Starbucks CEO Kevin Johnson speaks at the company’s annual shareholders’ meeting at WAMU Theater on March 20, 2019 in Seattle, Washington.
Stephen Brashear | Getty Images
Starbucks shareholders rejected the coffee chain’s executive compensation proposal, in a rare admonition from an S&P 500 company.
The resolution is not binding and is unlikely to influence the decision of the board. However, the Wall Street Journal, which first reported, said only ten S&P 500 companies had rejected annual decision-making decisions in the past year, based on data from ISS Corporate Solutions.
The proposal has paid out $ 1.86 million to CEO Kevin Johnson for performance in fiscal 2020, as the company endures the coronavirus pandemic and pays $ 50 million in retention if it goes through the fiscal 2022 would remain.
“The board unanimously supported the performance-based retention rewards awarded to our executives at the end of 2019,” Mary Dillon, board member and Ulta CEO, said in a statement to CNBC. “This award – earned over a period of time by the company’s outstanding performance – is in line with our commitment to shareholder value creation and ‘pay-for-performance’ philosophy.”
In 2020, 84% of Starbucks shareholders voted in favor of the pay decision.
Prior to the shareholders’ meeting, Institutional Shareholder Services, which manages ISS Corporate Solutions, and Glass Lewis recommended that shareholders reject the October 2019 to September 2022 performance incentive scheme. Both companies disagree with Starbucks’ rationale for one-time cash bonuses given to CEO Kevin Johnson and former COO Roz Brewer. Brewer forfeited her cash prize when she left the company in February to serve as CEO of Walgreens Boots Alliance.
ISS writes that it is concerned about the frequency of one-off awards and that Starbucks did not adequately explain why the long-term award was handed out in cash.
Starbucks said in a statement that shareholders should approve the resolution. The final payment for the cash grant will only be known in the 2022 budget. The company also noted that Starbucks’ market value has risen by $ 39 billion since Johnson became CEO in 2017.
Shares of Starbucks fell about 1.5% on Thursday. The stock has risen 92% in the past year, giving a market value of $ 128 billion.