Starbucks Shareholders Reject Executive Pay Proposal

By Heather Haddon 

Starbucks Corp. shareholders rejected the coffee company's executive compensation proposal, a rare rebuke to a major U.S. company.

The plan voted down by Starbucks shareholders Wednesday includes millions of dollars in bonus and retention pay for Starbucks' chief executive, though the resolution was nonbinding and may not affect executives' compensation. Only 10 S&P 500 companies have had shareholders reject annual say-on-pay resolutions in the last year, according to ISS Corporate Solutions, an executive compensation consulting firm run by investment adviser Institutional Shareholder Services.

The compensation proposal for the company's executives included a one-time bonus award to CEO Kevin Johnson of $1.86 million for its 2020 fiscal year. Starbucks's board also agreed in late 2019 to provide Mr. Johnson with a three-year retention bonus of up to $50 million if he helped to boost the company's stock to established targets and remained at Starbucks through the end of its 2022 fiscal year.

The company said in a filing to shareholders that Mr. Johnson had helped Starbucks's market value grow by more than $39 billion since becoming CEO in 2017 and had helped deliver stronger results compared with most peers.

ISS and fellow proxy-advisory firm Glass Lewis had advised shareholders to vote against the pay resolutions. ISS wrote that Starbucks hadn't adequately explained why the long-term award was made in cash and said that the frequency of the one-time awards was concerning. Starbucks's rationale for the performance-cash pay wasn't adequate given the size of the potential $50 million bonus, ISS said.

Mary Dillon, the CEO of Ulta Beauty Inc. and a Starbucks director who chairs its compensation committee, said that the board unanimously backed the performance awards, which reflect Starbucks's support of paying for high performance. Mr. Johnson's role is vital to the company particularly during the pandemic, Ms. Dillon said in a statement.

"Our board and management team will continue to engage with investors in the months ahead to understand their perspectives as part of our ongoing evaluation of our executive compensation programs," she said.

Rosalind Brewer, the company's outgoing chief operating officer who left to become the CEO of Walgreens Boots Alliance Inc., forfeited her $5 million retention bonus, Starbucks said.

Also on Wednesday, Starbucks elevated Ariel Investments LLC co-CEO and president Mellody Hobson to board chairwoman. Ms. Hobson, a prominent investor and Starbucks board member since 2005, officially became the only Black chairwoman of an S&P 500 company.

Starbucks turns 50 years old in 2021, expanding from a single Seattle store into a global brand that has sought to address societal issues such as racism and the environment, while also drawing criticism for growing too rapidly. The company last year said it would tie executive compensation to increasing minority representation within its ranks and slash its water and waste usage. It is also closing hundreds of U.S. stores as it shifts to new ones that offer more to-go options.

Write to Heather Haddon at [e-mail]

(END) Dow Jones Newswires

March 17, 2021 18:46 ET (22:46 GMT)

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