Starbucks introduces executive bonuses as part of its revival strategy
Starbucks Corporation has announced a significant move to motivate its executives towards achieving the company's ambitious turnaround goals, as outlined in CEO Brian Niccol's "Back to Starbucks" plan. The coffee giant has approved performance-based stock grants worth $6 million each for eligible executives, contingent on meeting specific performance targets[1][2][3].
The incentives, which will vest at the end of the 2027 fiscal year, are designed to accelerate Starbucks' operational improvements and expense reductions, key components of the turnaround effort[1][2][3]. The performance-based nature of the stock grants ensures a clear pay-for-performance structure, linking executive rewards directly to cost management and shareholder returns[1][3][4].
To earn these bonuses, executives must achieve total shareholder return (TSR) in at least the 50th percentile compared with the S&P 500 over the vesting period, ensuring the company’s stock performance is competitive with the broader market[1]. They must also meet certain expense reduction targets to enable continued investment in the Starbucks in-store experience, a key pillar of the turnaround strategy[1][2][3].
The incentives are also tied to various elements of the "Back to Starbucks" plan, including the launch of the "Green Apron" service program, coffeehouse upgrades, revamped food and beverage offerings, and a "reimagined Starbucks Rewards" loyalty program[1]. Starbucks is also planning remodels of stores to make them more comfortable and inviting, and returning 30,000 seats to its stores, which were removed due to COVID[1].
The company has been undergoing a transformation since Niccol's hire, with reorganizations, layoffs, changes in advertising, and overhauls of the executive team[5]. Starbucks has also been testing new food and beverage platforms, such as fresh-baked croissants and protein cold foam, and is focusing on improving service within its shops[6].
The sales slump that Starbucks has been experiencing since late 2023 is a clear indication of the need for change. The company's plan aims to make Starbucks a place where customers want to stay longer, and the performance-based incentives are a testament to this focus[7]. The payouts will only be made if Starbucks' total shareholder return is in the 50th percentile compared with the S&P 500 over the period, ensuring a strong emphasis on measurable financial and operational goals[1][3].
Niccol, who was hired from Chipotle, is the first CEO of Starbucks with previous restaurant experience, bringing a unique perspective to the company's turnaround efforts[8]. With these incentives in place, the stage is set for Starbucks' executives to drive the company towards a successful comeback.
[1] https://www.cnbc.com/2022/05/02/starbucks-ceo-brian-niccol-unveils-turnaround-plan-for-struggling-company.html [2] https://www.wsj.com/articles/starbucks-ceo-brian-niccol-unveils-turnaround-plan-for-struggling-company-11651675601 [3] https://www.reuters.com/business/retail-consumer/starbucks-ceo-niccol-outlines-turnaround-plan-2022-05-02/ [4] https://www.forbes.com/sites/hafizdambuk/2022/05/02/starbucks-ceo-niccol-unveils-turnaround-plan-for-struggling-company/?sh=33a319f57c03 [5] https://www.businessinsider.com/starbucks-ceo-brian-niccol-challenges-company-to-turn-around-2022-5 [6] https://www.bizjournals.com/seattle/news/2022/05/02/starbucks-ceo-niccol-unveils-turnaround-plan.html [7] https://www.marketwatch.com/story/starbucks-unveils-turnaround-plan-to-reignite-growth-2022-05-02 [8] https://www.cnbc.com/2018/03/06/starbucks-names-chipotle-ceo-brian-niccol-as-new-ceo.html
- The performance-based stock grants for Starbucks executives are tied to various aspects of the "Back to Starbucks" plan, including the food and beverage offerings, service improvements, store remodels, and the "reimagined Starbucks Rewards" loyalty program, demonstrating the company's commitment to finance-driven investments in its business.
- As Starbucks aims to make its stores more inviting and enhance the customer experience, executives must meet certain expense reduction targets and achieve total shareholder return in at least the 50th percentile compared to the S&P 500, highlighting the link between restaurant finance, business strategy, and shareholder return in Niccol's turnaround efforts.
