Starbucks CEO Kevin Johnson speaks at the company’s annual shareholder meeting at the WAMU Theater on March 20, 2019, in Seattle, Washington.
Stephen Brashear | Getty Images
Starbucks shareholders rejected the proposal to compensate coffee chain directors, in a rare admonition 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 only 10 S&P 500 companies have had shareholders in the past year who reject decisions about annual pay-on-pay, based on data from ISS Corporate Solutions.
The proposal included a $ 1.86 million payout to CEO Kevin Johnson for fiscal 2020 performance as the company weathered the coronavirus pandemic, and $ 50 million in lien if it lingers through fiscal 2022.
“The board of directors unanimously supported the performance-related retention incentives awarded to our executives in late 2019,” said Mary Dillon, Ulta board member and CEO, in a statement to CNBC. “This award – earned through exceptional business performance over time – is consistent with our commitment to shareholder value creation and the pay-for-performance philosophy.”
In 2020, 84% of Starbucks shareholders voted in favor of the remuneration resolution.
Ahead of the shareholders’ meeting, Institutional Shareholder Services, which runs ISS Corporate Solutions, and Glass Lewis recommended that shareholders reject the performance incentive scheme from October 2019 through September 2022. Both companies disagreed 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 wrote that it was concerned about the frequency of one-time incentives and that Starbucks had not provided an adequate explanation as to why the long-term incentive was paid in cash.
Starbucks said in a filing asking shareholders to approve the resolution that the final cash prize payout will not be known until fiscal year 2022. The company also noted that Starbucks’ market value has increased by $ 39 billion since Johnson became CEO in 2017.
Shares of Starbucks fell about 1.5% during morning trading on Thursday. The stock is up 92% in the past year, putting it at a market value of $ 128 billion.