Brian Niccol will start next month with a pay package worth $113 million, a large part of which is equity to replace awards from his prior employer that he’ll have to relinquish, Bloomberg reports.
The package will likely make him one of the highest-paid CEOs in the US, but the change led to an instant return in terms of the company’s stock price. After the announcement, shares in Starbucks soared by 25%, the most ever, and added $21.4 billion to the market capitalization.
Outgoing CEO Laxman Narasimhan, who was terminated without cause with respect to his contractual entitlements, will leave with a payout likely worth roughly $10 million, according to filings and his 2022 offer letter. He also holds equity awards worth millions of dollars, which he may collect in part depending on the terms of his exit.
The costly switch follows a difficult stretch for Starbucks which has grappled with weaker sales and activist investors Elliott Investment Management and Starboard Value reportedly amassing stakes in the company. Meanwhile former CEO Howard Schultz, who had shaped the company over decades, had publicly lamented that it lost focus on its key US operations.
The chain will award Niccol stock grants worth $75 million to replace unvested awards he will leave behind at Chipotle Mexican Grill Inc. He’ll also get a $10 million signing bonus. Those come on top of his annual pay package of $28.2 million, consisting of a salary, a bonus and a long-term stock award.
Much of the equity is linked to performance targets that span multiple years and may pay out fewer, or more, shares depending on how the company does.
Another perk to sweeten the pot for Niccol: He won’t be required to move to the coffee chain’s headquarters in Seattle, though that’s where his primary office will be. Starbucks is setting up a remote office for him in California, and he’ll commute to Seattle and travel as needed.
Narasimhan is poised to exit with a $7.8 million severance payment. He will also get a pro-rated annual bonus for the current fiscal year, which may amount to roughly $2 million assuming that he’s met the performance targets underpinning the payout.
On the day of his exit he also still held equity awards worth millions of dollars as of Tuesday’s close that were scheduled to vest in coming years, some contingent on results. Starbucks’s regulatory filings don’t specify what will happen to them, and a company spokeswoman declined to comment.
Public-company executives typically receive at least a partial payout of unvested stock awards if they are terminated without cause.
Narasimhan’s tenure as CEO at Starbucks, a role he was handpicked for by Schultz from consumer goods giant Reckitt Benckiser Group Plc, lasted less than two years. He will be succeeded by Brian Niccol, who has led Chipotle Mexican Grill since 2018. Niccol will assume the role at Starbucks on September 9th.
Schultz, 71, has held the CEO position at Starbucks three times. He currently serves as chairman emeritus and holds a net worth of $5.5 billion, according to the Bloomberg Billionaires Index.
