Annals of Ridiculous Exec Comp: a $12 Million Howard Schultz 'Retention
Bonus' at Starbucks
by jeff Bailey
May 01, 2012
Executive compensation among publicly-traded U.S. companies is a sprawling
smorgasbord of cash and equity and guaranteed pensions – seemingly limited
only by the appetite of the CEO to gorge him or herself. But we hold in
special scorn those individuals who have already attained billionaire status
thanks to stockholdings in the companies they run, and yet who continue to
feast as if their next meal was in doubt.
here for a
special list of these
do the billionaires, say, like Larry Ellison of Oracle (ORCL),
get special scorn? Because their huge stockholdings in the companies they
run give them all the incentive they need to show up for work and do a great
job. We suspect that if boards of directors at such companies suddenly grew
spines and told the CEOs they’d have to work for nothing – no salary, no
bonus, no stock awards or options, no special guaranteed pension – that the
billionaire CEOs would, after sulking, keep doing what they’d been doing. To
do otherwise would risk their wealth, after all.
Which brings us to Howard Schultz, CEO of Starbucks (SBUX).
His roughly 23 million Starbucks shares are valued at more than $1.3
billion. He has feasted mightily in prior years, so as of the end of the
2011 fiscal year, October 2, Schultz also had stock options that carried
unrealized gains of about $170 million. And there’s the usual bunch of other
compensation stuff for him.
Point is, the bulk of the man’s wealth is tied up in Starbucks stock. He has
demonstrated an extreme desire to run the company and be identified as its
leader. If you doubt that, read his second self-flattering business memoir,
"Onward: How Starbucks Fought for Its Life Without Losing Its Soul,” or
spare yourself and read this
unkind review of the book,
written by yours truly. In “Onward,” without any apparent embarrassment,
Schultz details how he schemed to oust Jim Donald, Starbucks’ CEO during a
period when Schultz fancied himself a strategic thinker who didn’t need to
be pulling all the levers.
Starbucks’ board may not realize it, but they have Howard by the coffee
beans – his whole being seems tied up in his role as Starbucks’ CEO. Hell,
he’d probably pay them to remain CEO. And yet:
Schultz was given a $12 million restricted stock award recently and it was
explained as a retention bonus. “After the end of fiscal 2011, our ceo was
granted a special RSU award in recognition of his leadership in driving
record 2011 performance and the board's desire to retain Mr. Schultz for at
least the next three years.”
Schultz threatening to leave? Perhaps take another job?
aren’t told, but the idea seems silly. Schultz received regular compensation
of $16.4 million last year.
Schultz has, of course, presided over a wonderful turnaround at Starbucks,
since returning as CEO.
SBUX data by
no one has profited more from that turnaround than Schultz, who’s holdings,
like those of smaller Starbucks shareholders, grew eightfold from the
stock’s bottom in late 2008.
Kevin Johnson, CEO of Juniper Networks (JNPR)
chairs the Starbucks compensation committee. Nice work, Kevin. Also on the
panel is Myron Ullman III, the recently retired CEO of JC Penney (JCP),
where he stepped aside quietly as former Apple (AAPL)
executive Ron Johnson brought in new top managers and awarded them
astounding up-front cash
bonuses. Myron walked away with $34.6 million in 2011 compensation.
Starbucks board members are paid roughly $250,000 a year for their services.
Starbucks’ board received wise counsel from not one but two compensation
consulting firms, Towers Watson & Co. and Frederic W. Cook & Co. One expects
the firms are well paid.
Jeff Bailey is an editor for the
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