Cracker Barrel Restaurants...

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