Starbucks’ new CEO Brian Niccol is expected to be paid well over $100 million in his first year with the company in one of the biggest US hires on record.
In an added sweetener, Niccol will not be required to relocate from his home in Newport Beach, California, to Seattle, the headquarters of the global café chain.
Starbucks announced on Tuesday that Niccol would take over from Laxman Narasimhan, who stepped down abruptly after spending little more than a year in the top job after facing public critiques from the company’s founder.
Niccol, who was lauded for his successful turnaround at Burrito chain Chipotle, will take the reins as the coffee giant’s chairman and CEO on September 9.
‘Right now he’s considered to be almost the LeBron James or the Tom Brady or the [Lionel] Messi of the restaurant industry,’ Bernstein analyst Danilo Gargiulo said as news broke of his hiring.
Niccol became one of the most highly sought after corporate executives in the world after he established a track record of success in turning around companies that have hit a rough patch, including Taco Bell and, most recently, Chipotle.
He took the top job at the California chain in 2018 when Chipotle was being roiled by a series of foodborne illness outbreaks that had sickened more than 1,000 of its customers over several years.
Revenue at Chipotle has nearly doubled since his arrival after he energized product innovation and at the same time, instituted employee benefits like a program that pays employees’ college tuition costs at certain schools.
Starbucks is counting on Niccol to revive fading sales and re-establish the company as a destination where customers are willing to pay premium prices for its products.
In a filing with the Securities and Exchange Commission late Wednesday, Starbucks said that the 50-year-old Niccol will receive a cash bonus of $10 million as well as $75 million in equity to make up for what is being forfeited by his abrupt departure from Chipotle.
The equity component of his pay package will vest over time and is contingent on meeting performance targets.
If Starbucks meets those targets and other goals, his pay could easily surpass $100 million in his first year.
Niccol’s annual base salary will be $1.6 million. He’ll also have an annual cash incentive opportunity at a target of 225 per cent of his base salary and a maximum of 450 per cent of base salary. If he achieves the maximum incentive, it would be about $8.8 million.
Starting in fiscal 2025, Niccol will be eligible to receive annual equity awards worth up to $23 million.
Perhaps just as notable, Starbucks is not requiring that Niccol relocate to Starbucks headquarters in Seattle, saying he can remain in Newport Beach, California, where he currently lives and where Chipotle is based.
According to a regulatory filing, Starbucks will help create, with assistance from Niccol, a small remote office in Newport Beach and the company will hire an assistant for Niccol at that location.
Niccol will commute to Seattle as needed on the company plane, as well as embark on any other business travel that’s deemed necessary.
Starbucks Chief Financial Officer Rachel Ruggeri is serving as the interim CEO until Niccol arrives in early September.
Niccol will be the fourth boss in less than three years after Narasimhan – former boss of British consumer goods giant Reckitt Benckiser who joined in March 2023 – left with immediate effect.
Throughout his tenure, Narasimhan faced scrutiny over his lack of experience in the restaurant sector, as well as critiques from predecessor Howard Schultz, the pioneer who built Starbucks into the world’s largest coffee chain.
Schultz, who severed ties with Starbucks last September but remains one of its largest shareholders, published an open letter on LinkedIn in May slamming disappointing earnings and what he called the company’s ‘fall from grace’.
He said the company needed to renew its focus and begin fixes at home in the US, as well as face up to its problems.
‘At any company that misses badly, there must be contrition and renewed focus and discipline on the core,’ he said. ‘Own the shortcoming without the slightest semblance of an excuse.’
Narasimhan, who was recruited by Schultz, said at the time: ‘We had a tough quarter. We need to do better, and we will. As I look forward, I’m confident we have the right strategy.’
Starbucks’ downturn has been blamed on weaker demand due to price rises and boycotts related to the war in Gaza and alleged links to Israel.
Mellody Hobson, who spearheaded the leadership shake up, said the board had begun pushing to have Narasimhan replaced ‘a couple months ago.’
‘I made an overture through someone to Brian, and he took the call,’ Hobson told CNBC.
‘We thought we had the opportunity to engage with one of the biggest names in the industry, someone whose track record is just clearly proven,’ she said. ‘He knows this industry, and we thought he would be the right leader for this moment.’
Shares of Starbucks surged 20 percent when Niccol’s appointment was announced earlier this week, and changed little Thursday.