Starbucks CEO Swap Will Cost $120 Million In Bet On Turnaround

(Bloomberg) -- The chief executive officer switch atop Starbucks Corp. is poised to cost the coffee chain at least $120 million, and possibly more, as the board bets on a change of leadership to turn the business around. .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, according to filings. The package will likely make him one of the highest-paid CEOs in the US..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 billionaire founder and former CEO Howard Schultz, who had shaped the company over decades, has 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..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 spent less than two years atop Starbucks, to which he was handpicked by Schultz from consumer goods-maker Reckitt Benckiser Group Plc. Niccol has led Chipotle since 2018. He starts at Starbucks on Sept. 9..Schultz, 71, has had three stints as CEO of the chain he founded. He currently is chairman emeritus and has a net worth of $5.5 billion, according to the Bloomberg Billionaires Index..--With assistance from Devon Pendleton..More stories like this are available on bloomberg.com.©2024 Bloomberg L.P.

Starbucks CEO Swap Will Cost $120 Million In Bet On Turnaround

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.

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