Starbucks has announced a massive pay package for its new Chief Executive Officer, Brian Niccol, worth up to $113 million (£88 million).
The deal stands as one of the largest in corporate history and is four times greater than that of his predecessor, Laxman Narasimhan.
A Surprise Leadership Change
Niccol is the former CEO of Chipotle Mexican Grill, and his appointment comes just 17 months after Narasimhan took the helm. Starbucks’ decision to poach Niccol from Chipotle underscores the company’s commitment to a strategic shift.
Remote Work and Special Perks
As part of the agreement, Niccol will be allowed to work remotely from his home in Newport Beach, California. Starbucks has committed to covering the costs of setting up a “small remote office” for Niccol and providing him with a dedicated local assistant. Niccol will also have access to the company’s private jet for travel to Starbucks’ headquarters in Seattle when needed.
Breakdown of Niccol’s Compensation Package
Niccol’s pay package is structured around a substantial tranche of share options. His compensation includes:
- A $10 million sign-on bonus.
- $75 million in stock options to compensate for the shares he will forfeit from Chipotle.
- An annual salary of $1.6 million.
- The potential to earn up to $23 million annually in share-based bonuses.
- A cash bonus worth nearly $3.6 million, contingent on the company’s performance.
If Niccol’s contract is fully realized, his total compensation could reach $113.2 million. For comparison, Niccol earned $22.5 million at Chipotle in 2023 and $17.2 million the previous year.
Need Career Advice? Get employment skills advice at all levels of your career
Comparisons with Predecessor’s Pay
Niccol’s compensation dwarfs the package offered to Narasimhan, who joined Starbucks from UK consumer goods group Reckitt in April 2023. Narasimhan received a $28 million sign-on package and was paid $14.6 million by Starbucks last year.
Controversy Over Executive Pay
The revelation of Niccol’s pay package has sparked renewed criticism over executive compensation. This comes at a time when the pay for CEOs of the UK’s 100 largest listed companies has reached record levels, leading to calls for a reassessment of wealth distribution.
Starbucks’ Defense and Strategic Shifts
Starbucks defended the decision by stating that Niccol has:
“proven himself to be one of the most effective leaders in our industry, generating significant financial returns over many years.”
The appointment is part of a broader shake-up within Starbucks, which is under pressure from activist investor Elliott Investment Management to enhance its performance and stock price. This includes expanding the board and improving corporate governance.
Mellody Hobson, Starbucks board chair, said:
“We are thrilled to welcome Brian to Starbucks. His phenomenal career speaks for itself. Brian is a culture carrier who brings a wealth of experience and a proven track record of driving innovation and growth. Like all of us at Starbucks, he understands that a remarkable customer experience is rooted in an exceptional partner experience.
“Our board believes he will be a transformative leader for our company, our people, and everyone we serve around the world.”
Niccol said:
“I am excited to join Starbucks and grateful for the opportunity to help steward this incredible company, alongside hundreds of thousands of devoted partners.
“I have long-admired Starbucks iconic brand, unique culture and commitment to enhancing human connections around the globe. As I embark upon this journey, I am energized by the tremendous potential to drive growth and further enhance the Starbucks experience for our customers and partners, while staying true to our mission and values.”
Market Reaction and Company Performance
Following Niccol’s appointment, Starbucks’ stock price surged by 24%, marking its best trading day ever. This is notable as the company’s share price had fallen nearly 20% over the past five years, while the benchmark S&P 500 index rose by more than 80 percent.
However, Starbucks has faced challenges in recent months, including missed sales expectations due to weakening demand in the US and China.
Ongoing Unionization Efforts
Meanwhile, Starbucks employees continue their efforts to unionize.
In February, the company agreed to a new organizing “framework” with Starbucks Workers United. Since then, negotiations have been ongoing.
While workers at more than 370 locations have voted to unionize, no labor agreement has yet been reached.
