Starbucks shareholders voted against the company’s CEO pay proposal in a rare move that may indicate some shareholders think the chief executive is overpaid.
The news was first reported by the Wall Street Journal following Starbucks’ annual shareholder meeting. Starbucks confirmed the results of the vote to CNN Business.
Starbucks CEO Kevin Johnson earned a $1.86 million bonus in fiscal year 2020 in addition to a larger retention award, designed to keep Johnson in the position through fiscal year 2022, according to Starbucks’ proxy statement.
“The board unanimously supported the performance-based retention rewards granted to our executives in late 2019,” said Starbucks board member and Ulta Beauty CEO Mary Dillon in a statement responding to the vote.
Companies seek non-binding approval on executive compensation from shareholders through so-called “say-on-pay” proposals outlined in proxy statements each year. Because the proposal is not binding, companies don’t need to make any changes based on the outcome of the vote. But companies are legally required to allow investors to vote on compensation.
Generally, “it is pretty rare for the ‘say-on-pay’ proposals not to be approved,” said Kai Liekefett, a partner atSidleyAustin law firm who specializes in executive pay and corporate governance.
Starbucks said in response to the guidance that “we respectfully disagree,” with the recommendations, saying that the award reflects the value Johnson has brought to the company and is designed to keep him in the role through at least fiscal year 2022, while the company executes its rapid growth agenda. The company has recently lost two high-ranking officials: former COO Rosalind Brewer, who just took the helm at Walgreens, and Patrick Grismer who recently stepped down as chief financial officer.
Shareholders ultimately decided to go with the recommendation issued by the advisories and voted down Johnson’s proposed compensation package.
Though Starbucks is not required to make any changes, it should take shareholder sentiment into account as it considers how to structure executive pay moving forward, said Liekefett. Investors may feel “alienated if a board does not appear to be responsive … to the criticism,” he said. That could ultimately lead to advisories voting against director nominations, or invite an activist shareholder to take a stake in the company.
Starbucks intends to better understand what happened, Dillon noted.
“Our board and management team will continue to engage with investors in the months ahead to understand their perspectives as part of our ongoing evaluation of our executive compensation programs,” she said.
-Cnn
