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Starbucks announced a shock shake-up in its executive team earlier this week, replacing outgoing boss Laxman Narasimhan with now ex-Chipotle CEO Brian Niccol.
Effective September 9, Niccol will become the coffee chain’s fourth CEO in under three years.
The change, announced Tuesday, was unexpected, with Narasimhan’s tenure only clocking in at 17 months. Starbucks confirmed he will exit the company with immediate effect, with CFO Rachel Ruggeri will serve as interim CEO until that date.
In a statement released by the company, Mellody Hobson, chair of the board, thanked Narasimhan for “his contributions to Starbucks… in the face of some challenging headwinds.”
Hobson also stated that the company is “thrilled” to welcome Niccol. “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.”
How much is Starbucks paying new CEO David Niccol?
Starbucks has put together a mouth-watering compensation to draw Niccol away from his role as CEO at Chipotle, four times the value of that of Narasimhan.
One of the largest executive compensation packages in corporate history, Niccol’s total pay could be worth well over $100million.
That includes an annual salary of $1.6million, $74million in stock options, $23million in share-based bonuses, $3.6million in cash bonuses—oh, and a $10million sign-on bonus as an extra shot to perk up the package to a possible $113.2million.
By our math, that comes in at around 16,740,440 caramel macchiatos.
It’s a price Starbucks is happy to pay. “Our board believes he will be a transformative leader for our company, our people, and everyone we serve around the world,” Hobson said.
Not all employees might feel the package is fair, though. As 2022 survey from Just Capital found that 73% say that most CEOs of America’s largest companies are compensated too much.
A 2023 Economy Policy Institute study found that from 1978 to 2022, top CEO compensation skyrocketed by 1,209.2% compared with a 15.3% increase in compensation for a typical worker.
Why have Starbucks brought in a new CEO?
Starbucks says Niccol has “proven himself to be one of the most effective leaders in our industry, generating significant financial returns over many years”.
The company has been under pressure to improve the company’s financial performance and improve its stock price, which has fallen by 20% over the past five years amid a backdrop of tough market conditions and an unsettled workforce.
Workers at several hundred Starbucks stores have voted to unionize, but despite the company agreeing to talks with Starbucks Workers United, no formal agreements have been reached.
The disruption in stores has been an ongoing battle for Starbucks’ executive team, including staff filing multiple complaints with the National Labor Relations Board (NLRB), ranging from retaliation and harassment to intimidation and union busting.
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Starbucks has denied the charges and says it respects its workers’ rights to organize, though it has retained union avoidance law firm Littler Mendelson.
The coffee giant is optimistic about the ability of Niccol to drive performance while minimizing disruption, highlighting his work at Chipotle.
“His focus on people and culture, brand, menu innovation, operational excellence, and digital transformation have set new standards in the industry and driven significant growth and value creation,” their statement said. “Revenue has nearly doubled, profits have increased nearly sevenfold, and the stock price has increased by nearly 800% during his leadership, all while increasing wages for retail team members, expanding benefits, and strengthening the culture.”
While Niccol gets to work on replicating that success for beverages rather than burritos, he has been given the flexibility to work from home at his property in Newport Beach, California.
Starbucks will pay for a “small remote office,” set him up with a local assistant, and offer the use of a company jet when he travels to its Seattle-based HQ.
