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Starbucks CEO Kevin Johnson speaks during the company’s annual meeting of shareholders at the WAMU Theater on March 20, 2019 in Seattle, Washington.
Stephen Brashear | Getty Images
Starbucks shareholders have rejected the coffee chain executive compensation proposal, in a rare warning from an S&P 500 company.
The resolution is not binding and is unlikely to affect the decision of the board. However, the Wall Street Journal, which first reported the news, said just 10 companies in the S&P 500 had seen their shareholders reject annual compensation entitlement resolutions over the past year, based on data from ISS Corporate Solutions.
The proposal included a payment of $ 1.86 million to CEO Kevin Johnson for Fiscal 2020 performance as the company weathered the coronavirus pandemic and $ 50 million in retention compensation if he stays true to the ‘fiscal year 2022.
“The board unanimously supported the performance-based retention awards given to our executives at the end of 2019,” said Mary Dillon, member of the board of directors and CEO of Ulta, in a statement to CNBC. “This award – which is earned through outstanding company performance over a period of time – is in line with our commitment to creating shareholder value and the ‘pay for performance’ philosophy.”
In 2020, 84% of Starbucks shareholders voted in favor of the salary resolution.
Prior to the shareholders’ meeting, Institutional Shareholder Services, which manages ISS Corporate Solutions, and Glass Lewis recommended that shareholders reject the performance incentive program from October 2019 to September 2022. The two companies were not d agree with Starbucks’ rationale for the one-time cash bonuses given to CEO Kevin Johnson and former COO Roz Brewer. Brewer lost her cash reward when she left the company in February to take on the role of CEO of Walgreens Boots Alliance.
ISS wrote that he was concerned about the frequency of one-time rewards and that Starbucks had failed to provide an adequate explanation of why the long-term reward was being distributed in cash.
Starbucks said in a filing asking shareholders to approve the resolution that the final cash award payment would not be known until fiscal 2022. The company also noted that Starbucks’ market value increased by $ 39 billion. dollars since Johnson became chief executive in 2017.
Starbucks shares were down about 1.5% on Thursday morning in trading. The stock has risen 92% in the past year, giving it a market value of $ 128 billion.
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