Starbucks as a global food and beverage retailer has never shied away from taking substantial risks, and their most recent decision to pay the new CEO Brian Niccol a $113 million compensation package is evidence to that. This incredible amount has turned heads across the international business community as one of the biggest sign on deals in corporate history. Niccol previously served as the boss of Chipotle Mexican Grill and he is assuming his new Starbucks’ position at a time where the company is facing some serious operational challenges.
When Starbucks decided to invest heavily in Brian Niccol’s leadership, the firm’s management made it known that they are looking to turn things around due to declining stock prices. This is actually so since the company’s stock shares started lagging behind in the market and mounting pressures from activist investors further pushed the firm to appoint a new CEO.
A high stake investment
Brian Niccol now holds Starbucks’ future in his own hands and the $113 million package is more than just a welcome bonus. The package includes a $10 million sign on bonus alongside another $75 million in stock options to compensate for the shares Niccol renounced at Chipotle, as well as a $1.6 million annual salary with the possibility of $23 million in performance related bonuses.
This enticing deal offered to Niccol is four times bigger when compared to that of his predecessor, Laxman Narasimhan, who received a compensation of $28 million as a sign on package. Starbucks is maintaining strong faith in Niccol’s intelligence to replicate what he achieved at Chipotle Mexican Grill, where he guided the firm to an 800% rise in the company’s stock value. Although there’s a lot on the line, this investment commitment by Starbucks could lead to even greater rewards for the company and its stakeholders.
Niccol’s proven track record
The timing of Brian Niccol’s appointment as the new Chief Executive Officer at Starbucks couldn’t have been better. He’s a complete executive who oversaw a surprising turnaround at Chipotle and brought the firm from the brink of bankruptcy to new operational heights. Chipotle’s stock price surged under his leadership thus demonstrating his capability to guide a company through uncertain business times. Niccol has certainly earned the reputation as one of the most successful executives in the food and beverage industry because of his knack for innovation, which led to initiatives like the introduction of digital ordering at Chipotle to streamline operations at the firm.
New beginnings for Starbucks
Starbucks is looking to revitalize its brand and regain its market share with Brian Niccol as the one in charge. The company’s share price has dropped by almost 20% during the last five years, this is a sharp contrast to the 80% increase of Standard and Poor’s (S&P) 500 over the same period. Starbucks’ senior leadership has also faced increasing pressure from investors led by Elliott Investment Management, who are pushing for better governance and performance in the company. However, Starbucks’ stocks jumped by 24% and investors expressed an immediate response following Niccol’s appointment as the new Chief Executive Officer.
Brian Niccol will become Starbucks’ fourth CEO in less than three years and he is expected to bring both stability and vision to the company, since the firm desperately needs these two leadership aspects. And who knows? His leadership might be the spark that Starbucks needs to get back on track and win back the trust of their investors. Only time will tell if this $113 million investment will pay off in the end, but for the time being, it’s only fair to say that Starbucks is banking big on a certified and a proven executive who believes he has exactly what it takes to turn things around.
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