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Starbucks CEO gets a $60 million ‘golden goodbye’ even as company tries to keep out unions

Some people get a set of golf clubs when they retire.

Some people get a gold watch.

Starbucks
SBUX,
-0.01%

Chief Executive Kevin Johnson? At least $60 million in a golden goodbye. And that’s not the whole story, either.

The coffee chain’s 61-year-old honcho announced last week he was standing down, to replaced by founder Howard Schultz (he’s back again).

Johnson had been at the helm for almost exactly five years.

During his tenure the stock underperformed both the S&P 500
SPY,
+0.62%

index overall and an equal-weighted S&P 500 ETF like the Invesco S&P 500 Equal Weight ETF
RSP,
+0.64%
.

Starbucks’ return from news of Johnson’s appointment to news of his resignation? Some 56%, including dividends.

The S&P 500 during the same period? Er…97%.

How much would you pay for this kind of performance? No price is too high, surely.

Shareholders who wonder exactly how much they’ve paid in cash and equity will find it a challenge, though. The details are buried in the 45 dense pages in the company filings.

For instance, we know his annual pay during his five years at the helm added up to $79 million.

But then it reports he is due to receive a $60.3 million payout on retirement through “accelerated equity awards”?

Starbucks says Johnson has accumulated in total 3.2 million shares and options. That’s got a gross value, before option costs, of nearly $300 million. But the net value, after option expenses, will be much less.

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The company also reveals just 14 months ago the board awarded Johnson a juicy extra bonus package worth up to another $25 million… as a retention tool.

“In December 2019,” the company says in its filings, “the board desired to recognize and retain Mr. Johnson’s high-caliber leadership and awarded him a long-term cash performance-based award that reflects the board’s commitment to furthering the Company’s leadership continuity. The award is designed to retain Mr. Johnson in his role as president and CEO by providing compelling upside reward opportunity beyond the Company’s regular executive compensation program for continuing to achieve exceptional shareholder returns through our transformational ‘Growth at Scale’ agenda.” 

So he gets up to an extra $25 million to stick around…and then he gets to leave. Brilliant.

How much do these overlap? How long did he have to stay to get his retention bonus? What’s the net value of his take from stockholders in cash and equity for his five years in charge? It’s far from clear.

Starbucks did not respond to requests for comment.

But among the entertaining news is that Johnson, with his 3.2 million shares and options, made an extra $12 million last week after Starbucks announced the news he was leaving the company.

That’s because the stock rallied $4 on the news.

How about that? He leaves, the market cheers — and that makes him even richer.

Don’t you wish you lived up in the C-Suite clouds, a Twilight Zone where the normal laws of economics are upside down and back to front?

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Schultz has retaken the helm at Starbucks as the company faces a campaign among its workers to unionize. A look at executive pay would tell anyone why.

For example, last fall the company raised the minimum pay for baristas to $17 an hour. Good, right? Well, someone making soy lattes at that hourly rate would have to work 40 hours a week, 50 weeks a year, for 465 years to match Johnson’s annual pay, which averaged $15.8 million.

You don’t have to be Leon Trotsky to think this is messed up.

And that’s just part of it. Johnson’s $60-million retirement package alone would be enough to buy the 61-year old a lifetime income of $284,000 a month, according to immediateannuities.com.

So after leaving the company the former CEO could kick back, sit on the sofa flipping through channels, and earn more every month than a working barista at $17 an hour would make working for 8 years.

Workers United, the union currently trying to get in the door at Starbucks, isn’t impressed by Johnson’s golden goodbye. I emailed them for comment and they sent me back a statement from Nikki Taylor, the former Starbucks supervisor in Memphis who says she was fired for trying to unionize there.

“We, who are on the front lines providing great customer service, are struggling to pay rent and afford health care, so it is hard to hear that the Board who squandered millions of dollars on anti-union lawyers is rewarding the outgoing CEO with millions more,” wrote Taylor in a statement. “Kevin Johnson’s financial success was enabled by hundreds of thousands of partners who came to work everyday, even during a pandemic. We’re organizing to hold Starbucks accountable to be the company we know it can be—where we have a true partnership with management and an equal seat at the table.”

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The thing that always gets me about these CEO awards, apart from their sheer shamelessness, is that in addition to the vast sums these guys get every year for supposedly doing their job “well” they also get $1 million a year or more “base salary” just for doing their job at all.

In other words, a seven-figure salary isn’t the meal. It’s just an amuse-bouche, like those little nibbles the server brings you when you first sit down at the table. Then they expect an appetizer, a main course — and a dessert.

Johnson’s base salary was $1.55 million a year. Then you add on all the extras.

Out in the normal world, if someone pays me $1.55 million a year to do my job, they’re already expecting me to do my best.

But don’t blame the stockholders. They got short changed too.

Ah, the C-Suite.

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