As it seeks to reverse declining sales, reenergize the brand and address a problematic Chinese market, Starbucks has not only turned to a new boss but put a slam dunker of a corporate package on the coffee table.
The new chief executive of coffee house giant Starbucks is set to receive a sign-on pay package that, should he hit all his objectives, could be worth up to an eye-popping $113 million in what would be one of the biggest executive deals in corporate history.
It’s also a package four times the size of his predecessor, as the former Chipotle boss Brian Niccol prepares to take the helm following a surprise management shake-up this week after he was announced as the replacement to Laxman Narasimhan, who was just 17 months into his tenure.
He will become Starbucks’ fourth boss in less than three years – a fact that tells its own story – and Niccol will take up his new role on September 9. He has been given not only a bumper pay deal but will also be allowed to work remotely from his home in Newport Beach, California and will be able to use the company’s corporate jet to travel to its Seattle headquarters when required.
Breaking it down, Niccol’s annual salary will be $1.6 million but he will have the opportunity to earn up to $23 million worth of share-based bonuses each year, as well as a cash bonus worth nearly $3.6 million depending on the company’s performance. His package also includes a $10 million sign-on bonus, plus $75 million of extra stock options, paid over the length of his contract, to recompense shares that he will have to forego from Mexican burrito chain Chipotle, where he had been CEO since 2018.
That means that if the contract is paid out in full, his pay would reach a total of $113.2 million. Niccol received $22.5 million at Chipotle in 2023, with stock awards and options accounting for the bulk of his earnings, while he also took home a cash bonus of $5.2 million.
Package Dwarfs Narasimhan’s
Niccol’s new pay deal dwarfs the sign-on package received by Narasimhan, who joined from U.K. consumer goods group Reckitt in April 2023. He was offered a $28 million package and was paid $14.6 million by Starbucks last year, but had spent much of his short time at the top trying to deal with growing pressure from activist investor Elliott Investment Management.
Elliott was unhappy with the company’s performance and stock price – less impressive that a flat white at 20% down over the past five years – and had been demanding improvements, including the expansion of its board and improvements to the company’s corporate governance.
What will no doubt be in Starbucks’ mind is that during Niccol’s tenure at Chipotle, the stock climbed a red hot 773%, boosting the value of his overall compensation but also providing a massive boost to the company’s valuation.
To that end, Starbucks justified the huge potential earnings by saying that Niccol, who has earned himself the reputation as a corporate fixer after also heading Taco Bell, had “proven himself to be one of the most effective leaders in our industry, generating significant financial returns over many years.”
Investors responded positively, with Starbucks’ stock enjoying its best ever trading day after Niccol’s appointment was officially announced, leaping 24% and broadly holding those gains since. In the year to date that means its stock value is effectively unchanged.
Niccol’s job will be to turbocharge that performance and roast the competition.
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