Pay deal for new Starbucks CEO worth up to $113m
The new chief executive of Starbucks is in line for a sign-on pay package worth up to $113m (£88m), in one of the largest such executive deals in corporate history and which is four times larger than that of his predecessor. .
The American coffee chain poached the boss of Chipotle Mexican Grill, Brian Niccol, naming him as its new chief executive this week in a surprise management shake-up, ousting Laxman Narasimhan from the job after just 17 months.
Niccol has been given a large pay deal to switch roles and will also be allowed to work remotely from his home in Newport Beach, California. Starbucks has agreed to cover the costs of establishing the “small remote office” and a dedicated local assistant, and Niccol will be able to use the company aeroplane to travel to its headquarters in Seattle when required.
Niccol, who will take over the reins on 9 September and will become its fourth boss in less than three years, is in line for the bumper pay packet largely because of a huge tranche of share options.
His package includes a $10m signon bonus, and $75m of extra stock options to make up for shares that he will have to give up from Chipotle, the burrito chain that he has steered since 2018.
Niccol’s annual salary will be $1.6m and he has the opportunity to earn up to $23m worth of share-based bonuses each year, as well as a cash bonus worth nearly $3.6m depending on the company’s performance.
The contract, if paid out in full, would bring Niccol’s pay to $113.2m. He was paid $22.5m at Chipotle in 2023, and $17.2m a year earlier.
His new pay deal dwarfs the sign-on package received by Narasimhan, who joined from the UK consumer goods group Reckitt in April 2023, and was offered a $28m package. Narasimham was paid $14.6m by Starbucks last year.
Niccol’s pay deal came to light amid renewed anger over bumper executive remuneration. It emerged this week that pay for the bosses of the UK’s 100 biggest listed companies has increased to the highest level on record, triggering calls for a “new approach” to wealth distribution.
Starbucks said that Niccol had “proven himself to be one of the most effective leaders in our industry, generating significant financial returns over many years”.
His appointment, announced on Tuesday, is part of a wider shake-up at Starbucks, which has been trying to fend off pressure from activist the investor Elliott Investment Management. Elliott wants the company to improve its performance and stock price, including by expanding its board and improving its governance.
The company’s share price has tumbled nearly 20% over the past five years, whereas the benchmark S&P 500 index has surged by more than 80%. But Starbucks’ stock enjoyed its best ever trading day after Niccol’s appointment was announced, jumping by 24%.
In July, the company fell short of sales expectations owing to weakening demand in the US and China.
Staff at Starbucks, which is the world’s largest coffee chain, are embroiled in a fight to unionise. In February, the company agreed to a new organising “framework” with Starbucks Workers United, and negotiations have since continued. Workers have voted to unionise at more than 370 locations, but none has reached a labour agreement with the company.