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Starbucks CEO has a $553m haul

Starbucks Chairman and CEO Howard Schultz speaks during the Starbucks 2016 Investor Day meeting in New York. AP Photo/Richard Drew, File

Starbucks Chairman and CEO Howard Schultz speaks during the Starbucks 2016 Investor Day meeting in New York. AP Photo/Richard Drew, File

Published Feb 4, 2017

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New York - It’s no secret that Starbucks's Howard Schultz will

step down from the top job a wealthy man. What’s surprising is how

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wealthy. 

Schultz, 63, has received compensation worth about $172

million since he began his second stint as the coffee retailer’s chief

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executive officer in January 2008, according to the company’s regulatory

filings.

A closer look, however, reveals an even bigger haul.

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Schultz, who’s set to step down as CEO in April, received most of his

compensation in equity, which varies with Starbucks’ share performance. Since

he led the company to a sixfold stock improvement, Schultz’s total payday for

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the last nine years: $553.3 million.

“Whatever figure you read is highly unlikely to be the

value the executive actually receives,” said Peter Lupo, a managing director at

executive compensation consulting firm Pearl Meyer in New York. “For a CEO, only

about 10 percent of pay is guaranteed. The rest is typically closely tied to

performance.”

Companies such as Seattle-based Starbucks don’t have to

disclose the higher figure, making comparisons to other CEOs difficult.

Companies are only required to reveal the value of an executive’s complete pay

package in the year it’s granted. That includes payments such as salary,

bonuses and the value of taxable perks. For 2016, Schultz received a combined

$4.91 million under those categories.

The remainder came in stock options and restricted

shares, valued at $16.9 million on the day they were granted. But Schultz will

only receive the options over a number of years by remaining at the company,

which he plans to do, as executive chairman. The shares pay out if he achieves

certain goals, and he could end up with twice as many shares if those targets

are exceeded. What the awards will be worth at that point also depends on the

company’s stock price.

Piecing that together to get a full sense of what a CEO

ends up earning can be tricky, even for boards of directors. Many don’t do

thorough analyses of how pay packages can swell in value if the stock price

rises, according to John Trentacoste, a managing director at compensation

consultant Farient Advisors.

“At Starbucks, we have a pay-for-performance philosophy,

and Howard’s compensation over the past decade is directly reflective of the

company’s strong financial performance, under his leadership,” spokeswoman

Linda Mills said in an e-mail.

Schultz has become the face of Starbucks while steering

the business to greater heights. Since he returned to the top of the coffee

chain in 2008, the number of company-operated and licensed stores increased to

25 000 from 15 000, and operations expanded to 75 countries from 43. Revenue

has more than doubled. As a result, its shares have risen 517 percent, compared

with 61.8 percent for the S&P 500 Index.

In the meantime, the CEO has so far earned 2.92 million

restricted shares and 11.8 million options, according to data compiled by

Bloomberg, adjusted for a 2015 stock split. He’s exercised some of the options

but still holds most of them, filings show. Those proceeds, combined with the

outstanding equity awards valued as of Monday’s closing price of $55.90 a

share, comes out to $515.6 million. He’s also received $12 million in

salary, $22.2 million in bonuses and perks worth $3.54 million.

The estimate assumes Schultz hasn’t sold any of his

vested restricted shares, since regulatory filings don’t disclose if disposed

stock comes from certain awards or his previous ownership stake. Unvested

awards were excluded.

Read also:  Shoprite CEO scoops R50m performance bonus

Schultz joined Starbucks as head of marketing in 1982 and

ended up buying the company five years later. He was CEO until 2000, when he

became chairman to focus on global strategy. In 2008, the board tapped him for

a second stint after the stock had slid more than 40 percent in the previous 12

months.

Schultz on Sunday announced plans to hire 10 000 refugees

in coffee shops around the world within five years. It was a rebuke to

President Donald Trump’s immigration order that temporarily suspended admission

of refugees into the US.

The best corporate leaders inspire their companies to

success, a fact that’s sometimes forgotten by CEOs looking to match their

compensation to people such as Schultz, said Dan Walter, chief executive of

Performensation, a San Francisco-based pay consulting firm.

“That’s like saying you should get paid what Tom Brady or

Ben Roethlisberger get paid,” Walter said, referring to star quarterbacks of

the National Football League. “Win a few Super Bowls and then give me a call.”

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