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PROPOSAL 2 ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION |
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We are asking shareholders to approve, on a nonbinding, advisory basis, the compensation paid to our named executive officers as reported in this proxy statement (commonly referred to as a “say-on-pay”).
We encourage shareholders to read the Compensation Discussion and Analysis section of this proxy statement, which describes how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables and narrative, which provide detailed information on the compensation of our named executive officers. The Compensation Committee and the board of directors believe that the policies and procedures articulated in the Compensation Discussion and Analysis are effective in achieving our goals and that the compensation of our named executive officers reported in this proxy statement has contributed to the Company’s long-term success.
The board has adopted a policy providing for an annual say-on-pay advisory vote. In accordance with this policy and Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and as a matter of good corporate governance, we are asking shareholders to approve, on a nonbinding, advisory basis, the following resolution at the Annual Meeting:
RESOLVED, that the shareholders of Starbucks Corporation approve, on a nonbinding, advisory basis, the compensation of the Company’s named executive officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table, and the related compensation tables, notes, and narrative in the proxy statement for the Company’s 2023 Annual Meeting of Shareholders.
This advisory say-on-pay resolution is non-binding on the board of directors. Although non-binding, the board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. Unless the board modifies its policy on the frequency of future say-on-pay advisory votes, the next say-on-pay advisory vote will be held at the 2024 Annual Meeting of Shareholders.
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Board Recommendation |
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| The board of directors recommends a vote FOR approval, on a nonbinding, advisory basis, of the compensation paid to our named executive officers. |
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Compensation Discussion and Analysis |
This Compensation Discussion and Analysis (“CD&A”) provides information on our executive compensation program including Starbucks global compensation philosophy, which focuses on rewarding partners for their central role in our growth. While the principles underlying this philosophy extend to all levels of the organization, this CD&A primarily covers the compensation of our named executive officers (“NEOs”). For fiscal 2022, our NEOs are the current executive officers and former executive officers named below. We use “Compensation Committee” or “Committee” in the CD&A to refer to the Compensation and Management Development Committee of the Starbucks board of directors. We refer to all our employees as “partners,” including throughout this proxy statement, to reflect the significant role they play in our success.
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Howard Schultz | Laxman Narasimhan | Rachel Ruggeri | Michael Conway |
interim chief executive officer | chief executive officer-elect | executive vice president and chief financial officer | group president, International and Channel Development |
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John Culver* | Kevin Johnson** | Rachel A. Gonzalez*** |
former group president and chief operating officer | former president and chief executive officer | former executive vice president, general counsel |
* Effective October 1, 2022, we eliminated the chief operating officer role, and following the elimination of that role, Mr. Culver remained employed with the Company in a senior advisor role through January 1, 2023. Due to there no longer being an equivalent role for Mr. Culver, his employment was involuntarily terminated on January 2, 2023.
** Mr. Johnson retired as president and chief executive officer, effective April 4, 2022, and remained employed with the Company in a senior advisor role through October 2, 2022.
*** Ms. Gonzalez's employment as executive vice president, general counsel was involuntarily terminated effective April 4, 2022, in connection with changes in executive leadership, and Ms. Gonzalez remained employed with the Company in a senior advisor role through May 20, 2022.
EXECUTIVE SUMMARY
Business Highlights
In fiscal 2022, our executive leadership team experienced significant changes, commencing with the retirement of Kevin R. Johnson as president and chief executive officer, and the appointment of Starbucks founder, Howard Schultz, as interim chief executive officer in April 2022. Our board of directors selected Mr. Schultz based on his role in building Starbucks into one of the world’s most recognized and respected businesses, a company focused on delivering best-in-class financial performance, through exceeding the expectations of our people and our customers. Under his leadership, Starbucks grew from 11 stores with 100 partners to more than 28,000 stores in 77 countries, and he pioneered programs like comprehensive healthcare, stock ownership, and free college tuition for full and part-time partners.
Additional leadership and organizational changes followed in fiscal 2022, which concluded with the appointment of Laxman Narasimhan, as chief executive officer-elect in October 2022. Mr. Narasimhan is expected to be appointed as our permanent chief executive officer in April 2023. Mr. Narasimhan brings nearly 30 years of experience leading and advising global consumer-facing brands. Known for his considerable operational expertise, he has a proven track record in developing purpose-led brands, and building on companies’ histories, he has succeeded in rallying talent to deliver on future ambitions by driving consumer-centric and digital innovations.
Guided by Mr. Schultz and our partners, in fiscal 2022, we began to implement our Reinvention Plan, an inspired roadmap to build the future of Starbucks, while staying true to our mission of uplifting communities through a shared love for coffee and further extending our coffee leadership and innovation. Starbucks partners are at the core of the Reinvention Plan, and we are committed to investing in our partner base through recruiting, training, and onboarding initiatives. As part of the Reinvention Plan, we also are continuing to unlock the intersection of convenience and connection by introducing enhancements to the customer experience across the retail and digital realms. Finally, we are seeking to continue to accelerate our leadership position in international markets through the strength of our licensing model, the digital Starbucks Experience, and purpose-driven growth in China.
In fiscal 2022, we continued to manage the business through global economic uncertainties, inflationary pressures, a resurgence of COVID-19 in China, and lower government subsidies. In fiscal 2022, we grew global revenues 13%* year-over-year to a record $32.3 billion, driven by 8% comparable stores sales growth globally and 12% comparable stores sales growth in North America as we saw meaningful growth in our global customer base. In the U.S., we grew our unique customers 9% year-over-year, and we saw a 16%* increase in U.S. Starbucks Rewards membership year-over-year to nearly 29 million members. However, international comparable store sales decreased 9%, primarily attributable to COVID-19 related restrictions in China, and our operating income and operating margin for the International segment decreased, driven primarily by lower sales related to COVID-19 restrictions in China, investments in our partners, and lower government subsidies.
Despite such challenges, we remain confident in our long-term strategy as we continue to execute on our Reinvention Plan, which we believe will touch, and elevate our Starbucks partner, customer and store experiences, and position Starbucks to deliver sustainable, long-term, profitable growth, and value creation.
*Growth rate is based on a 52-week basis. Please refer to Appendix A for Reconciliation of Extra Week.
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| Total Consolidated Revenues (+13% year-over-year) $32.3 Billion U.S. 90-day active Starbucks® Rewards members grew 16% year-over-year to 28.7 Million | | |
| Operating Margin (-250 basis points year-over-year) 14.3% | Total Consolidated EPS (-20.1% year-over-year) $2.83 |
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| Expanded global retail store base 6% to 35,711 Stores | Non-GAAP Operating Margin (-290 basis points year-over-year,) 15.1%* | Total Consolidated non-GAAP EPS (-7.5% year-over-year, or -5% on a 52 week basis) $2.96* |
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* Appendix A includes a reconciliation of non-GAAP operating margin and non-GAAP EPS to the most directly comparable measure reported under GAAP. Year over year growth is based on a 52-week basis. For the annual revenue growth, please refer to Appendix A, Reconciliation of Extra Week.
Fiscal 2022 Executive Compensation Payouts
Our fiscal 2022 executive program payouts are aligned with our business performance. Each of our NEOs who was eligible to earn an annual cash incentive award under the annual Executive Management Bonus Plan (“Annual Incentive Bonus Plan”) would have earned an award based on our financial and operational results, progress against our ESG initiatives, and their individual performance. However, given our overall financial and operational performance in fiscal 2022 and given that transformation efforts under our Reinvention Plan remain ongoing, our Compensation Committee elected not to pay any such awards for fiscal 2022. Our fiscal 2020 PRSUs (awarded in November 2019) paid out at only 61.25% due to our inability to achieve the rigorous earnings targets and our total shareholder return performance compared to the S&P 500 during the last three fiscal years. Further, Mr. Johnson’s long-term cash performance-based award that was originally granted in December 2019 did not pay out given the challenging relative total shareholder return targets that were set for such award were not achieved.
Listening to Our Shareholders and Changes to Fiscal 2023 Compensation
Every year, Starbucks provides shareholders with the opportunity to approve its executive compensation program on an advisory basis. At our 2022 Annual Meeting of Shareholders, approximately 92.4% of our shareholders who cast votes supported our advisory vote on executive compensation. In addition, every year, we engage with shareholders representing a significant portion of our outstanding shares on a variety of topics, including our executive compensation program. During 2022, as part of our regular shareholder outreach, we engaged with our top shareholders, representing nearly 30% of our total shares outstanding. The shareholders with whom we engaged generally expressed support for our executive compensation program, and were also supportive of the meaningful enhancements that we made to our program in fiscal 2022, which included, among other things, clarifying that the non-financial individual performance factor portion of our Annual Incentive Bonus Plan would be weighted at 30% in the aggregate, and providing for more formulaic payout metrics for ESG goals.
In evaluating our compensation practices for fiscal 2023, the Compensation Committee was mindful of the feedback provided by shareholders and continued to refine our Annual Incentive Bonus Plan to more closely align compensation with company financial performance and further demonstrate our commitment to value creation for shareholders, including an increased focus on sales and earnings given the effects of COVID-19, supply chain and materials costs, potential difficulties in China, and the Company’s transformation in connection with our Reinvention Plan. Beginning with the fiscal 2023 Annual Incentive Bonus Plan, 70% of each participant’s target incentive opportunity will be earned based on adjusted net revenue and adjusted operating income financial metrics, increased from 50%, and the remaining 30% will be earned based on ESG metrics (15% increased from 10% in fiscal 2022) and individual performance (15% decreased from 30% in fiscal 2022). Profit specific goals, which included operating margin, comparable store sales, and net new stores, were eliminated from the Annual Incentive Bonus Plan as the Compensation Committee determined that performance against these metrics was largely reflected in the adjusted net revenue and adjusted operating income metrics and wanted to focus and simplify the plan, as described in more detail below in the section entitled “2023 Executive Compensation.”
Fiscal 2022 Target Total Direct Compensation
The vast majority of our NEOs’ target total direct compensation is in the form of compensation that is variable or “at-risk” based on our financial, operating, and ESG performance and the value of our stock price. The at-risk elements of our fiscal 2022 program include (i) our Annual Incentive Bonus Plan, an annual cash incentive award program, and (ii) our Leadership Stock Plan, through which PRSUs and RSUs were granted as long-term incentive awards.
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FORMER CEO Compensation Mix* | |
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Other NEOs** Compensation Mix | |
* The chart above does not include Mr. Schultz, who, in connection with his appointment as interim chief executive officer, received a base salary of only $1, was not eligible to earn an annual cash incentive award under the Annual Incentive Bonus Plan, and did not receive any equity award grants.
** This chart also does not include Mr. Narasimhan, who did not commence employment with the Company until October 1, 2022, the day immediately preceding the end of fiscal 2022.
Rigorous Goal Setting
Our management and the Committee worked collaboratively to set targets reflective of our ambitious performance goals and to drive long-term value creation for our shareholders.
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2022 Annual Incentive Bonus Plan | Leadership Stock Plan |
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| * The three radial slices shown here are not meant to be representative of their categorical value. |
Annual Incentive Bonus Plan
We set our fiscal 2022 performance target above our fiscal 2021 performance consistent with our challenging strategic growth plans and our rigorous goal setting philosophy. For fiscal 2022, the types of goals and the weightings of such goals were unchanged from fiscal 2021. However, the Compensation Committee elected to refine the Annual Incentive Bonus Plan for fiscal 2022 by clarifying that the Individual Performance Factor (“IPF”) portion of our Annual Incentive Bonus Plan for fiscal 2022 would be weighted at 30% in the aggregate. The IPF portion was limited to Mission and Values and strategic and operational goals specific to each individual participant (20% overall weighting), and inclusion and diversity goals whose achievement will vary by participant (10% overall weighting), while our planet- and profit-positive goals for fiscal 2022 were separate and distinct factors, with each having a 10% weighting and more formulaic payout metrics. Our planet-positive and profit-positive goals were applied consistently across the executive officer team.
The Annual Incentive Bonus Plan and the results of our fiscal 2022 performance are described in detail starting on page 47. While each of our NEOs who was eligible to earn an annual cash incentive award would have earned an award based on certain financial results and their individual performance, our Compensation Committee made a determination not to pay any such awards for fiscal 2022, given our overall earnings performance in fiscal 2022 and given that transformation efforts under our Reinvention Plan remain ongoing.
Leadership Stock Plan
Given the positive feedback received from shareholders in respect of our fiscal 2021 executive compensation program, the Compensation Committee did not make any changes to the Leadership Stock Plan for fiscal 2022. For fiscal 2022, long-term incentives were awarded in the form of: (1) PRSUs, where the number of shares earned is based on three-year EPS performance against pre-established annual targets, subject to a downward or upward adjustment of 25% based on relative TSR performance and an additional downward or upward adjustment of up to 10% based on achievement of inclusion and diversity goals and (2) time-based RSUs. The Leadership Stock Plan and the results of our fiscal 2022 performance are described in detail starting on page 52.
Compensation Policy Highlights
INTERIM CEO COMPENSATION
In connection with his appointment as interim chief executive officer, Mr. Schultz received a base salary of only $1, was not eligible to earn an annual cash incentive award under the Annual Incentive Bonus Plan and did not receive any equity award grants. Mr. Schultz was entitled to receive benefits on the same basis as similarly situated partners, including with respect to personal security as described in more detail below.
CEO-ELECT NEW HIRE PACKAGE
In connection with Mr. Narasimhan’s appointment as ceo-elect, we entered into an offer letter with Mr. Narasimhan, which provides for, among things, his compensation and employment terms. The Compensation Committee spent significant time reviewing Mr. Narasimhan’s compensation terms with its independent compensation consultant, and in approving the final terms, considered the importance of his role and responsibilities and aligning his compensation with the median compensation of our peer group. The rationale for each of the elements of Mr. Narasimhan’s compensation and how each element aligns with our compensation philosophy is summarized in the table below.
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Compensation Element | Description | Rationale |
Base Salary | $1,300,000 | Provides executives with a predictable level of income; reflects role and responsibilities as well as market competitiveness. |
Annual Incentive Bonus | 200% of base salary | Reflects role and responsibilities as well as market competitiveness and internal equity considerations. Ties additional upside earning opportunity to Company and individual performance results. |
Annual Equity Incentives | Annual equity awards with a target value of $13,600,000 | Reflects role and responsibilities as well as market competitiveness and internal equity considerations |
Replacement Equity Grants | Replacement equity grant with a target value of $9,250,000: 60% in PRSUs, which vest based on performance, and 40% in RSUs, which vest annually over three years Awards are forfeited if Mr. Narasimhan’s employment terminates within twelve months of his start date, except in certain limited circumstances as described below under Employment Agreements and Termination Arrangements | The replacement equity grants were made in respect of certain outstanding equity awards that Mr. Narasimhan forfeited when he left his previous employer to join Starbucks, consistent with market practice To provide alignment with the other members of the Company’s leadership team, 50% of the PRSUs provide for participation in the Company’s in-progress FY2021-2023 PRSU cycle, 25% of the PRSUs provide for participation in the Company’s in-progress FY2022-2024 PRSU cycle, and 25% of the PRSUs provide for participation in the Company’s FY2023-2025 PRSU cycle, in the latter case for awards granted in November. |
Perquisites and Other Executive Benefits | Reimbursement for relocation expenses (including tax reimbursements) and up to $50,000 in legal fees | Supports our objective of attracting and retaining top executive talent; consistent with market practice and the Company’s relocation policy. Mr. Narasimhan’s relocation benefits are provided for pursuant to the Company’s international relocation policy, which applies to all partners at the vice president level and above. |
Signing Bonus | $1,600,000 Awards are forfeited if Mr. Narasimhan’s employment terminates within twelve months of his start date, except in certain limited circumstances as described below under Employment Agreements and Termination Arrangements | In consideration of Mr. Narasimhan’s cash incentive opportunity that was forfeited from his previous employer; consistent with market practice |
Severance Benefits | Cash severance and equity vesting benefits in the event of termination without misconduct or resignation for good reason, conditioned on a release of claims against the Company; will be entitled to participate in the Starbucks Severance and CIC Plan upon becoming permanent ceo, which is expected to occur on or before April 1, 2023 | Supports our objective of attracting and retaining top executive talent; consistent with market practice. Please see Executive Compensation Agreements and Arrangements below for more information |
2022 EXECUTIVE COMPENSATION PROGRAM
Fiscal 2022 Executive Compensation Overview
The following table provides information regarding the elements of our fiscal 2022 executive compensation program.
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Element | Form | Objectives and Basis |
Base Salary | Cash | Attract and retain highly qualified executives to drive our success |
Annual Incentive Bonus | Cash | Drive short-term Company performance and promote our financial goals and our people-, planet-, and profit-positive initiatives Actual payout based on financial performance against pre-established net revenue and operating income targets and company planet- and profit-positive goals and an individual performance factor. |
Long-term Incentive | PRSUs and time-based RSUs | Drive long-term Company performance, align interests of executives with those of shareholders, promote our people-positive initiatives, retain executives through long-term vesting, and provide potential wealth accumulation Delivered 60% in PRSUs and 40% in time-based RSUs PRSUs are earned based on three-year EPS performance against pre-established annual targets, subject to downward or upward adjustment of 25% based on our relative TSR performance and downward or upward adjustment of up to 10% based on achievement of three-year inclusion and diversity goals; shares are only able to vest after the full three-year performance period RSUs vest over a four-year period, subject to continued service with the Company, and become more valuable as our stock price increases, which benefits all of our shareholders |
Perquisites and Other Executive Benefits | Limited enhanced benefits (See “Other Compensation Policies - Perquisites and Other Executive Benefits”) | Provide for the safety and wellness of our executives and support our objective of attracting and retaining top executive talent |
Deferred Compensation | 401(k) plan and non-qualified Management Deferred Compensation Plan | Provide methods for general savings, including for retirement and benefits generally consistent with our peer group |
General Benefits | Health and welfare plans, stock purchase plan, and other broad-based partner benefits | Offer competitive benefits package that generally includes benefits offered to all partners |
Financial Results Under Performance Goals
In determining the design of our fiscal 2022 Annual Incentive Bonus Plan and the PRSUs granted under the Leadership Stock Plan, we considered prior year incentive plan targets and results as well as our financial and operating performance in fiscal 2021, with the targets for fiscal 2022 financial goals set at a level significantly above the prior year’s results.
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CONSOLIDATED ADJUSTED NET REVENUE(1) (IN MILLIONS) | CONSOLIDATED ADJUSTED OPERATING INCOME(2) (IN MILLIONS) |
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ADJUSTED EARNINGS PER SHARE(3) | TOTAL SHAREHOLDER RETURN |
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(1)Adjusted net revenue is a non-GAAP measure. The fiscal 2022 consolidated adjusted net revenue result excludes foreign currency fluctuations. The fiscal 2021 consolidated adjusted net revenue result excludes foreign currency fluctuations and the impact of the 53rd week. The fiscal 2020 consolidated adjusted net revenue result excludes foreign currency fluctuations; Channel Development transition impacts; accounting changes and other items.
(2)Adjusted operating income is a non-GAAP measure. The fiscal 2022 consolidated adjusted operating income result excludes foreign currency fluctuations. The fiscal 2021 consolidated adjusted operating income result excludes foreign currency fluctuations and the impact of the 53rd week. The fiscal 2020 consolidated adjusted operating income result excludes foreign currency fluctuations; Channel Development transition impacts; accounting changes and other items.
(3)Adjusted earnings per share is a non-GAAP measure. The fiscal 2022 adjusted earnings per share result excludes foreign currency fluctuations. The fiscal 2021 adjusted earnings per share result excludes foreign currency fluctuations, effects of tax law changes, and the 53rd week. The fiscal 2020 adjusted earnings per share result excludes foreign currency fluctuations and the Channel Development transition impact.
Elements of Fiscal 2022 Executive Compensation
Base Salary
The Compensation Committee generally reviews and approves base salaries annually at its November meeting, and makes periodic adjustments in connection with promotions, changes in roles and/or responsibilities, or to reward individual performance and promote market competitiveness. In making any such adjustments, the Compensation Committee will also consider the breadth, scope, and complexity of the NEO’s role, internal equity, and whether the NEO’s base salary is appropriately positioned relative to similarly situated executives in our peer group. For fiscal 2022, the Committee reviewed and approved the base salaries shown below (and with respect to Mr. Johnson in his role as our president and ceo, the Committee recommended, and the independent directors approved, his base salary). In fiscal 2022, Ms. Ruggeri and Ms. Gonzalez each received base salary increases based on their performance and market competitiveness and internal equity considerations, which became effective on November 29, 2021.
In connection with his appointment as interim chief executive officer, Mr. Schultz received a base salary of only $1. Mr. Narasimhan did not receive a base salary in fiscal 2022 as his employment did not commence until October 1, 2022, the day immediately preceding the end of fiscal 2022.
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| Base Salary (Annualized Rate) |
Named Executive Officer | Fiscal 2022 | Fiscal 2021 | % Change |
Howard Schultz | | $1 | | | N/A | N/A |
Rachel Ruggeri | | $840,000 | | | $800,000 | 5 | % |
Michael Conway | | $925,000 | | | $925,000 | 0 | % |
Kevin R. Johnson* | | $1,550,000 | | | $1,550,000 | 0 | % |
John Culver | | $1,000,000 | | | $1,000,000 | 0 | % |
Rachel A. Gonzalez** | | $761,250 | | | $725,000 | 5 | % |
* Mr. Johnson retired as president and chief executive officer, effective April 4, 2022, and remained employed with the Company in a senior advisor role through October 2, 2022. During his time in a senior advisor role, Mr. Johnson’s base salary was reduced by 50%.
** Ms. Gonzalez’s employment as executive vice president, general counsel was involuntarily terminated effective April 4, 2022, in connection with changes in executive leadership, and Ms. Gonzalez remained employed with the Company in a senior advisor role through May 20, 2022. During Ms. Gonzalez’s time in a senior advisor role, Ms. Gonzalez’s base salary was reduced by 50%.
Annual Incentive Bonus Plan
Starbucks annual cash incentive awards for NEOs are paid pursuant to our Annual Incentive Bonus Plan. The Annual Incentive Bonus Plan is designed to ensure that awards are differentiated based on individual performance and align compensation with the execution of strategic initiatives that drive long-term performance. Fifty percent (50%) of the overall Annual Incentive Bonus Plan payout would have been based on adjusted net revenue and adjusted operating income goals on a consolidated Company basis, with a payout between 0-200% of target, depending on performance. The remaining 50% of the overall Annual Incentive Bonus Plan payout would have been based on profit-positive (10% overall weighting), planet-positive (10% overall weighting), and IPF goals (30% overall weighting) with a payout between 0-200% of target for each component, depending on performance. As described in detail starting on page 51, the IPF is composed of goals that were specific to each individual participant related to our Mission and Values, strategic and operational goals and diversity and inclusion metrics, with a 10% overall weighting assigned to diversity and inclusion and a 20% overall weighting assigned to the remaining IPF goals. The graphic below illustrates the weighting of the performance goals and the calculation of the financial performance goals and individual performance factor components of the annual cash incentive awards for fiscal 2022.
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FY22 Design | BASE ($) | | TARGET ANNUAL INCENTIVE OPPORTUNITY (%) | | PERFORMANCE FACTORS (Illustrated Below) |
No Fiscal 2022 Annual Incentive Bonus Plan Payouts
As discussed above, each of our NEOs who was eligible to earn an annual cash incentive award would have earned an award based on our financial results and people positive, profit positive, and planet positive goals. However, after considering the recommendations of our interim chief executive officer, the Committee exercised its discretion to adjust all payouts under the Annual Incentive Bonus Plan to $0 for fiscal 2022, given our overall financial performance in fiscal 2022, and where we are currently in our Reinvention Plan (except with respect to Ms. Gonzalez, who received a prorated payout, pursuant to the terms of her separation agreement).
Target Opportunities
The target opportunities as a percentage of base salary for fiscal 2022 for our NEOs other than Mr. Schultz and Mr. Narasimhan are shown below. Neither Mr. Schultz nor Mr. Narasimhan were eligible to participate in the Annual Incentive Bonus Plan for fiscal 2022.
Such target opportunities were determined by the Compensation Committee after considering a number of factors, including the executive’s role and responsibilities, whether the target annual incentive is competitive with similarly situated executives in our peer group, and our recent and projected financial performance.
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| Bonus Targets Percentage of Base Salary |
Named Executive Officer | Fiscal 2022 | Fiscal 2021 | % Change |
Rachel Ruggeri | 125% | 120% | 5% |
Michael Conway | 150% | 150% | 0% |
Kevin R. Johnson* | 200% | 200% | 0% |
John Culver | 150% | 150% | 0% |
Rachel A. Gonzalez** | 100% | 100% | 0% |
* Mr. Johnson retired as president and chief executive officer, effective April 4, 2022, and remained employed with the Company in a senior advisor role through October 2, 2022. During Mr. Johnson’s time in a senior advisor role, Mr. Johnson’s annual bonus opportunity was reduced by 50%.
** Ms. Gonzalez received a prorated target bonus payout for fiscal 2022 in connection with her departure from the Company on May 20, 2022.
Financial, Planet Positive, and Profit Positive Performance Measures
For fiscal 2022, the portion of the annual cash incentive award derived from financial performance goals was based on the achievement of adjusted net revenue and adjusted operating income measures on a Company consolidated basis. We chose these measures because we believed they would motivate our executives to drive Company growth and profitability consistent with our board-approved annual financial and long-term strategic plans.
To reflect performance above or below targets, adjusted net revenue and adjusted operating income have sliding scales that would have provided for annual cash incentive award payouts greater than the target bonus if results were greater than target (up to a maximum 200% payout) or less than the target bonus if results were lower than the target (down to a threshold of 25% of target payout, below which the result would be 0% payout).
Financial Performance Goals
Adjusted Net Revenue
For the NEOs, 40% of the financial performance goals was based on adjusted net revenue. The payout for each component ranges from 0% to 200%. The threshold, target, and maximum criteria and actual results for adjusted net revenue for fiscal 2022 were as follows:
ADJUSTED NET REVENUE(1)
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| Threshold (Millions U.S.$) 25% Payout | Target (Millions U.S.$) 100% Payout | Maximum (Millions U.S.$) 200% Payout | Payout Percentage |
Consolidated | | |
(1)The performance measures under the Annual Incentive Bonus Plan that were approved at the beginning of the performance period provided for certain non-GAAP adjustments so that the performance measures would more consistently reflect underlying business operations than the comparable GAAP measures. The fiscal 2022 consolidated net revenue result excludes foreign currency fluctuations.
Adjusted Operating Income
For the NEOs, 60% of the financial performance goals, was based on adjusted operating income goals. In fiscal 2022, consolidated adjusted operating income equaled the total of all business units’ operating income less total unallocated corporate expenses.
ADJUSTED OPERATING INCOME(1)
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| Threshold (Millions U.S.$) 25% Payout | Target (Millions U.S.$) 100% Payout | Maximum (Millions U.S.$) 200% Payout | Payout Percentage |
Consolidated | | |
(1)The performance measures under the Annual Incentive Bonus Plan that were approved at the beginning of the performance period provided for certain non-GAAP adjustments so that the performance measures would more consistently reflect underlying business operations than the comparable GAAP measures. The fiscal 2022 consolidated operating income result excludes foreign currency fluctuations.
Planet Positive Performance Goals
We believe giving back more than we take from the planet contributes to our primary objective of maintaining Starbucks standing as one of the most recognized and respected brands in the world. Further, we believe sustainability of our raw materials, especially coffee, is paramount to our business operations. As a result, our coffee, dairy, and waste goals for fiscal 2022 would have accounted for 10% of the overall fiscal 2022 Annual Incentive Bonus Plan payout, with equal weighting amongst such goals.
The graphic below sets forth additional details regarding our coffee, dairy, and waste goals, as well as the relative weighting of each component.
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| Planet Positive Sustainability |
| Coffee: Accelerate sustainable on-farm coffee solutions, complete coffee technology and tool roadmap, launch Nestle partnership |
| Dairy: Global sustainable dairy standard, verification program and on-farm program; global standard aligned to by all regions |
| Waste: All regions establish targets, plans, and capabilities to enable activation towards global waste strategy in FY23 |
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| Coffee (33% weighting) | Dairy (33% weighting) | Waste (33%) |
Payout | On-Farm Coffee Solutions | Coffee Technology and Tool Roadmap | Nestle Partnership | Global Standard | Pilots Beyond Baseline of 20 | Target, plans and capabilities established |
200% | 50% Implementation | Yr 1 Completed | Synergies realized | | 40 farms and/or additional progress toward implementing on farm changes beyond pilot assessments | Yr 1 Completed |
150% | 35% Implementation | 50% of Yr 1 Completed | | | 30 farms and/or additional progress toward implementing on-farm changes beyond pilot assessment | 50% of Yr 1 Completed |
100% | 25% Implementation | Roadmap Completed | Launched | Aligned by all regions | 20 farm pilots globally | Executed in all regions |
90% | | | | | | 90% of regions |
75% | | | | | | 75% of regions |
50% | 15% implementation | | | Piloted only | | 50% of regions |
25% | | | | | | 25% of regions |
0% | 0% achievement for category if any area is not started |
Profit Positive Performance Goals
The profit-positive element of our annual cash incentive program reflected purely quantitative measures. As a result, our total Company comparable sales, total Company net new stores, and total Company operating margin goals would have accounted for 10% of the overall fiscal 2022 Annual Incentive Bonus Plan payout, with equal weighting of such goals.
The graphic below sets forth additional details regarding our total Company comparable sales, total Company net new stores, and total Company operating margin goals, as well as the relative weight of each component.
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| Profit Positive: Targets for Earnings Growth Drivers |
| FY22 Total Company Comp | 10.7% |
| FY22 Total Company Net New Stores | 2.037 |
| FY22 Total Company Operating Margin | 17.0% |
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| | Payout | Comp | Net New Stores | Op Margin |
Profit Positive: Earnings Growth Drivers | |
FY22 Total Company Comp (33% weighting) •Scale based on business performance revenue scales, adjusted for specific retail market FY22 Financial Plan Comp Factor (Current year comp sales adjusted by revenue range of 92% to 104%), allowing for twice the downside protection. FY22 Total Company Net New Stores (33% weighting) •Proposed range of +/- 20% net new stores FY22 Total Company Operating Margin (33% weighting) •Scale based on business performance operating income scale range (86% to 107.5%, with assumed 50% flow-through), allowing for twice the downside protection. | | 200% | > +4ppt | > +400 stores | > +80bps |
| 150% | +2ppt to +4ppt | +201 to +400 stores | +40bps to +80bps |
| 110% | +1ppt to +2ppt | +101 to +200 stores | +10bps to +40bps |
| 100% | -2ppt to +1ppt | +/-100 stores | -40bps to +10bps |
| 90% | -2ppt to -6ppt | -101 to -200 stores | -40bps to +120bps |
| 50% | -6ppt to -8ppt | -201 to -400 stores | -120bps to +160bps |
| 0% | < -8ppt | < -400 stores | < -160bps |
Financial, Planet Positive, and Profit Positive Performance Measures - Results
The table below shows the fiscal 2022 actual achievement results for each of the financial, planet-positive, and people-positive components of the Annual Incentive Bonus Plan.
($ in millions)
| | | | | | | | | | | | | | |
Performance Measure | Weighting | FY22 Target | FY22 Result | FY22 Achievement Factor(2) |
Business Performance(1) |
Total Company Consolidated | 52.0% |
Corporate Revenue | 40% | $33,435 | $32,774 | 85.0% |
Corporate OI | 60% | $5,681 | $4,945 | 30.0% |
Planet Results | 95.8% |
Coffee | 33% | Varies | 100.0% | |
Dairy | 33% | Varies | 87.5% | |
Waste | 33% | Varies | 100.0% | |
Profit Results | 60.0% |
FY22 Total Company Comp | 33% | 10.7% | 7.6% | |
FY22 Total Company Net New Stores | 33% | 2,037 | 1,878 | |
FY22 Total Company Operating Margin | 33% | 17.0% | 15.1% | |
(1)The performance measures under the Annual Incentive Bonus Plan that were approved at the beginning of the performance period provided for certain non-GAAP adjustments so that the performance measures would more consistently reflect underlying business operations than the comparable GAAP measures. The fiscal 2022 consolidated net revenue result and consolidated operating income result excludes foreign currency fluctuations.
As noted in the table above, consolidated Company adjusted net revenue and adjusted operating income goals were achieved at 95% and 87% of target, respectively, resulting in weighted achievement factors of 85% and 30%, respectively, and a weighted achievement factor of 52% for all consolidated Company financial performance goals.
Our planet-positive goals related to coffee, dairy, and waste were achieved with a weighted achievement factor of 95.8% for all planet-positive goals, and our profit-positive goals related to total Company comparable sales, net new stores, and operating margin were achieved at 71%, 92%, and 89% of target, respectively, resulting in a weighted achievement factor of 60% for all profit-positive goals.
Individual Performance Factor (“IPF”)
The IPF was weighted at 30% of the total payout under the fiscal 2022 Annual Incentive Bonus Plan and was composed of the elements set forth in the table below, which vary by individual.
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Element | Weight | Payout Range | Goals | Rationale |
| | | | |
People (Common goals shared by all NEOs with performance results varying by individual) | 10% | 0-200% | •BIPOC Retention Rate*: >90% •Mentorship Program: Serve as a mentor to BIPOC mentees with a meaningful time commitment demonstrated through monthly group meetings with all mentees and monthly individual meetings with each mentee •Inclusive Leadership Survey linked to Mentorship Program: Average score >4.5 on scale of 1-5 •Executive Champion or Two Other Elective Activities: Serve as an executive sponsor for a Starbucks Partner Network or demonstrate leadership in at least two other elective activities that builds inclusive leadership capability such as designing an experiential activity, engaging with professional organizations related to an action plan, or joining experiences that build inclusive leadership capacity | Our people-positive vision is to cultivate an inclusive environment where everyone belongs. We believe the strength, diversity, and inclusiveness of our workforce are significant contributors to our success as a global brand. |
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Living Our Mission and Values/Helping Others Succeed (Goals vary by individual) | 20%
| 0-200%
| Varies by individual, but focused on: •Creating a culture of warmth and belonging, where everyone is welcome. •Delivering our very best in all we do, holding ourselves accountable for results. •Acting with courage, challenging the status quo, and finding new ways to grow our company and each other. •Being present, connecting with transparency, dignity, and respect. | Living our Mission and Values enables our partners to deliver an elevated Starbucks Experience to our customers every day. |
Strategic and Operational Goals (Goals vary by individual) | | | Varies by individual, tied to the NEO’s primary areas of responsibility | Individual strategic and operational goals directly tied to the NEO’s primary areas of responsibility are important to driving sustainable growth and value creation. |
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* BIPOC refers to Black, Indigenous, and People of Color. BIPOC retention is measured using a fiscal year-to-date retention metric and monitors the retention of BIPOC partners who were under an NEO’s functional hierarchy (reporting up through an NEO’s organization) at the beginning of the fiscal year and who remained employed with Starbucks throughout the fiscal year. A partner does not need to report to an NEO’s organization at the end of the fiscal year to be counted as retained, so long as they are still an active Starbucks partner.
With respect to Mr. Johnson’s IPF, his individual strategic and operational performance goals for fiscal 2022 were set in October 2021 in collaboration with the independent members of the board.
Fiscal 2022 Individual Performance
While the Committee did not determine IPF payout factors or overall payouts, at the Committee’s November 2022 meeting, Mr. Schultz evaluated the performance of the other NEOs and presented the results of those evaluations to the Committee for consideration as the Committee believed that such individual performance results would be useful in determining compensation targets and amounts for continuing NEOs in fiscal 2023. Such individual performance results are summarized below. Due to Mr. Johnson’s retirement and the decision to eliminate Mr. Culver’s position and not pay awards under the Annual Incentive Bonus Plan, the Compensation Committee did not assess their individual performance for fiscal 2022.
Rachel Ruggeri
Ms. Ruggeri achieved her Mission and Values and strategic and operational goals, as she helped to create increased spans for partners to support development; drove continued leadership development, with three bench directors promoted to vice president and one vice president promotion to senior vice president; and prioritized a team of dedicated resources to transform Financial Planning, creating efficiency in the process. In addition, she facilitated partners in all disciplines and across functions to come together to design, develop, and provide leadership support and input on one of our most anticipated Investor Days in our history, which focused on our Reinvention Plan. While the BIPOC retention rate of Ms. Ruggeri’s reporting hierarchy fell just short of her ≥ 90% goal with an 89.5% retention rate, Ms. Ruggeri achieved her other People goals as she served as the executive sponsor of the Starbucks Partners for Sustainability Network, received a 4.5 employee feedback score, and successfully mentored BIPOC partners through monthly mentoring circles.
Michael Conway
Mr. Conway achieved his Mission and Values and strategic and operational goals, as he executed our first-ever in person International Forum, with 30+ licensee leaders in attendance; aligned our International and Channel Development financial plan to our new service standards, ensuring cross-channel coordination, and gained increased visibility to Starbucks locations; and fostered strong results across our digital and financial platforms. In addition, he bridged our human capital strategies to international markets and business partners through locally relevant programs, aligning international regions to enterprise goals, implemented a Store Experience Assessment across regions to ensure a consistent Starbucks Experience, and developed funding and organizational structures in support of Starbucks Digital Services. Mr. Conway’s BIPOC retention rate of his reporting hierarchy also fell just short of his ≥ 90% goal with an 89.7% retention rate, however he achieved his other People goals having successfully mentored BIPOC partners through monthly mentoring circles, served as executive sponsor of the Starbucks Black Partner Network, and achieved a 4.67 employee feedback score.
Leadership Stock Plan
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Fiscal 2022 Design | ANNUAL EPS PERFORMANCE TARGETS AVERAGED OVER 3 YEARS | | 3-YR RELATIVE TSR vs S&P 500 (upward or downward modifier of +/-25%) | | ACHIEVEMENT OF INCLUSION & DIVERSITY GOALS (upward or downward modifier of +/-10%) | | TIME-BASED RSUs |
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| | 60% PRSUs | | | | 40% TIME-BASED RSUs | |
Overview
In fiscal 2022, the Committee granted each of our NEOs who was employed by the Company prior to the beginning of the year long-term performance-based compensation in the form of PRSUs and time-based RSUs. PRSUs are earned only to the extent pre-established performance goals are met. Time-based RSUs vest annually in equal installments of 25%, commencing on the first anniversary of the grant date. Both PRSUs and time-based RSUs include dividend equivalent rights payable at the same time as the underlying shares are earned.
The values of the long-term incentive awards reflected in the table below were designed to be competitive to market, recognize the personal performance of each executive in the fiscal year prior to the November grant date (as applicable), and to further increase the percentage of total pay that is variable and at-risk based on Starbucks financial, shareholder return, and inclusion and diversity performance. The table below reflects the value of annual long-term incentive awards approved by the Committee for our NEOs in each of the last two fiscal years under the Leadership Stock Plan, other than Mr. Schultz who did not receive any equity grants in fiscal 2022 or Mr. Narasimhan who did not receive any annual long-term incentive awards in fiscal 2022 but instead received the replacement grants described above in “ceo-Elect New Hire Package.” We determined the number of PRSUs to be delivered by dividing 60% of the value approved by the Committee by the closing price of our stock on the grant date. For time-based RSUs, we divided 40% of the value by the closing price of our stock on the grant date. Because the value approved by the Committee is approved in advance of the awards being granted and may use different assumptions than are applied to the awards for accounting purposes, the value of awards approved by the Committee may be different from the grant date fair value of equity awards as disclosed in the Summary Compensation Table.
Value of Annual Long-Term Incentive Compensation Awards
| | | | | | | | | | | | | | |
Named Executive Officer | Granted in Fiscal 2022 | Granted in Fiscal 2021 | % Change |
Howard Schultz | — | | N/A | N/A |
Rachel Ruggeri | $4,500,000 | (1) | $875,000 | 414.3 | % |
Michael Conway | $4,500,000 | (1) | $3,500,000 | 28.6 | % |
Kevin R. Johnson | $15,500,000 | | $14,500,000 | 6.9 | % |
John Culver | $6,000,000 | | $6,000,000 | 0 | % |
Rachel A. Gonzalez | $3,500,000 | | $3,500,000 | 0 | % |
(1) In November 2021, the Compensation Committee approved a $3,625,000 increase in the target value of Ms. Ruggeri’s annual awards under the Leadership Stock Plan to reflect her elevation to the role of executive vice president and chief financial officer in January 2021. Mr. Conway also received an increase of $1,000,000 in the target value of his annual awards under the Leadership Stock Plan in consideration of his prior performance, the significance of his role with the Company, and market considerations.
Fiscal 2022 PRSUs
Consistent with the feedback that we have received from shareholders and our focus on strategic performance that will drive longer‑term shareholder returns, the EPS metric is measured over a three-year period, and at the end of the three years, a relative TSR modifier can impact payout of PRSUs upward or downward by 25%. In addition, consistent with our practice beginning with the fiscal 2021 PRSUs, we are holding our senior leaders collectively accountable for meeting a three-year inclusion and diversity goal for the fiscal 2022 PRSUs, which focuses on improvement in Black, Indigenous, and LatinX representation at the manager level and above by 5% or more by 2024. The representation metric will operate as a modifier to the payout of the fiscal 2022 PRSU award.
Annual EPS performance targets are set each year and then averaged at the conclusion of the three-year performance period to determine baseline payouts from 0-200%, and three-year relative TSR performance is measured against the S&P 500. The PRSUs granted in fiscal 2022 reflect this structure and represent 60% of target long-term award value for fiscal 2022.
The extent to which PRSUs are earned is based on our achievement of annual adjusted EPS, relative TSR goals measured over a three-year period following the grant date, and, with respect to fiscal 2022 PRSUs, achievement of inclusion and diversity goals. Annual EPS targets are measured and certified by the Compensation Committee each year. To reflect performance above or below target, adjusted EPS has a sliding scale that provides for payouts greater than the target number of PRSUs if performance results are greater than target (up to a maximum 200% of payout) or less than the target number if performance results are lower than target (down to a 25% payout for threshold performance, below which
the payout would be 0%). If the threshold EPS goal under the PRSUs is not met, then the awards will pay out at zero. Linear interpolation will be applied to performance that falls between EPS goals.
To the extent the performance targets are met, earned PRSUs generally vest 100% on the third anniversary of the grant date, with a possible adjustment upward or downward of 25% based on achievement of predetermined relative TSR goals and, with respect to fiscal 2022 PRSUs, a possible adjustment upward or downward of up to 10% based on achievement of predetermined inclusion and diversity goals.
The TSR metric will modify the fiscal 2022 PRSUs (as well our other outstanding PRSU grants) as follows: (i) upwards to a maximum of 125% if Starbucks TSR ranking is equal to or exceeds the 75th percentile, and (ii) downwards to a threshold of 75% if the Starbucks TSR ranking is equal to or below the 25th percentile, with linear interpolation to be applied if Starbucks TSR ranking is between the 25th and 75th percentile and above and below the 50th percentile.
RELATIVE TSR MODIFIER
| | | | | | | | |
≤ 25th Percentile | 50th Percentile | ≥ 75th Percentile |
75% | 100% | 125% |
The representation metric will modify the fiscal 2022 PRSUs as follows: (i) upwards to a maximum of 110% if the inclusion and diversity goal of 5% representation growth is met or exceeded; (ii) reducing the number of PRSUs earned by 5% if the inclusion and diversity goal is not achieved but growth is positive and below 5%; and (iii) reducing the number of PRSUs earned by 10% if representation falls over the three-year performance period.
REPRESENTATION MODIFIER(1)
| | | | | | | | |
<0% | ≥0% and <5% | ≥5% |
90% | 95% | 110% |
(1)For improvement of representation of Black, Indigenous, and Latinx partners at the manager level and above.
The threshold, target, and maximum number of PRSUs that could have been earned by the NEOs are disclosed in the Fiscal 2022 Grants of Plan-Based Awards Table on page 65.
PRSU EPS Targets and Performance Through the End of Fiscal Year 2022
As noted in the table below, the EPS goal for fiscal year 2022 and actual EPS results apply to the third year of the three-year performance period for the PRSUs awarded to our NEOs in November 2019, the second year of the three-year performance period for the PRSUs awarded to our NEOs in November 2020, and the first year of the three-year performance period for the PRSUs awarded to our NEOs in November 2021.
The table below sets forth the EPS goals for each of the last three fiscal years and the application of the TSR modifier to the payout of PRSUs awarded to our NEOs in November 2019.
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| | FY20 | FY21 | FY22 | | | |
PRSU Granted 11/13/2019 | | Min | Target | Max | Min | Target | Max | Min | Target | Max | | November 2019 PRSU Payout |
EPS: Goals by Year | | $2.891 | $3.043 | $3.196 | $2.205 | $2.594 | $2.801 | $2.906 | $3.419 | $3.692 | | Avg EPS Payout Result | 81.67% |
EPS Result | | | $1.154(1) | | | $3.002(1) | | | $3.010(1) | | | 3-yr TSR Modifier | 75.00% |
Result as a % of Target | | | 38% | | | 116% | | | 88% | | | Nov 2019 PRSU Payout | 61.25% |
Payout Result | | | 0% | | | 200% | | | 45% | | | | |
TSR Result
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| | FY21 | FY22 | FY23 |
PRSU Granted 11/11/2020 | | Min | Target | Max | Min | Target | Max | Min | Target | Max |
EPS: Goals by Year | | $2.205 | $2.594 | $2.801 | $2.906 | $3.419 | $3.692 | — | — | — |
EPS Result | | | $3.002(1) | | | $3.010(1) | | | | |
Result as a % of Target | | | 116% | | | 88% | | | | |
Payout Result | | | 200% | | | 45% | | | | |
TSR Result
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| | FY22 | FY23 | FY24 |
PRSU Granted 11/10/2021 | | Min | Target | Max | Min | Target | Max | Min | Target | Max |
EPS: Goals by Year | | $2.906 | $3.419 | $3.692 | — | — | — | — | — | — |
EPS Result | | | $3.010(1) | | | | | | | |
Result as a % of Target | | | 88% | | | | | | | |
Payout Result | | | 45% | | | | | | | |
TSR Result
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(1)Adjusted EPS is a non-GAAP measure. The fiscal 2022 adjusted EPS result excludes foreign currency fluctuations. The fiscal 2021 adjusted EPS result excludes foreign currency fluctuations, effects of tax law changes, and the 53rd week. The fiscal 2020 adjusted EPS result excludes foreign currency fluctuations and the Channel Development transition impact.
The table below sets forth the number of fiscal 2020 PRSUs held by our NEOs that vested and were settled in shares in November 2022.
| | | | | |
Named Executive Officer | Number of Fiscal 2020 PRSUs Vested |
Rachel Ruggeri(1) | N/A |
Michael Conway | 16,170 |
Kevin R. Johnson | 62,372 |
John Culver | 24,257 |
Rachel A. Gonzalez(2) | N/A |
(1)Ms. Ruggeri did not receive a fiscal 2020 PRSU grant, as she did not serve in an executive leadership role before her appointment as chief financial officer in February 2021.
(2)In connection with her departure from the Company on May 20, 2022, Ms. Gonzalez’s fiscal 2020 PRSUs were pro-rated based on her service during the performance period (assuming target performance) and settled in cash pursuant to her separation agreement.
Fiscal 2022 Time-Based RSUs
Time-based RSUs represented 40% of the total award under the Leadership Stock Plan, designed to support executives’ stock ownership and encourage retention. Time-based RSUs were granted to our NEOs on November 10, 2021, and represent 40% of the value shown above for fiscal 2022. Time-based RSUs vest annually in equal installments of 25%, commencing on the first anniversary of the grant date. RSUs are an important tool for us to retain and incentivize our highly sought after NEOs since the value of the awards will be delivered to our NEOs over a four-year period, subject to continued service with us, and become more valuable as our stock price increases, which benefits all of our shareholders. The time-based RSUs granted to the NEOs in fiscal 2022 are disclosed in the Fiscal 2022 Grants of Plan-Based Awards Table on page 65.
Long-Term Cash Performance Award
In December 2019, the board desired to recognize and retain Mr. Johnson’s high-caliber leadership and awarded him a long‑term cash performance-based award that reflected the board’s commitment to furthering the Company’s leadership continuity. The award was designed to retain Mr. Johnson in his role as president and ceo by providing compelling upside reward opportunity beyond the Company’s regular executive compensation program for achieving exceptional shareholder returns. The award had a target value of $25 million but a payout under the award could only be earned if our relative TSR performance meaningfully outperformed the S&P 500 during the period beginning October 1, 2019, to September 30, 2022. Specifically, the award would have paid out at 100% of target if the Company’s TSR performance relative to the companies comprising the S&P 500 index was at the 65th percentile, zero if performance was at the 40th percentile, and 200% of target if performance was at the 80th percentile, with linear interpolation between these points. At the end of fiscal 2022, Starbucks relative TSR was at the 25th percentile, resulting in no payout of the award.
Severance and CIC Plan
In August 2022, the Compensation Committee adopted the Executive Severance and Change in Control Plan (“Severance and CIC Plan”) to facilitate the transformation and evolution of our executive leadership team and to align our executive compensation program more closely with market practices. Prior to adoption of the Severance and CIC Plan, we would from time-to-time offer severance benefit arrangements for terminated or separated executives as part of a negotiated termination of employment in exchange for a release of claims against the Company and other restrictive covenants. The Severance and CIC Plan was also adopted to provide uniformity and internal equity with respect to severance benefits among similarly situated executives and avoid protracted negotiations with departing executives.
The table below describes the material features of the Severance and CIC Plan and the Committee’s rationale for the design of the Plan.
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Severance and CIC Plan | Material Features | Rationale for Design |
Termination without Cause Outside of CIC Period(1) | •Limited cash severance (1.5x sum of base and target bonus, and a payment equal to 18 months of COBRA premiums), continued vesting of outstanding equity awards (pro-rated based on length of service during vesting period), pro-rated bonus earned based on actual financial performance, and outplacement service benefits •Provides for benefits comparable to those offered by members of our peer group •Requires a departing executive to sign a release of claims acceptable to us and comply with restrictive covenant obligations as a condition to receiving these severance benefits | •Provides reasonable compensation to executives who leave the Company under certain non-change in control related circumstances to facilitate their transition to new employment •Consistent with market practice; helps us attract and retain talented executives •Avoids protracted negotiations with individual executives outside of CIC context •Release of claims align interests with shareholders by mitigating any potential employer liability and avoiding future disputes or litigation •Restrictive covenants protect the Company by prohibiting competition, solicitation of, or interference with, our partners, other service providers, clients, customers, suppliers, and other third parties, and disparagement of our products, partners, officers, directors, consultants, and joint venture partners |
Termination without Cause or Resignation for Good Reason During CIC Period | •“Double-trigger” provisions providing for limited cash severance (2x sum of base and target bonus, and a payment equal to 18 months of COBRA premiums), accelerated vesting of outstanding equity awards (with performance-based awards vesting at target), pro-rated bonus earned based on the greater of target and actual financial performance, and outplacement service benefits •Provides for benefits comparable to those offered by members of our peer group •Requires a departing executive to sign a release of claims acceptable to us and comply with restrictive covenant obligations as a condition to receiving these severance benefits | •Preserves morale and productivity and encourages executives to maintain the stability of our business during the potentially volatile period accompanying a change in control and to pursue transactions that are in the best interests of our shareholders regardless of whether those transactions may result in their own job loss •Double-trigger acceleration protects against the loss of retention power following a change in control of the Company and to avoid windfalls, both of which could occur if vesting accelerated automatically as a result of the transaction •Consistent with market practice; helps us attract and retain talented executives •Avoids protracted negotiations with individual executives during the CIC context •Aligns interests with shareholders by mitigating any potential employer liability and avoiding future disputes or litigation •Restrictive covenants protect the Company by prohibiting competition, solicitation of, or interference with, our partners, other service providers, clients, customers, suppliers, and other third parties, and disparagement of our products, partners, officers, directors, consultants, and joint venture partners |
(1)For purposes of the Severance and CIC Plan, the “CIC Period” refers to the period commencing 89 days prior to, and ending 24 months following, a change in control of the Company.
For additional information regarding the key elements of the Severance and CIC Plan, please refer to the section entitled “Executive Compensation Agreements and Arrangements” below.
Our Executive Compensation Process
Target total direct compensation for our NEOs is composed of base salary, target annual cash incentive award, and target value of long‑term equity incentives. Target total direct compensation is designed to be competitive with peer companies and market data, as explained below under Peer Group Companies and Benchmarking.
The Compensation Committee typically reviews target total direct compensation and approves the target value of annual cash incentive awards (as a percentage of base salary) annually at its November meeting following the conclusion of the fiscal year. Base salaries, annual cash incentive payments (for performance in the prior fiscal year), performance goals for annual cash incentive awards, and long-term equity grants are approved after the end of each fiscal year at the Committee’s November meeting. This process allows the Compensation Committee to consider comprehensive information, including the performance of each NEO during the prior fiscal year, when making final compensation decisions.
Management’s Role in the Executive Compensation Process
Our ceo, along with key members of our human resources function (“Partner Resources”) and our Law & Corporate Affairs Department each help support the Compensation Committee’s executive compensation process and regularly attend portions of the Committee’s meetings. As part of the executive compensation process, our ceo provides his perspective to the Compensation Committee regarding the performance of his executive leadership team, which includes all our executive officers and certain other senior officers of the Company. Members of the Partner Resources team present recommendations to the Compensation Committee on the full range of annual executive compensation decisions, including (i) annual and long-term incentive compensation plans, (ii) target competitive positioning of executive compensation, and (iii) target total direct compensation for each executive officer. These recommendations are developed in consultation with our ceo (except with regard to his own compensation) and are supported by market data.
The Role of Consultants in the Executive Compensation Process
Beginning in September 2021, the Compensation Committee engaged Pay Governance as its outside independent compensation consultant. The Compensation Committee’s consultant regularly attends committee meetings and attends executive sessions as requested by the Compensation Committee’s chair. During fiscal 2022, Pay Governance did not perform any services for Starbucks other than advising on executive compensation and non-employee director compensation under its engagement by the Compensation Committee. Pay Governance’s tasks also included reviewing, validating, and providing input on information, programs, and recommendations made by management.
At-Risk Compensation
A core principle of our executive compensation program is that a large majority of compensation awarded to our NEOs, especially to our ceo, be variable, performance-based or “at-risk.” This type of compensation is primarily dependent on the financial success of our Company and the performance of Starbucks common stock. This means that our executives are rewarded when they produce value for our shareholders and our partners. Elements of our fiscal 2022 program that fall within this category include annual cash incentive awards, PRSUs, and RSUs.
Internal Pay Equity
The Compensation Committee considers internal pay equity, among other factors, when making compensation decisions. However, the Compensation Committee does not use a fixed ratio or formula when comparing compensation among executive officers. The Compensation Committee believes that a failure to maintain an appropriate balance in the pay levels among members of our executive leadership team creates inappropriate business risks.
Peer Group Companies and Benchmarking
The Compensation Committee reviews compensation levels and design at peer companies as part of its decision-making process so it can set total compensation levels and practices that it believes are competitive and aligned with Starbucks’ scale and performance. The Compensation Committee generally sets target total direct compensation for our executives to be competitive with peer companies and other market data and takes into consideration scope of job responsibilities, individual performance of the executive, and other factors. The Compensation Committee’s executive compensation determinations are based on its review of such factors and are informed by the experiences of the members of the Compensation Committee as well as input from, and peer group data provided by, the Compensation Committee’s independent compensation consultant.
The market data considered by the Committee as part of the annual pay-setting process reflects compensation levels and practices for executives holding comparable positions at peer group companies and includes broader compensation survey data.
The Compensation Committee, with assistance from its independent compensation consultant, annually reviews the composition of our peer group. As part of such reviews, the Committee considers specific criteria and recommendations regarding companies to add or remove from the peer group. The industries from which we select our peer group companies consist of consumer staples, consumer discretionary, and information technology-software and services companies. From those industries, the Committee selected a peer group that includes global companies with complex management needs and strong brand profiles. For fiscal 2022, the Committee modified the 2021 peer group by removing The Home Depot, Inc. and Yum! Brands, Inc., and adding Kimberly-Clark Corporation and Mondelez International, Inc.
The Compensation Committee and independent directors considered the peer group in connection with their fiscal 2022 target total direct compensation decisions. The table below lists the companies that were considered for fiscal 2022.
Starbucks Fiscal 2022 Executive Compensation Peer Group Companies
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| Consumer Staples The Coca-Cola Company Colgate-Palmolive Company General Mills, Inc. The Kraft Heinz Company PepsiCo, Inc. The Procter & Gamble Company Kimberly-Clark Corporation Mondelez International, Inc. | Consumer Discretionary The Estée Lauder Companies Inc. Marriott International, Inc. McDonald’s Corporation NIKE, Inc. Target Corporation V.F. Corporation | IT-Software and Services PayPal Holdings, Inc. Visa Inc.
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Peer Group Determining Criteria for Fiscal 2022
| | | | | |
Category | Criteria |
General | •Publicly traded (not a subsidiary) •U.S. based (not a foreign issuer) •Comprehensive disclosure (recent initial public offerings may be excluded due to limited disclosure information) |
Industry/Business Focus | •Consumer Discretionary and Consumer Staples •IT & Software Services - limited to companies focused on digital transactions and payment processing |
Size | •0.25x to 4.0x Starbucks revenue •0.25x to 4.0x Starbucks 12 month average market cap value |
Other | •Commonly identified peer of continuing peer companies •Brand recognition (based on Forbes 100 most valuable brands) •Competitor for executive talent •Growth profile |
| | | | | | | | | | | |
| Revenues as of each company’s most recent four quarters ended on 10/02/2022 (in millions) | Market capitalization as of 09/30/2022 (in millions) | Employees as of most recent fiscal year |
25th Percentile | $19,171 | $45,483 | 35,030 |
Median | $27,053 | $77,095 | 79,000 |
Starbucks | $32,250 | $96,680 | 402,000 |
75th Percentile | $42,343 | $169,759 | 120,000 |
Other Compensation Policies
2023 Executive Compensation
In evaluating our compensation practices in fiscal 2023, the Compensation Committee was mindful of the feedback provided by shareholders and continued to refine our Annual Incentive Bonus Plan to more closely align compensation with company financial performance and further demonstrate our commitment to value creation for shareholders, including an increased focus on sales and earnings given the effects of COVID-19, supply chain and materials costs, potential difficulties in China, and the Company’s transformation in connection with our Reinvention Plan. As such, for fiscal 2023, financial performance results will represent 70% of the overall Annual Incentive Bonus Plan payout (compared to 50% for fiscal 2022), with 30% and 40% weighting for total Company revenue and operating income goals, respectively (compared to 20% and 30% for fiscal 2022). The chart on the next page sets forth the updated components of the Annual Incentive Bonus Plan for fiscal 2023 and their relative weights as compared to the plan design for fiscal 2022. In addition, financial revenue and operating income performance metrics for all participants in the Annual Incentive Bonus Plan, regardless of position, will be aligned to total Company financial performance for fiscal 2023, which will ensure more uniformity and consistency in the way that total Company financial performance goals apply to all participants and will further align the invaluable efforts of our partners with the overall success of the Company.
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| | FY22 EMBP Design | | | | | FY23 EMBP Design | |
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| Revenue (20%) | | | | | Total Company Revenue (30%) | |
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| Operating Income (30%) | | | Total Company OI (40%) |
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| Planet Positive (10%) | | Profit Positive (10%) | | | | | ESG: I&D and Sustainability (15%) |
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| People Positive (10%) | | Living Our Mission and Values / Helping Others Succeed & Individual Annual Performance Goals (20%) | | | Living Our Mission and Values / Helping Others Succeed & Individual Annual Performance Goals (15%) | |
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Regarding the non-financial components of the Annual Incentive Bonus Plan for fiscal 2023, ESG performance results will represent 15% of the overall Annual Incentive Bonus Plan payout (compared to 10% for each of the planet- and profit-positive results for fiscal 2022). The ESG performance goals will comprise Inclusion & Diversity goals as well as sustainability goals, which will continue to be objective and quantitative to ensure clear, rigorous goal-setting with respect to our ESG strategies and objectives. The Committee also updated our Inclusion & Diversity metrics for fiscal 2023 to both remove complexity and provide more relevancy to our Inclusion & Diversity goals, providing a clearer and more impactful path for participants to drive our progress in our people-positive efforts. Further, the profit-positive goals that applied for fiscal 2022, which included operating margin, comparable store sales, and net new stores, were eliminated for fiscal 2023 as the Compensation Committee determined that the outcome of such metrics was largely reflected in the adjusted net revenue and adjusted operating income metrics and ultimately duplicative of the financial performance metrics under the Annual Incentive Bonus Plan.
The IPF component of the Annual Incentive Bonus Plan for fiscal 2023 will represent 15% of the overall Annual Incentive Bonus Plan payout (from 30% for fiscal 2022). The IPF component will continue to be comprised of goals which are specific to each individual participant related to our Mission and Values, strategic and operational goals.
Retirement of Kevin R. Johnson
Mr. Johnson retired from his position as president and chief executive officer and as a member of the board, effective April 4, 2022. To ensure an effective and smooth transition, Mr. Johnson continued to provide executive transition services through the end of fiscal 2022, and his base salary and annual bonus opportunity were reduced by 50%, effective June 1, 2022, in proportion to the level of services he was expected to provide. Because Mr. Johnson was retirement eligible, his PRSUs and RSUs continued to vest under the terms of his existing award agreements. As discussed above, Mr. Johnson did not earn a cash incentive award, and he received the same payout of his fiscal 2019 PRSUs as other employees. In addition, Mr. Johnson’s long-term cash performance-based award, which he was granted in December 2019, did not pay out as described above.
Separation of John Culver
Effective October 1, 2022, we eliminated the chief operating officer role and Mr. Culver remained employed with the Company in a senior advisor role through January 1, 2023. Due to there no longer being an equivalent role for Mr. Culver, his employment was involuntarily terminated on January 2, 2023. Mr. Culver has executed a Separation Agreement and Release, which provided for the severance benefits set forth in our Executive Severance and Change in Control Plan in consideration for a release of claims in favor of Starbucks, and compliance with restrictive covenants, which included, among other provisions, compliance with non-solicitation, non-competition, and non-disparagement requirements.
Separation of Rachel Gonzalez
Ms. Gonzalez’s employment as executive vice president, general counsel was involuntarily terminated effective April 4, 2022, in connection with changes in executive leadership, and Ms. Gonzalez remained employed with the Company in a senior advisor role through May 20, 2022 at 50% of her prior base salary.
Because this separation occurred prior to the Company’s adoption of the Executive Severance and Change-in-Control Plan in connection with this transition and following negotiations with Ms. Gonzalez, Starbucks entered into a Separation Agreement and Release with Ms. Gonzalez in March 2022, which provided for cash severance payments, a pro-rated bonus, payments which were intended to cover COBRA benefits and attorney fees, and outplacement services. In addition, pursuant to the Separation Agreement and Release, Ms. Gonzalez’s unvested PRSU awards and time-based RSU awards were pro-rated based on her service from the vesting commencement date of each applicable award through the date of her termination, and assuming target performance in case of the PRSUs. These pro-rated awards were settled in cash for an amount equal to the number of shares subject to such awards multiplied by our average February 2022 stock price. The payments and benefits to Ms. Gonzalez under the Separation Agreement were subject to her executing and not revoking a reaffirmation of a release of claims and other commitments and obligations, which included reaffirming her duties and responsibilities of her Confidentiality, Non-Solicitation, Non-Competition and Inventions Agreement. Please see the section entitled “Potential Payments Upon Termination or Change in Control” for more information.
Following the adoption of Starbucks Executive Severance and Change in Control Plan, all executive officer severance benefits are expected to be paid pursuant to the terms of this plan.
Perquisites and Other Executive Benefits
Our executive compensation program includes limited executive perquisites and other benefits. The aggregate incremental cost of providing these perquisites and other benefits to our NEOs is detailed in the “Fiscal 2022 All Other Compensation Table” on page 65. We believe the perquisites and other executive benefits we provide are
representative of those offered by the companies that we compete with for executive talent, and therefore offering these benefits serves the objective of attracting and retaining top executive talent.
We offer the following perquisites to our NEOs:
•Company Aircraft. The Company maintains aircraft to facilitate business travel. The Company has adopted a comprehensive Corporate Aircraft Use Policy, including guidelines for annual reporting to the Audit Committee to ensure transparency relative to aircraft usage and the business purpose served. In accordance with the Corporate Aircraft Use Policy, the executive officers may enter into an aircraft time-sharing agreement, which allows them to use corporate aircraft for personal travel under the terms outlined in such aircraft time-sharing agreement between them and the Company. Personal use of the aircraft by an executive officer pursuant to the time-sharing agreement requires them to reimburse the Company for the operating expenses of such flights that is chargeable pursuant to Federal Aviation Regulations. The Company’s Corporate Aircraft Use Policy allows for personal guests of executive officers and board members to travel on business-related flights on our corporate aircraft under certain limited circumstances. The policy also allows for certain executive personal travel done in connection with flight that is otherwise for a business-purpose. Both types of use result in imputed income to the executive or director under Internal Revenue Service regulations and, for NEOs, “other compensation” equal to the aggregate incremental costs to the Company resulting from such personal travel, which is reported in the Summary Compensation Table.
•Security. We believe that the personal safety and security of our senior executives is of the utmost importance to the Company and its shareholders. Pursuant to our executive security program, we may from time to time provide personal security services to certain executives. Security services include home security systems and monitoring and, in some cases, personal security services. These protections are provided due to the range of security issues encountered by senior executives of large, multinational corporations and particularly with respect to high-profile executives. Based on a security study, the Company made the decision to provide personal security services to Mr. Schultz due to security considerations arising from his role as our interim chief executive officer and his significant visibility as our founder. We view the security services provided to Mr. Schultz as an integral part of our risk management program and as necessary and appropriate business expenses, given his importance to Starbucks. However, because such services may be viewed as conveying a personal benefit to Mr. Schultz, we have reported the aggregate incremental costs of such services in the “All Other Compensation” column of the Summary Compensation Table.
The Company did not pay personal security costs for any other executive in fiscal 2022, except in connection with business-related travel.
•Executive Physicals and Life and Disability Insurance. We offer to pay for annual physical examinations for all partners at the senior vice president level and above. These examinations provide a benefit to the Company and the executive at a relatively small cost to the Company. We also provide life and disability insurance to all partners at the vice president level and above at a higher level than is provided to partners generally. The amounts paid in respect of these benefits to our NEOs in fiscal 2022 are detailed in the “Fiscal 2022 All Other Compensation Table.”
•Relocation and Expatriate Expenses. We provide relocation assistance to some manager-level partners and all partners at the director level and above. Under limited circumstances, we provide certain reimbursements and benefits to partners that expatriate to another country for work on the Company’s behalf.
•Deferred Compensation. Executives, as well as partners at the director level and above in the U.S., are eligible to defer cash compensation under the MDCP. The MDCP is primarily intended to provide eligible partners an additional before-tax means of saving over and above that available under the 401(k) plan. We do not pay or guarantee above-market returns. The appreciation, if any, in the account balances of plan participants is due solely to contributions
by participants and the underlying performance of the measurement investment funds selected by the participants. The measurement investment fund alternatives available to MDCP participants are identical to the investment funds available to 401(k) plan participants. Effective January 1, 2011, we ceased making Company matching contributions under the MDCP.
Investing in our Partners (Our Total Rewards Philosophy)
We believe that investing in our partners results in increased engagement, satisfaction, and retention, which ultimately leads to an elevated Starbucks Experience for our customers.
Our Total Rewards Philosophy
Our Total Rewards philosophy is designed to recognize and reward the contributions of all partners, including executives. We offer a comprehensive benefits package to all eligible full- and part-time partners in the U.S. and locally competitive benefits packages in other countries. In addition to our equity incentive plans discussed above, we offer an employee stock purchase plan to partners in the U.S. and Canada that allows participants to purchase Starbucks stock at a 5% discount to the fair market value at the end of each offering period under the plan. We believe our Total Rewards practices motivate our executives to build long-term shareholder value and reward the partners who take care of our customers.
•Broad-Based “Bean Stock” Program: A long-term incentive grant of time-based RSUs was made in November 2021 to approximately 223,000 eligible non-executive partners in 21 markets around the world, including part-time partners. We refer to this broad-based equity program as our “Bean Stock” program. Bean Stock participants include those partners who work in our stores and serve our customers directly. In fiscal 2022, Bean Stock participants realized approximately $132 million in pre-tax gains from previously granted Bean Stock awards.
•Future Roast 401(k) Savings Plan: Available to all U.S. partners who are at least age 18 with 90 days of service. The Starbucks Match within the 401(k) is 100% of the first 5% of eligible compensation contributed each pay period. The match is immediately fully vested and is contributed to each participant’s 401(k) account each pay period along with the participant’s contributions. In fiscal 2022, Starbucks contributed more than $146 million in matching contributions.
•Insurance Coverage for Partners: For more than 30 years, Starbucks has provided health insurance coverage for partners working 20 hours or more a week. Starbucks also provides life and disability insurance to eligible partners.
•College Achievement Plan: The Starbucks College Achievement Plan was launched in fiscal 2014. It provides eligible partners in the U.S. with the opportunity to earn a first-time bachelor’s degree online from Arizona State University with 100% upfront tuition coverage. Additionally, our military service member and Veteran partners can extend an additional Starbucks College Achievement Plan benefit to a qualifying family member of their choice. As of the end of the first quarter of fiscal 2023, nearly 10,000 partners had graduated with degrees, and more than 23,000 partners were participating in the Starbucks College Achievement Plan.
•Paid Sick Time, Vacation, Holiday, and Parental Leave: Starbucks is an industry leader in paid sick time and parental leave and has competitive policies for vacation and holiday pay.
•Partner Assistance: Our CUP Fund gives financial assistance to Starbucks partners in times of special need due to illness, death in the family, natural disasters, or other extreme circumstances.
•Partner Financial Well Being: My Starbucks Savings enables eligible partners to save directly from their paycheck for emergencies and other financial needs. Starbucks provides an incentive to eligible partners at key milestones in their savings journey. Starbucks Student Loan Management program provides a platform for eligible Starbucks partners to manage their student loans. Both programs were launched in September 2022.
The above benefits specifically apply in the U.S., but we generally strive to provide similar benefits in all countries while considering the social coverage programs available in each country.
Executives are eligible to participate in all benefit plans we offer to partners generally. This helps us attract and retain top executive talent.
Executive Compensation Agreements and Arrangements
Employment Agreements and Termination Arrangements
None of our NEOs have employment or severance agreements. We typically deliver an offer letter to an executive officer upon hire or promotion noting that the executive is employed “at will,” and these letters typically do not provide for severance upon termination, except for Mr. Narasimhan, who was appointed as ceo-elect in October 2022, and will become a participant in the Severance and CIC Plan after April 1, 2023.
Narasimhan Offer Letter: Pursuant to his Offer Letter, Mr. Narasimhan will be entitled to certain severance payments and benefits upon certain qualifying terminations of employment. Specifically, upon termination of Mr. Narasimhan’s employment without “misconduct” (as defined in the Offer Letter) prior to April 1, 2023, or if he is not appointed as chief executive officer of the Company by April 1, 2023 and he resigns from employment with the Company in April 2023, then he will receive severance pay of $7,800,000, a pro-rata portion of his fiscal year 2023 annual incentive target opportunity, full accelerated vesting of his replacement grant RSUs and his fiscal 2023 time-based RSUs under the Leadership Stock Plan, and the opportunity for his replacement grant PRSUs to vest based on actual performance following the end of the applicable performance period, in each case, subject to the execution of a release of claims against the Company. The equity treatment for the awards described above also applies upon a termination of Mr. Narasimhan’s employment without misconduct at any other time or, if he then participates in the Severance and CIC Plan, he resigns for good reason in connection with a change in control. After April 1, 2023, Mr. Narasimhan is expected to become a participant in the Company’s Severance and CIC Plan.
Severance and CIC Plan – Non-CIC Benefits: All of our currently employed NEOs are eligible to participate in the Severance and CIC Plan (except for Mr. Schultz, who is not eligible to participate in the plan, and Mr. Narasimhan, who is expected to become eligible to participate in the plan after April 1, 2023). The Severance and CIC Plan provides for certain severance payments and benefits in the event of a termination of employment by the Company without cause other than during the CIC Period, subject to the participant’s execution and non-revocation of a release of claims in favor of the Company, and compliance with restrictive covenants.
Specifically, participants are entitled to receive (i) an amount equal to 1.5x the sum of the participant’s base salary and target annual cash bonus (“Cash Severance Payment”), 50% of which is paid within 10 business days following the release effective date, and 50% of which is paid 18 months after termination, (ii) a pro-rata portion of the participant’s annual cash bonus for the year of termination (“Pro-rata Bonus”) based on actual Company performance (assuming 100% achievement of any individual performance targets), paid at the same time annual bonuses are paid to similarly situated partners, (iii) a lump sum cash payment equal to 18 months’ of average COBRA coverage cost, paid within 10 business days following the release effective date, and (iv) outplacement services, or at the Company’s discretion, a lump sum up to $25,000 for such services. In addition, all unvested equity awards will be pro-rated based on service from the applicable vesting commencement date through the termination date and will continue to vest according to the original vesting schedule of the award (with performance-based awards earned based on actual performance determined at the end of the relevant performance period), and vested
stock options will remain exercisable for 36 months following the termination date.
Change-in-Control Arrangements
The Severance and CIC Plan also provides for certain severance payments and benefits in the event of a termination of employment by the Company without cause or resignation for good reason, in each case, during the CIC Period, subject to the participant’s execution and non-revocation of a release of claims in favor of the Company, and compliance with restrictive covenants.
Specifically, the severance payments and benefits participants are entitled to receive upon such a termination are the same as those described above with respect to a termination without cause outside of the CIC Period, except the multiple for the Cash Severance Payment is 2x (rather than 1.5x), 100% of the Cash Severance Payment is paid within 10 business days following the release effective date, and the Pro-Rata Bonus is based on the greater of target and actual Company performance.
The Severance and CIC Plan also provides for “double-trigger” accelerated vesting of equity (with any performance-based awards vesting at target), consistent with the “double-trigger” treatment that applies to all partners with equity compensation awards. This means that under our equity plan, unvested awards will accelerate vesting if (i) there is a change in control, and (ii) either (a) awards are assumed or substituted with awards of the surviving company and the partner is terminated or resigns for good reason during the CIC Period or (b) awards are not assumed or substituted with awards of the surviving company, in which case they vest immediately upon a change in control.
For additional information regarding the material features of the Severance and CIC Plan and the rationale for each feature, please refer to the section above entitled “Severance and CIC Plan.”
Executive Compensation Policies and Practices
Executive Stock Ownership Guidelines
Our long-standing stock ownership guidelines were established for executive officers to encourage them to have a long-term equity stake in Starbucks, align their interests with shareholders, and mitigate potential compensation-related risk. The guidelines provide that each executive officer must hold a multiple of their annual base salary in Starbucks stock and include the following holding requirements:
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Position | Ownership Requirement (Multiple of Base Salary) |
ceo | 6x |
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executive officers | 3x |
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other evps | 2x |
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In addition, as discussed in more detail below, in November 2022, the Committee adopted a share ownership guideline of $15 million in unpledged shares for Mr. Schultz for the duration of his service as interim chief executive officer.
Each executive officer generally has five years to achieve the minimum ownership requirement. If an executive is not on track to meet the requirement by the end of the third year after becoming subject to the guidelines, they will be required to hold 50% of the net shares received upon the exercise of stock options and the vesting of RSUs. This holding requirement increases to 100% if the executive has not met the minimum ownership guideline by year five.
In addition to shares held outright, unvested RSUs that are subject only to a time-vesting condition count towards the ownership threshold. As of the date of this proxy statement, all our NEOs exceed their current ownership requirement.
Risk Considerations
We believe that the design and objectives of our executive compensation program provide an appropriate balance of incentives for executives and avoid inappropriate risks. In this regard, our executive compensation program includes, among other things, the following design features:
•Balanced mix of fixed versus variable compensation and cash-based versus equity-based compensation;
•Variable compensation based on a variety of performance goals, including Company and, where appropriate, individual performance goals;
•Balanced mix of short-term and long-term incentives;
•Stock ownership and holding requirements;
•Anti-hedging and pledging policies that apply to all partners;
•Payout caps on incentive plans;
•Recoupment policy; and
•Compensation Committee oversight of incentive and commission arrangements below the executive level.
For fiscal 2022, Pay Governance performed an annual risk assessment of our compensation objectives, philosophy, and forms of compensation and benefits for all partners, including executives, to determine whether the potential risks arising from such policies or practices are reasonably likely to have a material adverse effect on the Company. Based upon this review, management and the Compensation Committee concluded that our compensation practices and policies do not create risks that are reasonably likely to have a material adverse effect on the Company, and Pay Governance supported this conclusion. A report summarizing the results of this assessment was reviewed and discussed with the Compensation Committee at its September 2022 meeting.
Recoupment of Incentive Compensation
Starbucks “clawback” policy allows board discretion to seek reimbursement with respect to incentive compensation paid or awarded to executive officers (as designated by the board) where: (i) the payment of a bonus or equity award (or the vesting of such award) was predicated upon the achievement of financial results that were the product of fraudulent activity or that were subsequently the subject of a material negative restatement, and (ii) a lower or no bonus payment or equity award would have been made to executive officers (or lesser or no vesting would have occurred with respect to such award) based on the restated financial results; that is, the financial results that would have pertained absent such fraudulent activity. The policy became effective, with respect to equity awards, beginning with awards granted in fiscal 2010 and, with respect to annual cash incentive awards, beginning with awards earned for fiscal 2010. In addition, since November 2017, our program provides for forfeiture of unvested equity awards as well as clawbacks of vested amounts and awards in the event the Company determines an executive has engaged in material misconduct, including willful and intentional failure to perform responsibilities, material failure to comply with Company rules, policies, or procedures, and personal conduct that is detrimental to the Company.
On October 26, 2022, the SEC adopted long-awaited final rules implementing the incentive-based compensation recovery provisions of the Dodd-Frank Act. The final rules direct the stock exchanges to establish listing standards requiring listed companies to develop and implement a policy providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers and to satisfy related disclosure obligations. We intend to timely amend and restate our clawback policy to reflect these new requirements.
Equity Grant Timing Practices
Most of our equity grants occur on pre-established dates pursuant to our equity grant guidelines, with annual grants generally occurring on the later of the second business day after the public release of fiscal year-end earnings, or, if later, the final day of the board of directors’ November meeting. Annual awards for executives are granted pursuant to a formula based on a specified dollar amount, with the number of shares and exercise price for each option grant determined based on the closing market price of our stock on the grant date and the number of shares for each RSU and PRSU grant determined by dividing the dollar amount by the closing market price of our stock on the grant date. The Compensation Committee approves annual awards for partners at the executive vice president level and above. The Compensation Committee has delegated authority to the interim chief executive and evp, Partner Resources to make annual grants, within certain parameters, to partners at the senior vice president level and below, and to newly hired or newly promoted partners below the executive officer level. All other new hire and promotion grants at the executive vice president level and above are approved by the Compensation Committee.
Anti-Hedging and Anti-Pledging Policies
Prohibition on Speculative Transactions: Starbucks Insider Trading Policy prohibits Starbucks partners (including executive officers) and directors from engaging in hedging transactions designed to offset decreases in the market value of Starbucks securities, including certain forms of hedging and monetization transactions, such as “zero-cost collars” and “prepaid variable forward contracts.” Our Insider Trading Policy also prohibits holding Starbucks stock in a margin account or pledging Starbucks stock as collateral for a loan.
Review of Pledging Arrangements: As of January 13, 2023, Mr. Schultz, our founder, interim chief executive officer, and largest individual shareholder, had pledged 11,000,000 shares of Starbucks common stock as potential collateral to secure certain personal indebtedness. The pledge was initiated prior to his appointment as interim ceo. The Nominating/Governance Committee has been advised by outside counsel on the board’s fiduciary responsibilities for overseeing pledging, of the potential risks associated with Mr. Schultz’s pledging of shares, and developments in pledging practices generally. With respect to the shares pledged by Mr. Schultz as of January 13, 2023, the Nominating/Governance Committee believes that Mr. Schultz’s pledging arrangements do not pose a material risk to shareholders or to Starbucks, in part because:
(i) The pledged shares secure personal term loans only used to fund outside personal business ventures.
(ii) The purpose of the hedge was not to shift or hedge any economic risk in owning Starbucks common stock.
(iii) Mr. Schultz is our founder and largest individual shareholder, retaining 21,694,538 shares of our common stock as of January 13, 2023.
No other executive officer or director, or any of their immediate family members, holds shares of Starbucks common stock that have been pledged to secure any personal or other indebtedness, and are prohibited from doing so. The Nominating/Governance Committee periodically reviews any pledging arrangements from a risk management perspective in accordance with the Insider Trading Policy and provides a report to the Audit and Compliance Committee and the board.
Further as noted above, in November 2022, the Committee adopted a share ownership guideline of $15 million in unpledged shares so that his share ownership in Starbucks is aligned with other shareholders and that his share ownership requirement is meaningful given his outstanding pledge of shares of Starbucks common stock.
Compensation Consultant Independence
In furtherance of maintaining the independence of the Compensation Committee’s compensation consultant, the Committee had the sole authority to retain, terminate, and obtain the advice of Pay Governance (at the Company’s expense). In connection with its engagement of Pay Governance in fiscal 2022, the Compensation Committee considered various factors bearing upon Pay Governance’s independence including, but not limited to, the amount of fees received by Pay Governance from Starbucks as a percentage of Pay Governance’s total revenue, Pay Governance’s policies and procedures designed to prevent conflicts of interest and the existence of any business or personal relationship that could impact Pay Governance’s independence. After reviewing these and other factors, the Compensation Committee determined that Pay Governance was independent and that its engagement did not present any conflicts of interest. Pay Governance also determined that it was independent from management and confirmed this in a written statement delivered to the chair of the Compensation Committee.
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT
The Compensation and Management Development Committee is intimately involved in the both the goal setting and decision-making processes for the Company’s executive compensation programs. The Committee has reviewed and discussed this Compensation Discussion and Analysis with the Company’s management. Based on this process and its thorough review, the Committee recommended to the board of directors that this Compensation Discussion and Analysis be included in this proxy statement.
Respectfully submitted,
Richard E. Allison, Jr. (chair)
Andrew Campion
Clara Shih
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Executive Compensation Tables |
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding fiscal years 2022, 2021, and 2020 compensation for our NEOs, except fiscal year 2020 and 2021 for Mr. Schultz and Mr. Narasimhan, and 2020 for Ms. Ruggeri, Mr. Conway, and Ms. Gonzalez were not provided because they were not NEOs in those years.
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Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) |
Howard Schultz interim chief executive officer | 2022 | $1 | — | — | — | — | $374,557 | $374,558 |
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Rachel Ruggeri executive vice president and chief financial officer | 2022 | $833,085 | — | $2,951,606 | — | — | $11,705 | $3,796,396 |
2021 | $718,275 | — | $1,542,542 | — | $1,053,409 | $15,214 | $3,329,440 |
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Laxman Narasimhan chief executive officer-elect | 2022 | — | $1,600,000 | $7,186,870 | — | — | $6,955 | $8,793,825 |
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Michael Conway group president, International and Channel Development | 2022 | $924,997 | — | $4,370,131 | — | — | $666,465 | $5,961,593 |
2021 | $755,678 | — | $3,914,566 | — | $1,133,360 | $653,283 | $6,456,887 |
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Kevin R. Johnson former president and chief executive officer | 2022 | $1,302,595 | — | $15,385,875 | — | — | $29,684 | $16,718,154 |
2021 | $1,609,610 | — | $14,755,014 | — | $4,030,000 | $30,538 | $20,425,162 |
2020 | $1,540,379 | — | $11,166,708 | — | $1,860,000 | $98,488 | $14,665,575 |
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John Culver former group president and chief operating officer | 2022 | $1,000,002 | — | $6,045,782 | — | — | $25,805 | $7,071,589 |
2021 | $979,325 | — | $6,421,550 | — | $1,941,595 | $24,971 | $9,367,441 |
2020 | $912,113 | — | $4,802,284 | — | $728,438 | $23,620 | $6,466,455 |
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Rachel A. Gonzalez former executive vice president, general counsel | 2022 | $440,232 | — | $3,614,063 | — | — | $7,625,802 | $11,680,097 |
2021 | $752,890 | — | $3,577,128 | — | $971,500 | $22,386 | $5,323,904 |
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(1)For Mr. Narasimhan, includes a sign-on bonus of $1,600,000, which was paid upon his commencing employment with the Company as chief executive officer - elect, effective October 1, 2022.
(2)Represents the aggregate grant date fair value, as computed in accordance with FASB ASC Topic 718. Consistent with the requirements of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, the value of the PRSUs is based on one-third of the full number of shares for which target EPS was: (i) established in fiscal 2020 for the award that was granted on November 13, 2019, which vested on November 13, 2022, (ii) established in fiscal 2021 for the award that was granted on November 11, 2020, which is scheduled to vest on November 11, 2023 and (iii) established in fiscal 2022 for the award that was granted on November 10, 2021, which is scheduled to vest on November 10, 2024. The remaining portions of the awards granted in November 2020 and November 2021 will be linked to EPS goals for subsequent fiscal years and will be reported in the Summary Compensation Table for those fiscal years. These amounts do not reflect whether the recipient has realized or will realize a financial benefit from the awards (such as by exercising stock options). The grant date fair values have been determined based on the assumptions and methodologies set forth in the Company’s Form 10-K (Note 13: Employee Stock and Benefit Plans) for the fiscal year ended October 2, 2022. The grant date fair value for PRSUs is reported based upon the probable outcome of the performance conditions at the target level on the grant date. The value of the annual PRSU awards granted in fiscal 2022, assuming achievement of the maximum performance level of 200%, would have been: Mr. Schultz $0; Ms. Ruggeri: $2,303,220; Mr. Narasimhan: $6,973,690; Mr. Conway: $5,140,270; Mr. Johnson: $18,371,780; Mr. Culver $7,291,576; and Ms. Gonzalez: $4,428,132. In accordance with GAAP, the fair value of stock awards granted to a retirement-eligible partner will be expensed earlier than identical stock awards granted to a partner who is not retirement eligible. During fiscal 2022, Mr. Johnson and Mr. Culver were retirement eligible.
(3)These amounts represent earned annual incentive bonuses under the Annual Incentive Bonus Plan.
(4)The table below shows the components of “All Other Compensation” for the NEOs.
EXECUTIVE COMPENSATION TABLES
FISCAL 2022 ALL OTHER COMPENSATION TABLE
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Name | Insurance Premiums ($)(1) | Retirement Plan Contributions ($)(2) | | Other ($) | | Total ($) |
Howard Schultz | $3,743 | — | | $370,814 | (3),(4) | $374,557 |
Rachel Ruggeri | $4,920 | $6,785 | | — | | $11,705 |
Laxman Narasimhan | — | — | | $6,955 | | $6,955 |
Michael Conway | $6,330 | $15,250 | | $644,885 | (5) | $666,465 |
Kevin R. Johnson | $6,030 | $15,250 | | $8,404 | (3) | $29,684 |
John Culver | $7,155 | $15,250 | | $3,400 |
| $25,805 |
Rachel A. Gonzalez | $3,146 | $10,833 | | $7,611,823 | (6) | $7,625,802 |
(1)Represents the premiums paid on behalf of our NEOs under our executive life and disability insurance plans.
(2)Represents Company matching contributions to the accounts of our NEOs in the Company’s 401(k) plan.
(3)Includes expenses related to the personal use of the Company aircraft.
(4)Includes expenses related to security in the amount of $342,182, and expenses in consideration for services provided prior to appointment as interim ceo.
(5)Mr. Conway was based internationally during fiscal 2020 before assuming his role as group president, International and Channel Development. Accordingly, Mr. Conway received certain benefits in connection with his international assignment which included tax equalization support in the amount of $641,485 which occurred in fiscal 2022.
(6)Includes severance payment and benefits paid to Ms. Gonzalez pursuant to her separation agreement in the aggregate amount of $7,608,423,which consists of (i) $2,283,750 in severance, (ii) a prorated bonus of $470,553 for fiscal year 2022, (iii) a $4,801,720 cash payment in recognition of equity grants that were scheduled to vest in 2022 after her separation date on May 20, 2022 and in 2023, (iv) $32,400, representing the cost of COBRA continuation coverage for a period of eighteen months, and (v) $20,000 that could be used for attorneys’ fees related to the negotiation of her separation agreement.
FISCAL 2022 GRANTS OF PLAN-BASED AWARDS TABLE
The following table sets forth information regarding fiscal 2022 annual incentive bonus awards and equity awards granted to our NEOs in fiscal 2022.
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| | | | Potential Future Payouts Under Non-Equity Incentive Plan Awards | | Potential Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares or Stock Units (#) | | | Grant Date Fair Value of Stock and Option Awards ($)(3) |
Name | Award Type | Approval Date | Grant Date(1) | Threshold ($) | Target ($) | Maximum ($) | | Threshold (#)(2) | Target (#) | Maximum (#) |
Howard Schultz | Annual Incentive(4) | | | — | — | — | | | | | | | | |
| RSUs(5) | | | | | | | | | | | | | |
| PRSUs(6) | | | | | | | | | | | | | |
Rachel Ruggeri | Annual Incentive(4) | | | 262,500 | 1,050,000 | 2,100,000 | | | | | | | | |
| RSUs(5) | 11/9/2021 | 11/10/2021 | | | | | | | | 15,894 | | | 1,799,996 |
| PRSUs(6) | 11/9/2021 | 11/10/2021 | | | | | 2,447 | 9,788 | 19,576 | | | | 1,151,610 |
Laxman Narasimhan | Annual Incentive(4) | | | — | — | — | | | | | | | | |
| RSUs(7) | 8/31/2022 | 10/1/2022 | | | | | | | | 43,912 | | | 3,700,025 |
| PRSUs(8) | 8/31/2022 | 10/1/2022 | | | | | 8,234 | 32,934 | 65,868 | | | | 2,789,510 |
| PRSUs(9) | 8/31/2022 | 10/1/2022 | | | | | 2,058 | 8,233 | 16,466 | | | | 697,335 |
Michael Conway | Annual Incentive(4) | | | 346,876 | 1,387,500 | 2,775,000 | | | | | | | | |
| RSUs(5) | 11/9/2021 | 11/10/2021 | | | | | | | | 15,894 | | | 1,799,996 |
| PRSUs(6) | 11/9/2021 | 11/10/2021 | | | | | 5,913 | 23,651 | 47,302 | | | | 2,570,135 |
Kevin R. Johnson | Annual Incentive(4) | | | 642,995 | 2,571,978 | 5,143,956 | | | | | | | | |
| RSUs(5) | 11/9/2021 | 11/10/2021 | | | | | | | | 54,746 | | | 6,199,985 |
| PRSUs(6) | 11/9/2021 | 11/10/2021 | | | | | 22,513 | 90,051 | 180,102 | | | | 9,185,890 |
John Culver | Annual Incentive(4) | | | 375,000 | 1,500,000 | 3,000,000 | | | | | | | | |
| RSUs(5) | 11/9/2021 | 11/10/2021 | | | | | | | | 21,192 | | | 2,399,994 |
| PRSUs(6) | 11/9/2021 | 11/10//2021 | | | | | 8,933 | 35,730 | 71,460 | | | | 3,645,788 |
Rachel A. Gonzalez | Annual Incentive(4) | | | 190,313 | 761,250 | 1,522,500 | | | | | | | | |
| RSUs (5) | 11/9/2021 | 11/10/2021 | | | | | | | | 12,362 | | | 1,399,997 |
| PRSUs(6) | 11/9/2021 | 11/10/2021 | | | | | 5,471 | 21,885 | 43,770 | | | | 2,214,066 |
(1)Annual equity awards granted in November 2021 were approved by the Compensation Committee except for grants to Mr. Johnson, which were approved by the independent members of the board upon the recommendation of the Compensation Committee. In accordance with our equity grant timing policy in place at the time of the November 2021 grant, the grant date for the regular annual equity grant was the final date of the November board meeting. Replacement equity awards granted to Mr. Narasimhan, which were made in respect of certain outstanding equity awards that Mr. Narasimhan forfeited when he left his previous employer to join Starbucks, were approved by our board of directors as part of Mr. Narasimhan’s offer letter. The grant date for the replacement equity awards was Mr. Narasimhan’s first day of employment with the Company.
(2)This threshold amount is based on achievement of pre-approved, annualized adjusted EPS targets and is subject to an adjustment, based on a three-year relative TSR against the S&P 500, of upward or downward of 25%, and a three-year representation modifier, of upward or downward of 10%.
(3)The grant date fair value is computed in accordance with FASB ASC Topic 718 for PRSUs and RSUs granted during the applicable fiscal year. For more information on, and assumptions used for the grant date fair value of the PRSUs and time-based RSUs, see the Company’s Form 10-K (Note 1: Summary of Significant
EXECUTIVE COMPENSATION TABLES
Accounting Policies and Estimates) for the fiscal year ended October 2, 2022. Consistent with the requirements of FASB ASC Topic 718, the value of the PRSUs is based on one-third of the full number of shares for which target EPS was established in fiscal 2022 for the award that was granted on November 10, 2021, which is scheduled to vest on November 10, 2024. The remaining portions of the awards granted in November 2021 will be linked to EPS goals for subsequent fiscal years and will be reported in the Summary Compensation Table for those fiscal years. Excludes the grant date fair value for the EPS performance-related component of the PRSUs granted in fiscal 2021 and fiscal 2020 based on the probable or target outcome of the fiscal 2022 EPS performance-related component because these PRSUs were not granted in fiscal 2022. The amounts included in the “Stock Awards” column of the Summary Compensation Table for fiscal 2022 related to the PRSUs granted in fiscal 2021 and fiscal 2020 are as follows: $0 for Mr. Schultz; $192,366 for Ms. Ruggeri; $0 for Mr. Narasimhan; $1,610,891 for Mr. Conway; $5,882,122 for Mr. Johnson; $2,366,836 for Mr. Culver; and $1,467,960 for Ms. Gonzalez.
(4)Represents awards under the annual incentive bonus plan payable in cash.
(5)Reflects RSUs that vest in four equal annual installments, subject to rounding of partial shares, beginning on the first anniversary of the grant date.
(6)The amount shown in these rows reflect the share amount, specifically the threshold, the target and the maximum potential awards of PRSUs granted for fiscal 2022 performance. The material terms of the PRSUs, which are completely at risk are further described in the CD&A.
(7)Reflects RSUs that vest in three equal annual installments, subject to rounding of partial shares, beginning on the first anniversary of the grant date.
(8)The amount shown in this row reflects the share amount, specifically the threshold, the target and the maximum potential awards of PRSUs granted to Mr. Narasimhan to allow him to participate in the Company’s in-progress FY2021-2023 PRSU cycle, which vest based on the achievement of goals set for the FY2021-FY2023 Performance Period. The material terms of the PRSUs, which are completely at risk are further described in the CD&A.
(9)The amount shown in this row reflects the share amount, specifically the threshold, the target and the maximum potential awards of PRSUs granted to Mr. Narasimhan to allow him to participate in the Company’s in-progress FY2022-2024 PRSU cycle, which vest based on the achievement of goals set for the FY2022-FY2024 Performance Period, subject to rounding of partial shares, beginning on the second anniversary of the grant date.
The following narrative provides further detail with respect to the information in the table above.
Equity Awards. In fiscal 2022, we granted each of our NEOs who was employed by the Company prior to the beginning of the year long-term performance-based compensation in the form of PRSUs and RSUs. In connection with Mr. Narasimhan’s appointment as chief executive officer-elect, Mr. Narasimhan received replacement equity grants in the form of PRSUs and RSUs, which were granted in respect of certain outstanding equity awards that Mr. Narasimhan forfeited when he left his previous employer to join Starbucks, consistent with market practice. All equity awards shown in this table were granted under the 2005 Long-Term Equity Incentive Plan. PRSUs awarded to our NEOs in fiscal 2022 will generally vest, subject to continued employment and achievement of performance metrics, 100% on the third anniversary of the date of grant (or on November 11, 2023 with respect to Mr. Narasimhan’s PRSU award providing for participation in the FY2021-2023 PRSU cycle, and on November 10, 2024 with respect to Mr. Narasimhan’s PRSU award providing for participation in the FY2022-2024 PRSU cycle). The final number of PRSUs earned also will be based on achievement of an EPS goal, a relative TSR modifier, and a representation modifier as further discussed in the Leadership Stock Plan section of the CD&A beginning on page 52. The circumstances pursuant to which the vesting of PRSUs and RSUs accelerate are described below in the section entitled Potential Payments Upon Termination or Change in Control-Equity Treatment on page 69.
Non-Equity Awards. These amounts reflect the potential threshold, target, and maximum annual incentive bonus awards payable to our NEOs as annual incentive bonuses for fiscal 2022 under the Company’s Annual Incentive Bonus Plan. Amounts shown are calculated as a percentage of fiscal 2022 year-end base salary. See the discussion and analysis regarding annual incentive bonuses in the CD&A section beginning on page 47 above for further information. Threshold bonus amounts assume achievement of the objective performance goals, tied to adjusted net revenue and adjusted operating income, at 25% of target and an individual performance factor payout of 0-200% of target. Target bonus amounts assume achievement of the objective performance goals, tied to adjusted net revenue and adjusted operating income, at the target amount and an individual performance factor payout of 0-200% of target. Maximum bonus amounts assume achievement of the objective goals at the maximum for a payout of 200% of target and an individual performance factor payout of 200% of target. As discussed in the CD&A, each of our NEOs who was eligible to earn an annual cash incentive award for fiscal 2022 would have earned an award based on our financial results and profit positive and planet positive goals. However, after considering the recommendations of our interim chief executive officer, the Committee exercised its discretion to adjust all payouts under the Annual Incentive Bonus Plan to $0 for fiscal 2022, given our overall financial performance in fiscal 2022 and where we are currently in our Reinvention Plan (except with respect to Ms. Gonzalez, who received a payout, pursuant to the terms of her separation agreement as shown in the All Other Compensation column of the Summary Compensation Table).
EXECUTIVE COMPENSATION TABLES
OUTSTANDING EQUITY AWARDS AT FISCAL 2022 YEAR-END TABLE
The following table provides information regarding stock options, PRSUs, and RSUs held by our NEOs as of October 2, 2022. No NEO has any other form of equity award outstanding. For stock awards, the amount listed below includes accrued dividend equivalents on unearned and unvested restricted stock units.
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| | | Option Awards | | Stock Awards |
Name | Grant Date | | Number of Securities Underlying Options (#) Total Grant | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#)(1) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($)(3) |
Howard Schultz | N/A | | | | | | | | | | | |
Rachel Ruggeri | 6/15/2020 | (6) | | | | | | | 4,415 | 372,008 | | |
| 11/11/2020 | (9) | | | | | | | 2,872 | 241,995 | | |
| 11/11/2020 | (11) | | | | | | | | | 11,482 | 967,474 |
| 2/16/2021 | (7) | | | | | | | 9,704 | 817,659 | | |
| 11/10/2021 | (9) | | | | | | | 16,245 | 1,368,804 | | |
| 11/10/2021 | (12) | | | | | | | | | 24,369 | 2,053,332 |
Laxman Narasimhan | 10/1/2022 | (6) | | | | | | | 43,192 | 3,639,358 | | |
| 10/1/2022 | (11) | | | | | | | | | 65,868 | 5,550,038 |
| 10/1/2022 | (12) | | | | | | | | | 16,467 | 1,387,509 |
Michel Conway | 11/14/2018 | (9) | | | | | | | 4,008 | 337,714 | | |
| 11/13/2019 | (9) | | | | | | | 8,800 | 741,488 | | |
| 11/13/2019 | (10) | | | | | | | | | 16,170 | 1,362,484 |
| 11/11/2020 | (9) | | | | | | | 11,480 | 967,305 | | |
| 11/11/2020 | (11) | | | | | | | | | 45,926 | 3,869,724 |
| 11/10/2021 | (9) | | | | | | | 16,245 | | 1,368,804 | | | |
| 11/10/2021 | (12) | | | | | | | | | 24,369 | 2,053,332 |
Kevin R. Johnson | 11/21/2016 | (4) | 445,633 | 122,343 | — | 56.10 | 10/2/2025 | | | | | |
| 4/17/2017 | (5) | 36,248 | 36,248 | — | 58.08 | 10/2/2025 | | | | | |
| 11/15/2017 | (4) | 535,615 | 285,615 | — | 56.70 | 10/2/2025 | | | | | |
| 11/14/2018 | (8) | 467,290 | 467,290 | — | 67.04 | 10/2/2025 | | | | | |
| 11/14/2018 | (9) | | | | | | | 20,841 | 1,756,063 | | |
| 11/13/2019 | (9) | | | | | | | 33,942 | 2,859,953 | | |
| 11/13/2019 | (10) | | | | | | | | | 62,372 | 5,255,465 | |
| 11/11/2020 | (9) | | | | | | | 47,566 | 4,007,911 | | |
| 11/11/2020 | (11) | | | | | | | | | 190,272 | 16,032,318 |
| 11/10/2021 | (9) | | | | | | | 55,956 | 4,714,853 | | |
| 11/10/2021 | (12) | | | | | | | | | 83,936 | 7,072,447 |
John Culver | 11/21/2016 | (4) | 211,089 | 158,017 | — | 56.10 | 11/21/2026 | | | | | |
| 11/15/2017 | (4) | 217,141 | 217,141 | — | 56.70 | 11/15/2027 | | | | | |
| 11/14/2018 | (9) | | | | | | | 11,222 | 945,566 | | |
| 11/13/2019 | (9) | | | | | | | 13,199 | 1,112,148 | | |
| 11/13/2019 | (10) | | | | | | | | | 24,257 | 2,043,895 |
| 11/11/2020 | (9) | | | | | | | 19,683 | 1,658,490 | | |
| 11/11/2020 | (11) | | | | | | | | | 78,736 | 6,634,296 |
| 11/10/2021 | (9) | | | | | | | 21,662 | 1,825,240 | | |
| 11/10/2021 | (12) | | | | | | | | | 32,491 | 2,737,692 |
(1)Includes the number of dividend equivalents accrued with respect to unvested PRSUs and RSUs as of October 2, 2022.
(2)Value is calculated by multiplying the number of RSUs that have not vested by the closing market price of our stock ($84.26) as of the close of trading on September 30, 2022 (the last trading day prior to our October 2, 2022, fiscal year-end).
(3)Value is calculated by multiplying the number of PRSUs that may be earned with respect to such PRSUs (at the achievement levels set forth in footnotes 10, 11, and 12 hereto, as applicable) by the closing market price of our stock ($84.26) as of the close of trading on September 30, 2022; actual number of PRSUs earned will be based upon performance against applicable adjusted EPS and relative TSR over a three-year performance period or adjusted EPS, relative TSR, and a representation modifier over a three-year performance period.
(4)Options vest in four equal annual installments (subject to rounding of partial shares), beginning on the first anniversary of the grant date.
(5)Options vest in four equal annual installments (subject to rounding of partial shares), beginning on November 21, 2017.
(6)Reflects RSUs that vest equally over three years on the anniversary of the grant subject to rounding of partial shares.
(7)Reflects RSUs that vest over four years with 50% on the second and fourth anniversary of the grant subject to rounding of partial shares.
EXECUTIVE COMPENSATION TABLES
(8)Reflects the number of performance-vesting stock options that were earned upon achievement of the pre-established performance goal. Upon the achievement of this performance goal, vesting of this award was exclusively to continued service for the remainder of the performance period, which ended on November 14, 2021.
(9)RSUs vest in four equal installments (subject to rounding or partial shares), beginning on the first anniversary date of the grant.
(10)Represents shares earned under PRSUs granted in fiscal 2020 based on Starbucks performance through the end of the three-year performance period covering fiscal 2020, fiscal 2021, and fiscal 2022. These shares were earned following certification of the EPS and TSR performance goals by the Compensation Committee. The earned PRSUs remained subject to the NEO’s continued employment (other than for any NEO who is eligible to retirement vesting) through their settlement on November 18, 2022.
(11)PRSUs that are to be earned and scheduled to settle on November 11, 2023, subject to (i) the achievement of EPS performance, subject to annual goals that are pre-established at the beginning of each of fiscal 2021, fiscal 2022, and fiscal 2023; (ii) Starbucks TSR relative to the S&P 500 Index over a three-year period covering fiscal 2020, fiscal 2021, and fiscal 2022; and (iii) the executive officer’s employment (other than for any NEO who is eligible for retirement vesting) through the settlement date. The number of shares and the payout value for the PRSUs reflect payout at maximum since Starbucks EPS performance and relative TSR performance as measured through the end of the first two years of the three-year performance period exceeded target levels (although they did not exceed maximum levels).
(12)PRSUs that are to be earned and settled on November 10, 2024, subject to (i) the achievement of EPS performance, subject to annual goals that are pre-established at the beginning of each of fiscal 2022, fiscal 2023, and fiscal 2024; (ii) Starbucks TSR relative to the S&P 500 Index over a three-year period covering fiscal 2022, fiscal 2023, and fiscal 2024; (iii) a representation modifier over a three-year period covering fiscal 2022, fiscal 2023, and fiscal 2024; and (iv) the executive officer’s employment through the settlement date. The number of shares and the payout value for the PRSUs reflect payout at target since Starbucks EPS performance as measured through the end of the first year of the three-year performance period exceeded threshold levels but did not exceed target levels.
FISCAL 2022 OPTION EXERCISES AND STOCK VESTED TABLE
The following table provides information regarding stock options that were exercised by our NEOs and stock awards that vested during fiscal 2022. Option award value realized is calculated by subtracting the aggregate exercise price of the options exercised from the aggregate market value of the shares of common stock acquired on the date of exercise. Stock award value realized is calculated by multiplying the number of shares shown in the table by the closing price of our stock on the date the stock awards vested.
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| Option Awards | | Stock Awards |
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) |
Howard Schultz | — | | | — | — |
Rachel Ruggeri | — | — | | 5,144 | 429,817 |
Laxman Narasimhan | — | — | | — | — |
Michael Conway | 30,158 | 1,653,072 | | 47,429 | 5,473,034 |
Kevin R. Johnson | 250,000 | 14,846,600 | | 210,710 | 24,686,966 |
John Culver | — | — | | 109,152 | 12,799,444 |
Rachel A. Gonzalez | 82,894 | 2,217,458 | | 58,516 | 6,490,022 |
NONQUALIFIED DEFERRED COMPENSATION
Management Deferred Compensation Plan
The NEOs are eligible to participate in the Management Deferred Compensation Plan (“MDCP”), a nonqualified plan the benefits of which are paid by Starbucks out of our general assets. The plan is subject to the requirements of Section 409A of the Code. We maintain a trust agreement with an independent trustee establishing a rabbi trust for the purpose of funding benefits payable to participants (including NEOs) under our MDCP in the event of a change in control. It is currently funded with a nominal amount of cash.
Deferrals. Participants may defer up to 70% of base salary to the MDCP and up to 85% of bonuses paid under certain eligible annual incentive bonus plans. Bonus deferral elections are available only to those who are eligible and enroll during the annual enrollment window that takes place prior to the start of each fiscal year. We do not provide matching contributions on participant MDCP deferrals.
Earnings. The MDCP uses measurement benchmarks to credit earnings on compensation deferred under the plan. Those measurement benchmarks are based on the same funds available under our 401(k) plan. Participants choose how to allocate their account balance among the measurement funds and may change how current deferred compensation is allocated at any time, subject to certain redemption fees and other limitations imposed by frequent trading restrictions and plan rules. Changes generally become effective as of the first trading day following the change.
In-Service Withdrawals and Separation from Service Distributions. At the time of making the deferral election for a particular year, a participant elects when the associated deferred compensation will be distributed. In general, the participant can receive scheduled “in-service” withdrawals or hardship withdrawals while still employed or have distributions paid upon separation from service. The specific distribution options depend on whether the deferred compensation was earned before or after January 1, 2005, and is subject to other plan rules.
For separation from service distributions, account balances resulting from the Company match and deferred compensation earned on and after January 1, 2005, can be paid either in a lump sum or in up to 10 annual installments, in each case beginning within 60 days or one year after separation from service. For partners who became newly eligible on or after October 1, 2010, and certain other partners, separation from service distributions can be paid either in a lump sum or amortized over a period of two to five years, in each case beginning within 60 days or one year after separation from service. If a participant is considered a “specified employee” on their separation date, Section 409A requires that the payments be delayed for six months after such separation date. Account balances resulting from pre-2005 deferred compensation can be distributed either in a lump sum within 60 days of separation or, if the participant is at least age 65 on their separation date, in up to 10 annual installments. Retirement age under the MDCP is age 65, and no current NEO with an MDCP balance was retirement eligible under the MDCP during fiscal 2022.
EXECUTIVE COMPENSATION TABLES
FISCAL 2022 NONQUALIFIED DEFERRED COMPENSATION TABLE
The following table shows contributions, earnings, withdrawals, and distributions during fiscal 2022 and the account balances as of October 2, 2022, for our NEOs under the MDCP.
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Name | Executive Contributions ($) | | Starbucks Contributions ($) | Aggregate Earnings ($)(1) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Fiscal 2022 Year-End ($)(2) |
Howard Schultz | — | | — | — | — | — |
Rachel Ruggeri | $543,717 | (3) | — | -$134,595 | — | $523,727 |
Laxman Narasimhan | — | | — | — | — | — |
Michael Conway | — | | — | — | — | — |
Kevin R. Johnson | — | | — | — | — | — |
John Culver | $705,399 | (3) | — | -$871,768 | — | $5,221,998 |
Rachel A. Gonzalez | — | | — | -$26,101 | — | $58,262 |
(1)We do not provide above-market or preferential earnings on MDCP contributions, so these amounts were not reported in the Summary Compensation Table. MDCP participants can select only from among the same investment funds as are available under our 401(k) plan.
(2)Of these balances, the following amounts, which were in the form of executive and Company contributions were reported in the “Salary,” “Non-Equity Incentive Plan Compensation,” and “All Other Compensation” columns in the Summary Compensation Table in prior-year proxy statements: Mr. Schultz - $0; Ms. Ruggeri - $110,348; Mr. Narasimhan - $0; Mr. Conway - $0; Mr. Johnson - $0; Mr. Culver - $3,250,892; and Ms. Gonzalez - $49,496. The information in this footnote is provided to clarify the extent to which amounts payable as deferred compensation represent compensation reported in our prior proxy statements, rather than additional currently earned compensation.
(3)This amount was deferred from Ms. Ruggeri’s and Mr. Culver’s fiscal 2022 base salary and eligible annual incentive bonus pay (if the NEO elected deferral of bonus pay), which is reported in the “Salary” and “Non-Equity Incentive Plan Compensation” columns of the Summary Compensation Table for fiscal 2022.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE
IN CONTROL
As described in the CD&A, our currently employed NEOs are entitled to certain payments and benefits under the Severance and CIC Plan in the event such NEOs experience certain qualifying terminations of employment, except for Mr. Schultz, who is not eligible to participate in the Severance and CIC Plan, and Mr. Narasimhan, who will be entitled to severance payments and benefits under his Offer Letter until he becomes eligible to participate in the Severance and CIC Plan upon his appointment as chief executive officer on April 1, 2023. For additional information regarding the material features of the Severance and CIC Plan and the rationale for each feature, please refer to the section above entitled “Severance and CIC Plan” on page 55. For additional information regarding the material features of Mr. Narasimhan’s severance entitlements under his Offer Letter, please refer to the section above entitled “Executive Compensation Agreements and Arrangements–Employment Agreements and Termination Arrangements–Narasimhan Offer Letter” on page 60.
The 2005 Key Employee Plan also provides for “double-trigger” accelerated vesting of equity (with any performance-based awards vesting at target), consistent with the “double-trigger” treatment that applies to all partners with equity compensation awards. This means that under our 2005 Key Employee Plan (which is also known as the Leadership Stock Plan), unvested awards will accelerate vesting if (i) there is a change in control, and (ii) either (a) awards are assumed or substituted with awards of the surviving company and the partner is terminated or resigns for good reason during the CIC Period or (b) awards are not assumed or substituted with awards of the surviving company, in which case they vest immediately upon a change in control.
Beginning with fiscal 2018 awards, PRSUs and RSUs accelerate upon a partner’s death or disability. As a result of the change to the Long-Term Equity Incentive Plan in fiscal 2018, whereby RSUs will now be granted annually rather than stock options, the Committee elected to make all RSUs granted as part of the annual grant process eligible for retirement vesting whereby the vesting of RSUs will fully accelerate upon the voluntary termination of employment of any partner who
satisfies the criteria for “retirement” under the 2005 Key Employee Plan, meaning the partner is at least 55 years old and has a minimum of 10 years of continuous service with Starbucks, unless otherwise provided in the grant agreement. For PRSUs, acceleration will be based on the number of shares earned when the performance period has been completed and the target number of shares when the performance period has not yet been completed.
The following table shows the estimated value that may be realized by each of the NEOs (other than Mr. Johnson) in the event of the following events occurring as of September 30, 2022 (the last business day of fiscal 2022):
•Death
•Disability
•Retirement
•Termination without cause
•Change in control where equity awards are assumed or substituted Change in control where equity awards are not assumed or substituted
•Termination without cause or resignation for good reason in connection with a change in control
Because Mr. Johnson retired as president and chief executive officer effective April 4, 2022 and remained employed with the Company in a senior advisor role through the end of fiscal 2022, the following table reflects the value that Mr. Johnson actually realized for his PRSUs and RSUs upon his retirement at the end of fiscal 2022, as permitted by Item 402 of Regulation S-K.
With respect to PRSUs and RSUs, the table below includes the estimated potential incremental value of additional PRSUs and RSUs at target that would have vested for our NEOs as of September 30, 2022 (the last business day of fiscal 2022) under the acceleration scenarios described above (or, with respect to Mr. Johnson, the actual incremental value of additional PRSUs and RSUs that vested upon his retirement at the end of fiscal 2022). The table does not include benefits generally available to all partners or payments and benefits that the NEOs would have already earned during their employment with the Company whether or not a qualifying termination or other acceleration event had occurred. Accelerated PRSU and RSU award value at target is calculated by multiplying the number of accelerated shares by the closing market price of our stock on September 30, 2022 ($84.26). Of the NEOs, Mr. Johnson and Mr. Culver satisfied the criteria for “retirement” under the 2005 Key Employee Plan as of
EXECUTIVE COMPENSATION TABLES
October 2, 2022. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be different and can only be determined at the time a qualifying termination or other acceleration
event actually occurs. Factors that could affect these amounts include the time during the year of any such event, the Company’s stock price and the executive’s age.
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Name | Type of Award/Plan | Death ($) | Disability ($) | Retirement ($) | Termination without Cause ($) | | Change in Control w/ Assumption or Substitution ($) | Change in Control w/out Assumption or Substitution ($) | Termination without Cause or Resignation for Good Reason in connection with Change in Control ($) | |
Howard Schultz | Cash Severance | — | | — | | N/A | — | | — | — | — | |
COBRA | — | | — | | N/A | — | | — | — | — | |
Outplacement | — | | — | | N/A | — | | — | — | — | |
PRSUs and RSUs | — | | — | | N/A | — | | — | — | — | |
Laxman Narasimhan(1) | Cash Severance | — | | — | | N/A | — | | — | — | — | |
COBRA | — | | — | | N/A | — | | — | — | — | |
Outplacement | — | | — | | N/A | — | | — | — | — | |
PRSUs and RSUs | — | | — | | N/A | — | | — | — | — | |
Rachel Ruggeri | Cash Severance | — | | — | | N/A | 2,310,002 | | (2) | — | | — | | 2,730,003 | | (3) |
COBRA | — | | — | | N/A | 26,280 | (2) | — | | — | | 26,280 | (3) |
Outplacement | — | | — | | N/A | 25,000 | | (2) | — | | — | | 25,000 | | (3) |
PRSUs and RSUs | 5,337,535 | | 5,337,335 | | N/A | — | | | — | | 5,337,535 | | 5,337,535 | | |
Michael Conway | Cash Severance | — | | — | | N/A | 2,775,002 | | (2) | — | | — | | 3,237,503 | | (3) |
COBRA | — | | — | | N/A | 35,280 | (2) | — | | — | | 35,280 | (3) |
Outplacement | — | | — | | N/A | 25,000 | | (2) | — | | — | | 25,000 | | (3) |
PRSUs and RSUs | 8,765,989 | | 8,765,989 | | N/A | — | | | — | | 8,765,989 | | 8,765,989 | | |
Kevin R. Johnson | Cash Severance | — | | — | | — | | — | | | — | | — | | 3,100,004 | | (3) |
COBRA | — | | — | | — | | — | | | — | | — | | 26,280 | (3) |
Outplacement | — | | — | | — | | — | | | — | | — | | 25,000 | | (3) |
PRSUs and RSUs | — | | — | | 33,682,851 | | — | | | — | | — | | 33,682,851 | | (4) |
John Culver(5) | Cash Severance | — | | — | | — | | 3,000,002 | | (2) | — | | — | | 3,500,003 | | (3) |
COBRA | — | | — | | — | | 35,280 | (2) | — | | — | | 35,280 | (3) |
Outplacement | — | | — | | — | | 25,000 | | (2) | — | | — | | 25,000 | | (3) |
PRSUs and RSUs | 13,640,179 | | 13,640,179 | | 13,640,175 | | 13,640,179 | | | — | | 13,640,179 | | 13,640,179 | | |
Rachel A. Gonzalez | Cash Severance | — | | — | | N/A | 7,576,023 | | (6) | — | | — | | — | | |
COBRA | — | | — | | N/A | 32,400 | | (6) | — | | — | | — | | |
Outplacement | — | | — | | N/A | — | | | — | | — | | — | | |
PRSUs and RSUs | — | | — | | N/A | — | | | — | | — | — | | |
(1)Mr. Narasimhan commenced employment with the Company on October 1, 2022, after the last business day of fiscal 2022.
(2)Under the Severance and CIC Plan, in the event of a termination of employment by the Company without cause other than during the CIC Period, participants are entitled to receive (i) an amount equal to 1.5x the sum of the participant’s base salary and target annual cash bonus, (ii) a pro-rata portion of the participant’s annual cash bonus for the year of termination based on actual Company performance (assuming 100% achievement of any individual performance targets), (iii) a lump sum cash payment equal to 18 months’ COBRA coverage, and (iv) outplacement services, or at the Company’s discretion, a lump sum up to $25,000 for such services.
(3)Under the Severance and CIC Plan, in the event of a termination of employment by the Company without cause or resignation for good reason, in each case, during the CIC Period, the severance payments and benefits participants are entitled to receive upon such a termination are the same as those described in footnote 2 above with respect to a termination without cause outside of the CIC Period, except the multiple for the cash severance payment is 2x (rather than 1.5x) and the pro-rata bonus payment is based on the greater of target and actual Company performance. We have assumed for purposes of this disclosure that the pro-rata bonus payment would be paid at target.
(4)Represents the incremental value of additional PRSUs and RSUs that vested upon Mr. Johnson’s retirement at the end of fiscal 2022. Mr. Johnson did not receive any other severance payments or benefits in connection with his retirement.
(5)Because Mr. Culver’s employment was not involuntarily terminated until January 2, 2023 (after the end of fiscal 2022), the table shows the estimated value that would be realized by Mr. Culver if each scenario set forth in the table above occurred as of September 30, 2022 (the last business day of fiscal 2022), as required by Item 402 of Regulation S-K. However, the actual amount received by Mr. Culver in connection with his termination of employment on January 2, 2023 was as provided for in his Separation Agreement and Release, which provided for the same severance benefits that Mr. Culver would have received under the Severance and CIC Plan if he was a participant in such plan and terminated by the Company without cause on such date.
(6)Represents severance payments and benefits actually paid to Ms. Gonzalez pursuant to her separation agreement in the aggregate amount of $7,608,423, which consists of (i) $2,283,750 in severance, (ii) a prorated bonus of $470,553 for fiscal year 2022, (iii) a $4,801,720 cash payment in recognition of equity grants that were scheduled to vest in 2022 after her separation date and in 2023, (iv) $32,400, representing the cost of COBRA continuation coverage for a period of eighteen months, and (v) $20,000 that could be used for attorneys’ fees related to the negotiation of her separation agreement.
EXECUTIVE COMPENSATION TABLES
CEO PAY RATIO
Pursuant to Item 402(u) of Regulation S-K and Section 953(b) of the Dodd-Frank Act, presented below is the ratio of the annual total compensation of Mr. Schultz to the annual total compensation of our median partner (excluding Mr. Schultz). The ratio is a reasonable estimate calculated in a manner consistent with SEC requirements. The SEC’s rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable because companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own ratios.
Starbucks employs over 385,000 partners in over 17,500 company-operated stores, which impacts the comparability of our CEO pay ratio to the disclosed pay ratios of companies that operate solely under franchised- or licensed-store models. Partners frequently work in flexible, part-time roles, which has the effect of lowering the annual total compensation for our median employee. In addition, Starbucks is a global company, with approximately 140,000 partners outside the U.S. Therefore, the median compensation disclosed below is based on our global workforce and is not designed to capture the median compensation of our U.S. partners.
Finally, to attract and retain talent, we pay competitively and tailor employee benefits in each jurisdiction, resulting in total rewards offerings that vary from country to country. For this reason, and because each partner’s relationship with our industry-leading total rewards offerings differs based on individual circumstances, we have not ascribed a value to healthcare or the other benefits provided to our partners. This allows total compensation of the median partner to represent the median of all partners based on elements of compensation shared generally among our partners worldwide. For more information regarding our total rewards philosophy, please see the Investing in Our Partners (Our Total Rewards Philosophy) section in the CD&A of this proxy statement on page 60.
Consistent with the methodology utilized for the fiscal 2021 calculation, we identified our median employee from all full-time and part-time partners regardless of status who were on our payroll records as of a determination date of October 2, 2022, based on base wages paid during the twelve-month period ending on that date. For permanent partners hired during the twelve-month period, compensation was annualized to reflect a full year of wages. Compensation for international employees was converted to U.S. dollar equivalents applying an average exchange rate for the fiscal year. The fiscal 2022 annual total compensation for Mr. Schultz was $374,558, as reported in the Summary Compensation Table of this proxy statement. The fiscal 2022 annual total compensation for our median employee, a part-time barista in the United States, was $12,254, including salary and Bean Stock. The ratio of our CEO’s annual total compensation to our median employee’s annual total compensation for fiscal 2022 is 31 to 1.
AUDIT COMMITTEE REPORT
As part of fulfilling its responsibilities, the Audit Committee has reviewed and discussed the audited consolidated financial statements and related footnotes for the fiscal year ended October 2, 2022, with management and Deloitte. The Audit Committee also discussed with Deloitte those matters required to be discussed under Public Company Accounting Oversight Board standards and the SEC. The Audit Committee has received the written disclosures and the letter from Deloitte required by the applicable requirements of the Public Company Accounting Oversight Board regarding Deloitte’s communications with the Audit Committee concerning independence and has discussed its independence with Deloitte.
Based upon the review and discussions referred to above, the Audit Committee recommended to the board of directors that the audited consolidated financial statements be included in Starbucks Annual Report on Form 10-K for the fiscal year ended October 2, 2022, for filing with the SEC.
Respectfully submitted,
Andrew Campion (chair)
Isabel Ge Mahe
Jørgen Vig Knudstorp
Joshua Cooper Ramo
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Board Recommendation |
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| The board of directors recommends a vote FOR the ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2023. |
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PROPOSALS 5-9 SHAREHOLDER PROPOSALS |
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As discussed more fully in section of this proxy statement captioned “Shareholder Engagement,” Starbucks has a history of actively engaging with our shareholders and we believe that strong corporate governance includes year-round engagement. We have a long-standing, robust shareholder outreach program in which we solicit feedback on our corporate governance, executive compensation program, and disclosure practices, as well as environmental and social impact programs and goals. Additionally, shareholder feedback is shared with our board of directors, on an ongoing basis.
Proposals 5 through 9 are shareholder proposals that will be voted on at this year’s Annual Meeting if properly presented by or on behalf of the shareholder proponent. the proponents are responsible for the content of their proposals, for which we and our board accept no responsibility.
We will promptly provide each shareholder proponent’s name, address, and, to our knowledge, share ownership upon a shareholder’s oral or written request given to our corporate secretary at Starbucks Corporation, 2401 Utah Avenue South, Seattle, Washington 98134.
PROPOSAL 5
SHAREHOLDER PROPOSAL REGARDING REPORT ON PLANT-BASED MILK PRICING
RESOLVED
In light of heightened public concern about the dairy industry’s environmental impact, the growing prevalence of allergies to cow’s milk, and the increasing demand for alternatives to dairy milk, the board is strongly urged to commission a report examining any costs to Starbucks’ reputation and any impact on its projected sales incurred as a result of its ongoing upcharge on plant-based milk. The report should address the risks and opportunities presented by the shift in public opinion regarding dairy vs. nondairy options, including, but not limited to, the aforementioned issues. Given the urgency of the matter, the board should summarize and present its findings to shareholders by the end of the third quarter of the current fiscal year. The report should be completed at a reasonable cost and omit proprietary information.
SUPPORTING STATEMENT
Although Starbucks prides itself on innovation, inspiration, and a purpose that “goes beyond profit,” our company has fallen short of its own environmental and “people-positive” aspirations by continuing to impose an upcharge on nondairy milk.
U.S. per capita fluid milk consumption has declined with each decade since the 1970s, and this downward trend is expected to continue. In contrast, the nondairy milk market, including oat, coconut, soy, and almond milks, is projected to grow from over $25 billion in 2022 to over $61 billion by 2029. Three major factors are driving the demand for nondairy milk: taste, lactose intolerance, and environmental concerns.
Research shows that 82% of people who consume plant-based milk do so because they prefer the taste.
While many people prefer nondairy milk over cow’s milk, other individuals can’t tolerate cow’s milk at all: 95% of Asian, 80 to 100% of Native American, 60 to 80% of Black, and 50 to 80% of Latinx populations suffer from lactose intolerance. Nonwhites currently comprise nearly 40% of the U.S. population, and that segment is growing, which means that increasing numbers of Americans may hesitate to visit Starbucks or order drinks that include milk because of our current upcharge on nondairy milk.
Approximately 56% of surveyed individuals who choose nondairy milk do so because of environmental concerns. Starbucks has publicly disclosed that dairy milk is the biggest contributor to our company’s carbon footprint and the second-highest contributor to water usage. Cattle, including dairy cows, account for roughly 40% of all greenhouse gas emissions from agriculture; plant-based milks produce less than one-third of CO2 emissions. It takes 144 gallons of water to produce just 1 gallon of dairy milk; nondairy milks require up to 90% less water.
Starbucks has committed to increasing plant-based options as a way of investing in an environmentally friendly menu. It is reasonable for shareholders to request an analysis of the potential costs to our company of the current upcharge on nondairy milk with regard to public relations and lost sales. Accordingly, we urge all shareholders to support this resolution.
BOARD RECOMMENDATION
The Starbucks board of directors recommends that shareholders vote AGAINST this proposal for the following reasons:
Starbucks is committed to a resource-positive future and to expanding Starbucks plant-based and plant-forward menu items globally is one of the ways we are pursuing this goal. Our aim is to provide our customers with a variety of food and beverage choices in addition to sustainable dairy, and we have collaborated with plant-based innovators so that today nearly all stores across our markets offer plant-based food and beverage menu items. We continue to introduce new drinks and food items to menus while innovating with plant-based ingredients across key platforms like espresso, cold brew, refreshers, and food to meet growing customer demand globally. Since the beginning of our 2022 fiscal year, we have launched three new beverage innovations featuring plant-based milk, including the Iced Sugar Cookie Almond Milk Latte offered as part of our holiday 2022 menu.
Our recent plant-based beverage innovations build on our demonstrated track record of providing customers with more choices. We began offering plant-based milk to customers in the U.S. in 1997 when we added soymilk to menus. As non-dairy beverages grew in popularity, we added coconut milk in 2015, almond milk in 2016, and expanded to offer oat milk nationally in 2021. We continue to innovate to expand plant-based menus and use technology to support greater adoption for plant-based options. In April 2021, in partnership with Arizona State University, we announced the ASU-Starbucks Center for the Future of People and the Planet, which focuses on initiatives aimed to deliver scalable impact towards our aspirational sustainability goals for 2030 and beyond. To empower customers and to promote environmental practices, the Center is exploring
alternative menu items, including a variety of plant-based protein sources and other offerings. The Center is also developing tools and training to improve environmental impacts and opportunities for current and new products.
Customers can customize any beverage on the menu with a variety of plant-based milk options, including soymilk, coconut milk, almond milk, and oat milk. As with other beverage customizations, the price for plant-based milk customization varies by market and depends on a mix of considerations. In some geographies, market conditions allow us to price plant-based milk more closely to dairy milk than in others. For instance, there is currently no additional charge for customizing beverages with plant-based milk in our Company-operated markets in the United Kingdom or Japan or licensed markets in France, Belgium, the Netherlands, or Luxembourg. Even in the United States, adding a splash of any plant-based milk to Brewed Coffee, Iced Coffee, Cold Brew, and Americano beverages is offered to our customers free of charge.
In addition to our efforts to increase plant-based offerings, Starbucks has innovated and worked with others to source high-quality dairy, responsibly and sustainably. In 2021, Starbucks launched its first on-farm pilot through U.S. Dairy Net Zero Initiative with Alliance Dairy to explore technologies related to renewable and organic fertilizer and water reuse. Starbucks also works with Agolin to improve feed efficiency and reduce enteric methane and is also collaborating with The Nature Conservancy to help refine and scale our approach to sustainable dairy and environmental stewardship.
Starbucks has long been committed to a resource-positive future and to expanding our plant-based menu items. As with all product offerings, we continuously evaluate the market for, and the price of, our plant-based menu items, including plant-based milk customizations. Commissioning a separate report on the impact of our pricing strategy for plant-based milk customizations would divert resources from our ongoing efforts to expand plant-based options for our customers, a goal that we hope the proponent shares.
The board of directors recommends that our shareholders vote against this proposal.
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Board Recommendation |
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| The board of directors recommends a vote AGAINST this proposal. |
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PROPOSAL 6
SHAREHOLDER PROPOSAL REGARDING CEO SUCCESSION PLANNING POLICY AMENDMENT
RESOLVED
Shareholders request the Starbucks Board of Directors (the “Board”) initiate the appropriate process to amend the Corporate Governance Principles and Practices for the Board of Directors to expand upon the CEO succession planning policy to include the following components:
•development and annual evaluation of position qualifications to reflect Starbucks business strategy;
•procedures to identify and develop internal candidates;
•a formal assessment process to annually evaluate the progress of internal candidates;
•requirements that succession planning begin at least three years before an expected transition and emergency succession planning is ongoing; and
•standards and metrics to annual evaluate the performance of the succession planning process.
SUPPORTING STATEMENT
Recent events highlight the need for a more robust succession planning policy at Starbucks. In April 2022, former CEO Kevin Johnson retired and Howard Schultz returned as Interim CEO while the Board searched for a permanent replacement. In explaining Starbucks’ external search, Schultz told a reporter, “For the future of the company, we need a domain of experience and expertise in a number of disciplines that we don’t have now.”1 While there may be circumstances where an external candidate is the best choice, not having any viable internal candidates is evidence of the Board’s weak succession planning.
Reportedly, the Board was notified of Johnson’s pending retirement at least one year in advance. Poor succession planning resulted in Starbucks losing a critical component of a smooth transition: business continuity. Rather than Johnson playing a large role in the onboarding of a successor, Laxman Narasimhan spent months shadowing Schultz who was retired for five years before his recent return. Adding to the bumpy transition, Schultz launched a “Reinvention Plan” that included changes to Starbucks strategy and leadership structure prior to Narasimhan’s start.2
An effective succession planning process includes the regular evaluation of skills and competencies needed in a successor, identification of promising internal candidates, and a talent development strategy. A dynamic policy would better equip Starbucks for an emergency or planned succession with capable internal candidates and a candidate profile to expedite an external search. Developing a robust leadership pipeline has a myriad of benefits including retained institutional knowledge and increased employee morale and retention. The current policy is lacking, and we fear the Board is overly reliant on Schultz, as this was his second return.
Research suggests that poorly planned successions and external successors negatively impact financial performance. A 2006 study found that delays in hiring a successor and recruiting externally decreased subsequent financial performance.3 Research published in the Harvard Business Review in 2021 suggests that CEOs hired internally could perform better than external hires 61% of the time.4 A 2001 study found that hiring externally following a CEO retirement precipitated a nearly 6% drop in performance.5 Given these risks, Starbucks would benefit from a robust succession planning policy that produces viable internal candidates going forward.
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1 https://www.wsj.com/articles/howard-schultz-says-starbucks-is-seeking-fresh-blood-in-ceo-search-116544880602
2 https://www.restaurantdive.com/news/Starbucks-eliminates-COO-role/630060/; https://investor.starbucks.com/press-releases/financial-releases/press-release-details/2022/Starbucks-Enters-New-Era-of-Growth-Driven-by-an-Unparalleled-Reinvention-Plan/default.aspx
3 https://www.researchgate.net/publication/287508898_Deaths_of_CEOs_Are_delays_in_naming_successors_and_insideroutsider_succession_associated_with_subsequent_firm_performance
4 https://hbr.org/2021/05/the-high-cost-of-poor-succession-planning
5 https://sloanreview.mit.edu/article/leadership-the-performance-impact-of-new-ceos/
BOARD RECOMMENDATION
The Starbucks board of directors recommends that shareholders vote AGAINST this proposal for the following reasons:
Our Nominating and Corporate Governance Committee of our board of directors reviewed proponent’s proposal and directed our general counsel and our corporate secretary to propose revisions to our Corporate Governance Principles and Practices for the Board of Directors (our “Governance Principles”) that would consider suggestions made in the proposal. After consulting with outside counsel, they recommended the following changes to the section on succession planning contained in our Governance Principles (deleted language is shown as struck-through; new language is underlined):
Succession Planning.
A primary responsibility of the Board is planning for chief executive officer succession. The Chair of the Nominating and Corporate Governance Committee, together with the Chair of the Board (or, if the Chair of the Board is not independent, the lead independent director), the Chair of the Compensation and Management Development Committee and the chief executive officer, will (collectively, the “succession planning team”) will annually evaluate and update as appropriate the skills, experience and attributes that the Board believes are important to be an effective chief executive officer in light of the Company’s business strategy. The succession planning team will also annually review with the Board, the Company’s chief executive officer succession planning with the Board process, including the identification, development and progress of internal
candidates, and how candidates have been assessed. Chief executive officer succession planning should be an ongoing process, with the goal of providing sufficient lead time before an expected transition while also being prepared for and responsive to unexpected developments. Pursuant to its charter, the Compensation and Management Development Committee has general oversight responsibility for management development and succession planning practices and strategy.
These changes substantially incorporate the suggestions made by the proponent. However, after consultation with outside counsel and benchmarking against publicly available, peer-company statements on succession planning, we determined that both anticipated and emergency succession planning should be an ongoing process rather than being artificially constrained by the three-year runway mandated by the proposal.
Our Nominating and Corporate Governance Committee recommended that the above changes to our Governance Principles be approved by our board of directors. The board of directors adopted these changes on December 23, 2022. The board of directors appreciated the proponent’s insightful contribution to our robust Governance Principles, but having already substantially implemented key elements of the proponent’s proposal, the board of directors recommends that our shareholders vote against this proposal
The board of directors recommends that our shareholders vote against this proposal.
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Board Recommendation |
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| The board of directors recommends a vote AGAINST this proposal. |
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PROPOSAL 7
SHAREHOLDER PROPOSAL REGARDING ANNUAL REPORT ON COMPANY OPERATIONS IN CHINA
RESOLVED
Shareholders request that, beginning in 2023, Starbucks Corporation report annually to shareholders on the nature and extent to which corporate operations depend on, and are vulnerable to, Communist China, which is a serial human rights violator, a geopolitical threat, and an adversary to the United States. The report should exclude confidential business information but provide shareholders with a sense of the Company's reliance on activities conducted within, and under control of, the Communist Chinese government.
SUPPORTING STATEMENT
American companies doing business in Communist China is a controversial public policy issue. See, e.g., "Doing business in China is difficult. A clash over human rights is making it harder," April 2, 2021, https://www .cnn.com/2021/04/02/business/nike-china-western-business-intJ-hnk/index.html.
Starbucks has 5,400 stores in over 200 cities across China, and relies on raw materials, finished products, labor and/or services from entities in the communist nation. China is an established serial violator of human and political rights.
•China is also a hostile adversary of the U.S. for many reasons, including:
•China intends to displace the U.S. as the lone global superpower by 2049;
•The U.S. has committed to defend Taiwan, which China has militaristically asserted is part of its country and may attempt to seize by force;
•U.S.-China relations are tense over a number of issues including China's military expansion; egregious human rights violations; actions related to the COVID pandemic; intellectual property theft; relentless espionage; elimination of freedom in Hong Kong; and environmental pollution.
China has also indicated that it would use its industrial capabilities for strategic purposes against adversaries.
Many Chinese companies - which are ultimately under the control of the Communist government-are vulnerable to the U.S. Holding Foreign Companies Accountable Act, do not adhere to basic auditing standards, and are therefore untrustworthy.
China - and by extension the companies it controls - is also identified in the U.S. State Department's 2022 Trafficking in Persons Report as a state sponsor of human trafficking. It is now subject to the Uyghur Forced labor Prevention Act, which imposes strict verification of parts and products imported from China, that they are not generated from slave labor.
Starbucks's extensive ties to China breed reputational risk for the company also. For example, while the company funds groups that promote the interests of homosexual and transgender individuals, the Communist government persistently and vigorously cracks down on those forms of identity within its borders.
A July 2022 joint statement from the leaders of the British and American domestic intelligence agencies warned that the Communist Chinese Party is the greatest threat to the international order. "We consistently see that it's the Chinese government that poses the biggest long-term threat to our economic and national security, and by ' our,' I mean both of our nations, along with our allies in Europe and elsewhere," said FBI Director Christopher Wray.
Given the controversial, if not dangerous, nature of doing business in and with China, shareholders have the right to know the extent to which Starbucks Corporation's business operations depend on Communist China.
BOARD RECOMMENDATION
The Starbucks board of directors recommends that shareholders vote AGAINST this proposal for the following reasons:
We do not believe that the requested report on “the nature and extent to which corporate operations depend on, and are vulnerable to, “Communist China” would benefit Starbucks shareholders. Starbucks is a reporting company for purposes of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”) and, as such, is already subject to comprehensive and ongoing disclosure requirements to its shareholders. Those requirements include informing Starbucks shareholders about operations in China to the extent they are material, including informing our shareholders about risks that have the potential to be material to our business.
U.S. securities laws are grounded in the idea that publicly traded companies have an obligation to disclose material information to shareholders. Generally, those disclosure obligations begin under the Securities Act of 1933, as amended (the “Securities Act”), with a company’s initial public offering, and continue under the Securities Exchange Act so long as a company has shares listed on a U.S. securities exchange, which, in Starbucks case, is Nasdaq. We primarily fulfill our ongoing disclosure obligations through proxy statements such as this one, our annual reports on form 10-K, our quarterly reports on form 10-Q, and periodic reports on form 8-K. Securities and Exchange Commission (“SEC”) regulations require us to include in our filings information about material factors that make an investment in Starbucks speculative or risky, and we have a well-developed process for identifying and disclosing those risks. Our most recent annual report on form 10-K, which we filed on November 18, 2022, includes disclosure regarding our operations in China to the extent that they are material to Starbucks, including the number of Starbucks stores in China, net revenues derived from China, and trends in store sales in China. Additionally, our form 10-K includes disclosure of numerous risk factors with respect to our operations in China, including with respect to macroeconomic conditions, the COVID-19 pandemic, US-China relations, and governmental regulations.
Starbucks also has as an enterprise risk management program (ERM) program—overseen by the Audit and Compliance Committee—designed to identify critical risks to our business operations throughout the world. In its charter, the Audit and Compliance Committee is specifically charged with
periodically reviewing and discussing with management major and emerging risk exposures, the steps taken to monitor and control such exposures, and risk assessment and risk management policies, which includes regular discussion of China. The committee regularly reports to the full board of directors on the substance of such reviews and discussions.
In addition, our Global Human Rights Statement affirms Starbucks commitment to respecting the human rights of individuals and communities impacted by our operations and products, and to respecting the principles of the UN Guiding Principles on Business and Human Rights; UN Global Compact; OECD Guidelines for Multinational Enterprises; International Bill of Rights; ILO Core Labor Standards; Women’s Empowerment Principles; Children’s Rights and Business Principles; and Framework Principles on Human Rights and the Environment. Our Global Environmental & Social Impact Report also discusses our progress against these commitments.
Given Starbucks existing disclosure obligations, the disclosures that we already make in our public reporting, and the ERM program and the oversight of that program by the Audit and Compliance Committee of our Board, we do not believe a separate report as proposed by NLPC is beneficial to, or in the best interest of, our shareholders.
The board of directors recommends that our shareholders vote against this proposal.
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Board Recommendation |
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| The board of directors recommends a vote AGAINST this proposal. |
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PROPOSAL 8
SHAREHOLDER PROPOSAL REGARDING ASSESSMENT OF WORKER RIGHTS COMMITMENTS
RESOLVED
Shareholders urge the Board of Directors to commission and oversee an independent, third-party assessment of Starbucks’ adherence to its stated commitment to workers’ freedom of association and collective bargaining rights as contained in the International Labour Organization’s Core Labor Standards and as explicitly referenced in the company’s Global Human Rights Statement. The assessment should apply to Starbucks’ direct and licensed operations and address management non-interference when employees exercise their right to form or join a trade union, as well as any steps to remedy practices inconsistent with Starbucks’ stated commitments. The assessment, prepared at reasonable cost and omitting legally privileged, confidential, or proprietary information, should be publicly disclosed on its website.
SUPPORTING STATEMENT
Starbucks made a global commitment to freedom of association, including non-interference, and collective bargaining rights in its Global Human Rights Statement. According to the International Labour Organization, “Freedom of association refers to the right of workers ... to create and join organizations of their choice freely and without fear of reprisal or interference” and collective bargaining “allows workers to negotiate their working conditions freely with their employers.”
In the U.S., many workers allege that Starbucks has interfered with these rights, including retaliation, intimidation, firings, captive audience meetings, store closings, undue surveillance, and illegally excluding unionized employees from wage and benefit increases—generating negative media coverage.1 Workers at hundreds of stores have voted to unionize, and regional offices of the National Labor Relations Board, after finding merit to hundreds of allegations of labor rights violations, have issued at least 20 complaints against Starbucks.2
In August 2022, a U.S. judge ordered Starbucks to reinstate seven Memphis, Tennessee employees who were allegedly fired for supporting an organizing campaign.3 Also in August, the labor board requested that Howard Schultz read a notice to all employees informing them that some had been unlawfully denied benefits and pay increases.4
We believe the apparent misalignment between Starbucks’ public commitments and its reported conduct represents material reputational, legal, and operational risks and may impact its long-term value. As Starbucks’ 2021 10-K states “our responses to any organizing efforts could negatively impact how our brand is perceived and have adverse effects on our business, including on our financial results.” Failing to respect workers’ rights could harm Starbucks’ reputation with consumers and hurt its ability to attract and retain a high-performing workforce, a crucial element of its ability to provide quality products and service. Research shows that union membership may have a positive effect on retention, in some cases, reducing resignations by as much as 65%.5 Studies show companies spend approximately 20% of an employee’s salary to replace them.6
Greater transparency on these issues could help address concerns about associated risks, and enable investors to perform human rights due diligence and assess Starbucks’ adherence to its human rights commitments.
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1 https://www.theguardian.com/business/2022/jul/04/new-york-starbucks-closed-union-drive; https://www.nytimes.com/2022/08/25/business/economy/starbucks-union-howard-schultz-nlrb.html
2 https://www.reuters.com/business/retail-consumer/starbucks-alleges-labor-board-misconduct-union-elections-us-cafes-2022-08-15; https://www.law360.com/employment-authority/starbucks-tracker; https://www.cnbc.com/2022/05/06/starbucks-accused-of-more-than-200-labor-violations-in-nlrb-complaint.html; https://www.pbs.org/newshour/economy/labor-board-files-complaint-against-starbucks-for-withholding-raises-from-unionized-stores;https://www.nlrb.gov/about-nlrb/what-we-do/investigate-charges
3 https://www.reuters.com/business/retail-consumer/starbucks-ordered-reinstate-workers-fired-amid-union-campaign-2022-08-18/
4 https://www.nytimes.com/2022/08/25/business/economy/starbucks-union-howard-schultz-nlrb.html
5 https://www.researchgate.net/publication/226530917_The_Impact_of_Union_Membership_on_Intent_to_Leave_Additional_Evidence_on_the_Voice_Face_of_Unions
6 https://www.americanprogress.org/article/there-are-significant-business-costs-to-replacing-employees/
BOARD RECOMMENDATION
The Starbucks board of directors recommends that shareholders vote AGAINST this proposal for the following reasons:
At Starbucks, our purpose goes far beyond profit. We believe Starbucks can, and should, have a positive impact on the communities we serve and that our employees—our partners—are at the heart of the Starbucks experience. As a board, it is our responsibility to ensure that Starbucks business and affairs are managed to meet Starbucks stated goals and objectives and that long-term interests of shareholder are served. Part of that responsibility includes working with management and our partners to invest in our partners health, well-being, and success and to create a culture of belonging that is centered around putting our partners first and where everyone is welcome.
We are proud of our investments in our Starbucks partners:
• We provide the highest-rated benefits in the country for full- and part-time hourly workers (including medical coverage and stock benefits).
• We offer competitive pay – with a minimum of $15/hour and average pay across our company-owned U.S. stores that is nearing $17.50/hour.
• Since 1991, our Bean Stock program has provided our partners the opportunity to share in the financial success of the company through shares of our stock—it's the reason our employees are called partners.
• We are broadening health insurance options, providing 100% upfront tuition coverage for college tuition through the Starbucks College Achievement Plan with Arizona State University, providing mental health services at no cost, and recently introduced a new suite of financial well-being benefits for our U.S. partners.
• To make our partners’ days run more smoothly, we’re improving the way our ‘behind the bar’ space is organized so it’s easier to navigate during busy times, creating easy processes for partners to sign up for and trade shifts to fit their schedules, and working to improve staffing at busy stores.
Starbucks partners’ voices and concerns are top priority for both management and this board—we are listening. We continue to believe that, together with our partners, we can build a company defined by dignity and respect for each other and our planet. We are united in the shared purpose of uplifting the partner experience today and for years to come.
On November 17, 2020, Kevin Johnson, our then chief executive officer, issued our Global Human Rights Statement. Our Global Human Rights Statement is an extension of our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time. In the Global Human Rights statement, we reiterated the following:
We respect the human rights of individuals and communities impacted by our operations and products, and we commit to respect the principles of the: UN Guiding Principles on Business and Human Rights; UN Global Compact; OECD Guidelines for Multinational Enterprises; International Bill of Rights; ILO Core Labor Standards; Women’s Empowerment Principles; Children’s Rights and Business Principles, and Framework Principles on Human Rights and the Environment.
We further stated that:
We adhere to ILO Core Labor Standards, including the rights to non-discrimination, equal pay for equal work, freedom of association, participation in collective bargaining and just and favorable conditions of work, such as ensuring the health and safety of our Partners.
We, as a board, fully supported the issuance of the Global Human Rights Statement. Our Global Human Rights Statement was established within the framework of the United Nations Guiding Principles on Business and Human Rights and reflects Starbucks commitment to respect human rights, and we diligently exercise our obligation to ensure that Starbucks fulfills that commitment to respect human rights. Human rights in the UN Guiding Principles on Business and Human Rights include the U.N. Universal Declaration on Human Rights as well as the 1998 International Labour Organization Fundamental Principles and Rights at Work (referred to as the “1998 Declaration”). The 1998 Declaration includes the principle of freedom of association and the right to collective bargaining, among other fundamental labor rights. These principles, as they are defined at the international level, are highly nuanced and manifest themselves through the application of a nation’s laws. U.S. labor law conforms to these principles; specifically, U.S. labor law reflects the principle that workers have the right to select a representative of their own choosing and, implicit in that principle, is the right of workers to choose not to be represented by a labor organization. Moreover, a cornerstone principle of U.S. labor law provides that all parties, including employers, have the right to freedom of expression and opinion in connection with union organizing efforts, provided there is no interference with this fundamental right. The ILO’s Committee on Freedom of Association has confirmed that employers enjoy such a right.
Starbucks contends that it complies with U.S. law with respect to freedom of association and the right to collective bargaining. It should be noted that the current General Counsel of the National Labor Relations Board has taken policy measures to expand and enhance U.S. law beyond previously established precedent. This policy shift has coincided with efforts of some Starbucks partners to seek union representation, which commenced in Buffalo, New York and has extended elsewhere in the country, impacting approximately 3% of Starbucks stores. Throughout this process, Starbucks has endeavored to comply with the law and we are committed to ensuring that it continue to do so. To the extent claims have been brought against Starbucks for violation of labor laws, the company has committed to defend itself where it believes the allegations are unfounded. To date, Starbucks has not been found to have violated the law as part of any enforced Order of the National Labor Relations Board.
Starbucks believes that the General Counsel of the National Labor Relations Board is pursuing the company as though the federal agency were an agent of the union, and that the agency’s behavior towards Starbucks is highly biased and inappropriate. For example, the NLRB pursued injunctive relief in Federal Court in Arizona that the court denied, concluding that the NLRB did not have a likelihood of success on the merits, in part, because the NLRB premised its filing on testimony that was later found to be untrue. Likewise, an NLRB administrative law judge recently issued a decision in which the complaint filed by the NLRB General Counsel against Starbucks was dismissed. One NLRB official has reported to the agency’s Inspector General that the agency’s handling of Starbucks representation elections has been done in a way that is biased in favor of supporters of the union. This is contrary to the law, which confers upon employees the right to form, join, or assist a labor organization, or to refrain from doing so. The NLRB Inspector General has publicly announced his investigation into these reports.
Moreover, where partners have selected a labor organization as their exclusive representative, Starbucks has committed to comply with the law and the rights of its partners to engage in collective bargaining.
While we do not believe or agree that the independent, third-party assessment advanced by the proponent is necessary or in the best interest of Starbucks, its shareholders, or its partners, we recognize that Starbucks commitment to respect human rights within the framework of the United Nations Guiding Principles on Business and Human Rights comes with the corresponding expectation that the company undertake human rights due diligence. Starbucks has commenced efforts to conduct a human rights impact assessment as a process to identify, assess, and address the company’s most salient human rights impacts across the value chain. In developing the scope for the Starbucks human rights impact assessment, the company expects to prioritize salient human rights for deeper level review. To that end, labor rights principles outlined in the 1998 Declaration, including the principles of freedom of association and the right to collective bargaining, will be included in that process. As part of Starbucks commitment to transparency with respect to our global social and environmental impacts, we expect to make available the results of Starbucks human rights impact assessment to shareholders, stakeholders, and other interested parties. Recognizing that care must be taken when reporting on matters that are in active litigation because of privilege concerns, and recognizing that the proponents’ proposal acknowledges that reality,
Starbucks expects to give due consideration to inclusion of labor rights where practicable and where such reporting does not adversely impact the company’s litigation position.
The board of directors recommends that our shareholders vote against this proposal.
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Board Recommendation |
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| The board of directors recommends a vote AGAINST this proposal. |
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PROPOSAL 9
SHAREHOLDER PROPOSAL REGARDING CREATION OF BOARD COMMITTEE ON CORPORATE SUSTAINABILITY
RESOLVED
Shareholders of Starbucks request that the Board of Directors create a board committee on corporate sustainability to oversee and review the impact of the company's policy positions and advocacy on matters relating to the company's ongoing growth and sustainability. The company shall issue a public report on the committee's findings by the end of 2023.
SUPPORTING STATEMENT
This summer, Starbucks announced it would be closing 16 stores due to safety concerns.1 "We've had to make the difficult decision to close some locations that have a particularly high volume of challenging incidents that make it unsafe for us to operate," a spokesman told reporters.2 Signaling that the July 2022 closures were "just the beginning," CEO Howard Schultz has forecast that ''there are going to be many more. "3
Indeed, store managers have complained of assaults, theft, and drug use in stores, while employees have recounted horror stories from store bathrooms, such as having to regularly clean up blood and needles, and seeing individuals overdose and need to be revived with Narcan.4 In no other multi-billion-dollar company would such scenes be acceptable, yet in many Starbucks locations across the country, it has become the norm.
The Board must stop and ask itself, "How did this happen?"
Starbucks leadership has embraced woke business practices and company policies that fail to protect its staff and its patrons.5 In response to an alleged racially discriminatory incident involving Starbucks employees at one of its Philadelphia stores in 2018, Starbucks closed all of its stores nationwide for "racial-bias education."6 This training was led by left-leaning organizations and individuals, including the former head of the Justice Department under President Obama.7
But Starbucks didn't stop there. It subsequently instituted sweeping policy changes by introducing a "third place policy" that invited non-customers to enjoy using Starbucks facilities, including its bathrooms, despite not making a single purchase.8 In doing so, Starbucks invited the exact behavior that it now laments as the cause of its store closures. Worse yet, the company flat out ignored an independent academic study that found that Starbucks' open bathroom policy was hurting its bottom-line.9
Changing company policy to now permit individual stores to make their own decisions as to whether to have an open bathroom policy is an important first step in addressing the decisions that led to the safety concerns experienced in the first place, but it is just that, a first step.10 Reflecting upon the company's policy positions and advocacy decisions-and assessing how they have contributed to its need to close stores due to safety issues - is therefore necessary to keep additional stores from closing and to protect shareholders.
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1 https://stories.starbucks.com/stories/2022/message-to-starbucks-partners-safety-in-our-stores/;
https://www.cnbc.com/2022/07 /14/starbucks-is-set-to-close-these-16-us-stores-over-safety-concems.html;
https://nypost.com/2022/07/12/starbucks-to-close-16-us-stores-over-crime-rampant-drug-use/
2 https://www.cnbc.com/2022/07/14/starbucks-is-set-to-close-these-16-us-stores-over-safety-concems.html
3 https://twitter.com/thehoffather/status/1547308330929963008;
https://www .cbsnews.com/boston/news/starbucks-store-closings-safety/;
https://www.businessinsider.com/starbucks-ceo-howard-schultz-says-more-store-closures-are-coming-2022-7
4 https://nypost.com/2022/07 /12/starbucks-to-close-16-us-stores-over-crime-rampant-drug-use/;
https://www.businessinsider.com/starbucks-closing-stores-for-safety-worker-perspectives-2022-7
5 https://nypost.com/2022/07/23/starbucks-ceo-howard-schultz-is-paying-for-going-woke/
6 https://stories.starbucks.com/press/2018/starbucks-to-close-stores-nationwide-for-racial-bias-education-may-29/
7 Id.
8 https://nypost.com/2018/05/10/starbucks-solution-to-race-issues-opening-bathrooms-to-all/;
https://www.pbs.org/newshour/nation/starbucks-changes-bathroom-policy-following-racial-firestorm;
https://stories.starbucks.com/press/2020/use-of-the-third-place-policy/:
https://www.eater.com/2018/5/21/l7375806/starbucks-no-purchase-policy-third-p lace-bathrooms
9 https://www.cbsnews.com/news/how-is-starbucks-open-bathroom-policy-working-out-not-great-one-study-says/;
https://www.forbes.com/sites/andriacheng/2019/11/12/starbucks-has-a-big-price-to-pay-for-its-open-bathroom-policy-study/?sh=5c09da836c4a
10 https://www.seattletimes.com/business/starbucks/starbucks-to-close-5-seattle-stores-due-to-safety-concems/;
https://www.al.com/news/2022/07/starbucks-closing-16-stores-due-to-crime-concems-reverses-bathroom-decision.html;
https://www.businessinsider.com/starbucks-open-bathroom-policy-ceo-rethink-safety-mental-heatth-2022-6
BOARD RECOMMENDATION
The Starbucks board of directors recommends that shareholders vote AGAINST this proposal for the following reasons:
Starbucks is committed to creating a welcoming and inclusive environment and advancing racial and social equity, and we are committed to furthering that work with intentionality, transparency, and accountability.
The Starbucks board of directors does not believe that establishing a separate corporate sustainability committee is necessary to properly exercise oversight of customer-facing practices like the Third Place. The charter for the nominating and corporate governance committee of the board of directors expressly addresses the Committee’s responsibility in overseeing the effectiveness of the Company’s ESG strategies, policies, practices, goals, and programs. The board of directors also regularly discusses the Company’s positions on matters significant to Starbucks, our operations, our partners, and our customers, including issues regarding public access to Starbucks stores.
Moreover, our existing framework reflects our longstanding and unwavering commitment to corporate sustainability. Our annual Global Environmental and Social Impact (“GESI”) Report details our efforts in corporate sustainability as they relate to our partners, highlighting the opportunities we offer, the work we do to foster a more inclusive workplace, and our various community initiatives and our commitment to the environment, offering insight into our strategies, goals, and progress. Our 2021 Civil Rights Assessment (CRA), which was conducted by a third-party, also details Starbucks commitment to sustaining Starbucks stores as a “third place” where customers feel welcome, fostering an internal culture of equity and inclusion, strengthening communities, and the importance of leadership.
The Proposal discusses the closure of 16 Starbucks stores due to safety concerns. We operate our network of over 9,200 company-operated stores in the U.S. with a focused commitment on creating a safe, welcoming, and inclusive environment at each location. We continuously evaluate store locations and store closures as an ordinary part of our operations. During our 2022 fiscal year, we closed 116 U.S. company-operated stores for a variety of reasons, including, in some instances, safety. During that same period, we opened 437 new company-operated stores in the U.S. representing net store growth of 318 stores. The closure of 16 stores does not materially impact our business, but it does exemplify our commitment to the safety of our partners.
Accordingly, because the Starbucks board of directors and its Nominating and Corporate Governance Committee have effective oversight over sustainability issues and have disclosed our commitment to further our efforts with intention, transparency, and accountability publicly, including through the GESI Report and the CRA, the board of directors does not believe that establishing a separate corporate sustainability committee is necessary to properly exercise its oversight of this important area, nor would such a commitment add to Starbucks existing commitment to corporate sustainability.
The board of directors recommends that our shareholders vote against this proposal.
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Board Recommendation |
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EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of October 2, 2022, regarding total shares subject to outstanding stock options and rights and total additional shares available for issuance under our existing equity incentive and employee stock purchase plans.
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Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) |
Equity compensation plans approved by security holders | 11,052,940 | 20.66 | (1) | 107,915,254 | (2) |
Equity compensation plans not approved by security holders | — | — | | — | |
Total | 11,052,940 | 20.66 | | 107,915,254 | |
(1)The weighted-average exercise price takes into account 6,694,571 shares under approved plans issuable upon vesting of outstanding RSUs and PRSUs at target which have no exercise price. The weighted average exercise price solely with respect to options outstanding under the approved plans is $55.85.
(2)Consists of 99,743,410 shares remaining available for issuance under the 2005 Long-Term Equity Incentive Plan and 8,171,844 shares remaining available for issuance under the 1995 Employee Stock Purchase Plan (“ESPP”). This number excludes 123,243 shares that were issued at the end of the ESPP purchase period, which began on October 1, 2022, and ended on December 31, 2022, after the end of our 2022 fiscal year. Shares available for issuance under the 2005 Long-Term Equity Incentive Plan may be issued pursuant to stock options, restricted stock, RSUs, and stock appreciation rights.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information concerning the “beneficial ownership” of our common stock by: (i) those persons who we know to beneficially own more than 5% of our outstanding common stock, (ii) our current directors and nominees, (iii) the “named executive officers” listed in the Summary Compensation Table, and (iv) all of our current directors and executive officers as a group. Under SEC rules, “beneficial ownership” for purposes of this table takes into account shares as to which the individual has or shares voting or investment power as well as shares that may be acquired within 60 days (such as by exercising vested stock options) and is different from beneficial ownership for purposes of Section 16 of the Exchange Act, which may result in a number that is different than the beneficial ownership number reported in forms filed pursuant to Section 16. Except as otherwise stated, information is provided as of the record date, January 13, 2023; this gives the best estimate of ownership prior to the filing of this proxy statement. An asterisk in the percent of class column indicates beneficial ownership of less than 1%. The beneficial owners listed have sole voting and investment power with respect to shares beneficially owned, except as to the interests of spouses or as otherwise indicated.
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Name of Beneficial Owner(1) | Shares(2) | Options(3) | Restricted Stock Units | Deferred Stock Units(4) | Total Beneficial Ownership | Percent of Class(5) |
Directors, Director Nominees, and Named Executive Officers | | | | | | |
Richard E. Allison, Jr. | 10,000 | — | — | 13,731 | 23,731 | * |
Andrew Campion | — | — | — | 13,731 | 13,731 | * |
Michael Conway | 44,514 | — | — | — | 44,514 | * |
John Culver(6) | 345,249 | 375,158 | — | — | 720,407 | * |
Beth Ford | — | — | — | — | 0 | * |
Isabel Ge Mahe | — | — | — | 13,731 | 13,731 | * |
Rachel Gonzalez(6) | 59,917 | 74,555 | — | — | 134,472 | * |
Mellody Hobson | 664,560 | — | — | 52,116 | 716,676 | * |
Kevin Johnson(6) | 174,357 | 911,496 | — | — | 1,085,853 | * |
Jørgen Vig Knudstorp | 18,000 | 49,289 | — | 10,309 | 77,598 | * |
Satya Nadella | 8,840 | 6,876 | — | 11,904 | 27,620 | * |
Laxman Narasimhan | — | — | — | — | 0 | * |
Joshua Cooper Ramo | 4,487 | — | — | 28,113 | 32,600 | * |
Rachel Ruggeri | 33,557 | — | — | — | 33,557 | * |
Howard Schultz | 21,694,538 | — | — | — | 21,694,538 | 1.88 |
Clara Shih | 5,740 | 5,166 | — | 7,920 | 18,826 | * |
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All current directors, nominees and executive officers as a group 15 persons | 22,504,560 | 72,172 | 954 | 151,555 | 22,729,242 | 1.98 |
5% Shareholders | | | | | | |
BlackRock Inc.(7) | 82,463,593 | — | — | — | 82,463,593 | 7.18 |
The Vanguard Group(8) | 98,681,046 | — | — | — | 98,681,046 | 8.6 |
(1)Unless otherwise indicated, the address of each of the individuals and entities named below is c/o Starbucks Corporation, 2401 Utah Avenue South, Seattle, Washington 98134.
(2)Represents the number of shares of common stock beneficially owned on January 13, 2023.
(3)Represents options that were exercisable on January 13, 2023, and options that become exercisable within 60 days of January 13, 2023.
(4)Represents the number of common stock units held under our Deferred Compensation Plan for Non-Employee Directors.
(5)Based on 1,148,558,716 shares of Starbucks common stock outstanding on January 13, 2023. Percent of class as of January 13, 2023, is calculated for each person and group by dividing the number of shares beneficially owned by the sum of the total shares outstanding plus the number of shares subject to securities beneficially owned by that person or group.
(6)Mr. Culver departed as group president and chief operating officer effective October 1, 2022, Ms. Gonzalez departed as executive vice president and general counsel effective April 4, 2022, and Mr. Johnson retired as chief executive officer effective April 4, 2022; beneficial ownership information for Messrs. Culver and Johnson, and Ms. Gonzalez is based on information available to the Company as of each respective date.
(7)BlackRock, Inc. stated in its Schedule 13G filing with the SEC on February 1, 2022 (the “BlackRock 13G filing”) that, of the 82,463,593 shares beneficially owned at December 31, 2021, it has (a) sole voting power with respect to 64,500,097 shares, (b) shared voting power with respect to 0 shares, (c) sole power to dispose of 82,463,593 shares, and (d) shared power to dispose of 0 shares. According to the BlackRock 13G filing, the address of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055.
(8)The Vanguard Group stated in its Schedule 13G filing with the SEC on February 10, 2022 (the “Vanguard 13G filing”) that, of the 98,681,046 shares beneficially owned at December 31, 2021, it has (a) sole voting power with respect to 0 shares, (b) shared voting power with respect to 1,999,489 shares, (c) sole power to dispose of 93,786,659 shares, and (d) shared power to dispose of 4,894,387 shares. According to the Vanguard 13G filing, the address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act, requires our executive officers, directors, and “beneficial owners” of more than 10% of our common stock to file stock ownership reports and reports of changes in ownership with the SEC. Based on a review of those reports and written representations from the reporting persons, we believe that during fiscal 2022, all transactions were reported on a timely basis except for a Form 4 by Zabrina Jenkins reporting shares withheld for taxes on vested restricted stock units which was due on April 20, 2022, and filed on April 22, 2022.
EXPENSES OF SOLICITATION
We will bear the expense of preparing, printing, and mailing this proxy statement and the proxies we solicit. Proxies will be solicited by mail, telephone, personal contact, and electronic means and may also be solicited by directors, officers, and Starbucks partners in person, by the Internet, by telephone, or by facsimile transmission, without additional remuneration. We have retained Alliance Advisors to act as a proxy solicitor in conjunction with the Annual Meeting. We have agreed to pay Alliance Advisors $30,000, plus reasonable out-of-pocket expenses, for proxy solicitation services.
We also will request brokerage firms, banks, nominees, custodians, and fiduciaries to forward proxy materials to the beneficial owners of shares of our stock as of the record date and will reimburse them for the cost of forwarding the proxy materials in accordance with customary practice.
Your cooperation in promptly voting your shares and submitting your proxy by Internet or telephone, or by completing and returning the enclosed proxy card (if you received your proxy materials in the mail), will help to avoid additional expense.
INTERNET VOTING
The Company is incorporated under Washington law, which specifically permits electronically transmitted proxies, provided that the transmission must either set forth or be submitted with information from which it can reasonably be determined that the transmission was authorized by the shareholder. The electronic voting procedures provided for the Annual Meeting are designed to authenticate each shareholder by use of a Control Number to allow shareholders to vote their shares and to confirm that their instructions have been properly recorded.
INTERNET AVAILABILITY OF ANNUAL MEETING MATERIALS
Under SEC rules, Starbucks has elected to make our proxy materials available to the majority of our shareholders over the Internet rather than mailing paper copies of those materials to each shareholder. On or about January 27, 2023, we mailed to the majority of our shareholders a Notice of Internet Availability of Proxy Materials (the “Notice”) directing shareholders to a website where they can access the proxy statement for our Annual Meeting, Annual Report, and view instructions on how to vote their shares by Internet or telephone. If you received the Notice only and would like to receive a paper copy of the proxy materials, please follow the instructions printed on the Notice to request that a paper copy be mailed to you.
PROPOSALS OF SHAREHOLDERS
Pursuant to SEC Rule 14a-8, shareholder proposals intended for inclusion in our 2024 proxy statement and acted upon at our 2024 Annual Meeting of Shareholders (the “2024 Annual Meeting”) must be received by us at our executive offices at 2401 Utah Avenue South, Mail Stop S-LA1, Seattle, Washington 98134, Attention: corporate secretary, on or prior to September 29, 2023.
Shareholder proposals submitted for consideration at the 2024 Annual Meeting of Shareholders but not submitted for inclusion in our proxy statement for our 2024 Annual Meeting pursuant to SEC Rule 14a-8, including shareholder nominations for candidates for election as directors, generally must be delivered to the corporate secretary at our executive offices no later than 120 days nor earlier than 150 days
before the first anniversary of the date of the 2023 Annual Meeting of Shareholders. As a result, any notice given by a shareholder pursuant to the provisions of our bylaws (other than notice pursuant to SEC Rule 14a-8 or proxy access as discussed below) must be received no earlier than October 25, 2023, and no later than November 24, 2023. However, if the date of the 2024 Annual Meeting occurs more than 30 days before or more than 60 days after March 23, 2024, notice by the shareholder of a proposal must be delivered no earlier than the close of business on the 150th day prior to the date of such annual meeting and no later than the close of business on the later of the 120th day prior to the date of such annual meeting or, if the first public announcement of the date of the annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which we first make a public announcement of the date of the annual meeting. Shareholder proposals or nominations must include the specified information concerning the shareholder and the proposal or nominee as described in our bylaws. In addition, shareholders who intend to solicit proxies in support of director nominees other than the company’s nominees must comply with the additional requirements of Rule 14a-19(b).
DIRECTOR NOMINATIONS FOR INCLUSION IN STARBUCKS PROXY MATERIALS (PROXY ACCESS)
Notice of proxy access director nominees must be delivered to the corporate secretary at our executive offices no earlier than August 30, 2023, and no later than September 29, 2023.
SHAREHOLDERS SHARING THE
SAME ADDRESS
The SEC permits us to deliver a single copy of our Notice to shareholders who share the same address and last name. And for those shareholders that received a paper copy of proxy materials in the mail, we are permitted to deliver a single copy of our Annual Report and this proxy statement, to shareholders who share the same address and last name. Shareholders who participate in this “householding” process will continue to receive separate proxy cards if they received a paper copy of proxy materials in the mail. We implemented this householding procedure to reduce our printing and mailing costs and fees, and to support our environmental goals set forth in our annual Global Environmental and Social Impact Report. If would like to enroll in householding, or if your household is already enrolled and you would like to revoke your householding consent, please contact Broadridge, either by calling toll free at +1 (866) 540-7095 or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. You will be removed from the householding program within 30 days of receipt of the revocation of your consent. A number of brokerage firms have instituted householding. If you hold your shares in “street name,” please contact your bank, broker, or other holder of record to request information about householding.
ANNUAL REPORT TO SHAREHOLDERS ON FORM 10-K
The 2022 Annual Report is being mailed with this proxy statement to those shareholders that received a copy of the proxy materials in the mail. For those shareholders that received the Notice, this proxy statement and our Annual Report are available at our website at http://investor.starbucks.com. Additionally, and in accordance with SEC rules, you may access our proxy statement at www.proxyvote.com. Upon request by any shareholder, we will furnish, without charge, a copy of the 2022 Annual Report as well as a copy of this proxy statement.
To submit your request by telephone, call 1-800-579-1639. To request by email, contact sendmaterial@proxyvote.com. If requesting materials by e-mail, please send a blank e-mail with your Control Number in the
subject line. Please submit your request by March 9, 2023, to ensure that materials can be sent to you prior to the date of the Annual Meeting.
Web links and QR codes throughout this document are provided for convenience only, and the content on the referenced websites does not constitute a part of this proxy statement.
OTHER BUSINESS
The board of directors knows of no other matters that properly may be brought before the Annual Meeting. However, if any other matters are properly brought before the Annual Meeting, the persons appointed in the accompanying proxy intend to vote the shares represented thereby in accordance with their best judgment.
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Appendix A – Non-GAAP Measures |
The Company provides certain non-GAAP financial measures in this proxy statement that are not in accordance with, or alternatives for, generally accepted accounting principles in the United States (“GAAP”). Our non-GAAP financial measures of non-GAAP operating margin and non-GAAP EPS exclude the below listed items, as they do not contribute to a meaningful evaluation of the Company’s future operating performance or comparisons to the Company’s past operating performance. The GAAP measures most directly comparable to non-GAAP operating margin and non-GAAP EPS are operating margin and diluted net earnings per share, respectively.
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Non-GAAP Exclusion | Rationale |
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Sale of certain company-operated business and joint venture operations | Management excludes the gain related to the sale of Evolution Fresh, as well as our South Korea and Russia joint venture operations as these incremental gains were specific to the sale activity and for reasons discussed above. |
Restructuring and impairment costs | Management excludes restructuring and impairment costs relating to the write-down of certain company-operated store and corporate assets. Management excludes these items for reasons discussed above. These expenses are anticipated to be completed within a finite period of time. |
Transaction and integration-related costs | Management excludes transaction and integration costs, primarily amortization, of the acquired intangible assets for reasons discussed above. Additionally, the majority of these costs will be recognized over a finite period of time. |
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Nestlé transaction and integration-related costs | Management excludes the transaction and integration-related costs related to the Global Coffee Alliance with Nestlé (inclusive of incremental costs to grow and develop the Global Coffee Alliance) for reasons discussed above. |
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Non-GAAP operating margin and non-GAAP EPS may have limitations as analytical tools. These measures should not be considered in isolation, as substitutes for, or superior to analysis of the Company's results as reported under GAAP. Other companies may calculate these non-GAAP financial measures differently than the Company does, limiting the usefulness of such measures for comparative purposes.
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| Year Ended | |
Consolidated | Oct 2, 2022
(52 Weeks Ended) | Oct 3, 2021
(53 Weeks Ended) | Change |
Operating margin, as reported (GAAP) | | 14.3 | % | | 16.8 | % | (250) | bps |
Restructuring and impairment costs(1) | | 0.1 | | | 0.6 | | |
Transaction and integration-related costs(2) | | 0.6 | | | 0.7 | | |
Nestlé transaction and integration-related costs(3) | | — | | | (0.1) | | |
Non-GAAP operating margin | | 15.1 | % | | 18.0 | % | (290) | bps |
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Diluted net earnings per share, as reported (GAAP) | $ | 2.83 | | $ | 3.54 | | (20.1) | % |
Gain resulting from divestiture of certain company-operated business and joint venture operations | | (0.01) | | | (0.73) | | |
Restructuring and impairment costs(1) | | 0.04 | | | 0.14 | | |
Transaction and integration-related costs(2) | | 0.17 | | | 0.17 | | |
Nestlé transaction and integration-related costs(3) | | — | | | (0.02) | | |
Correction of prior year estimated tax expense(4) | | (0.02) | | | — | | |
Income tax effect on Non-GAAP adjustments(5) | | (0.05) | | | 0.10 | | |
Non-GAAP EPS | $ | 2.96 | | $ | 3.20 | | (7.5) | % |
(1)Represents costs associated with our restructuring efforts, primarily severance and asset impairments related to certain company-operated store closures and impairment of certain corporate assets.
(2)Includes amortization expense of acquired intangible assets associated with the acquisition of East China. Fiscal 2022 also includes other expenses associated with our Russia market exit and with the sale of our Evolution Fresh business. Fiscal 2021 also includes amortization expense of acquired intangible assets associated with the acquisition of Starbucks Japan.
(3)Represents costs associated with the Global Coffee Alliance with Nestlé and a change in estimate relating to a transaction cost accrual.
(4)Represents a beneficial return-to-provision adjustment related to the prior year divestiture of certain joint venture operations that also received non-GAAP treatment.
(5)Adjustments were determined based on the nature of the underlying items and their relevant jurisdictional tax rates.
ANNEX A – NON-GAAP MEASURES
RECONCILIATION OF EXTRA WEEK FOR FISCAL 2021 MEASURES
The following tables reconcile the impact of the fiscal fourth quarter and fiscal year-ended October 3, 2021, to further enhance the comparability as we lap the 53rd week that was part of our 2021 results.
Reconciliation of Revenues
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Consolidated | Total (in millions) |
Revenue for the year ended October 3, 2021 as reported (GAAP) - 53-weeks | $ | 29,060.6 | |
Impact of extra week | (575.6) | |
Revenue - 52-weeks | 28,485.0 | |
Revenue for the year ended October 2, 2022 (GAAP) - 52 weeks | $ | 32,250.3 | |
Change | 13 | % |
Impact of foreign currency translation | 2 | % |
Change of impact excluding foreign currency | 15 | % |
Reconciliation of Earnings Per Share
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Consolidated | Oct 2, 2022 | Oct 3, 2021 | Change |
GAAP Earnings Per Share - 53-weeks | | $ | 3.54 | | |
Non-GAAP impact | | (0.34) | | |
Non-GAAP Earnings Per Share - 53-weeks | | 3.20 | | |
Impact of the extra week | | (0.10) | | |
Non-GAAP Earnings Per Share - 52-weeks | $ | 2.96 | | $ | 3.10 | | (5) | % |
Admission Requirements for the
Starbucks Corporation
2023 Annual Meeting of Shareholders
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Thursday, March 23, 2023 | 10:00 a.m. (Pacific Time) | Via Webcast www.virtualshareholdermeeting.com/SBUX2023 |
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How to Vote
Whether or not you plan to attend the Annual Meeting, we urge you to vote and submit your proxy in advance of the meeting by one of the methods below. Make sure to have your proxy card or voting instruction form (VIF) in hand.
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By internet go to www.proxyvote.com; | By toll-free telephone from the United States, U.S. territories and Canada: call 1-800-690-6903; | By mail (if you received a paper copy of the proxy materials by mail): mark, sign, date and promptly mail the enclosed proxy card in the postage-paid envelope; or | By scanning the QR code using your mobile device. |
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Participating in the Annual Meeting
This year’s Annual Meeting will be held in a virtual format through a live webcast.
You are entitled to participate in the Annual Meeting if you were a shareholder as of the close of business on January 13, 2023, the record date, or hold a valid proxy for the meeting. To be admitted to the Annual Meeting at www.virtualshareholdermeeting.com/SBUX2023, you must enter the 16-digit control number found next to the label “Control Number” on your Notice of Internet Availability, proxy card, or VIF, or in the email sending you the Proxy Statement. If you are a beneficial shareholder, you may contact the bank, broker or other institution where you hold your account if you have questions about obtaining your control number.
Whether or not you participate in the Annual Meeting, it is important that your shares be part of the voting process. You may log on to www.proxyvote.com and enter your Control Number.
We are committed to ensuring, to the extent possible, that shareholders will be afforded the ability to participate at the virtual meeting like they would at an in-person meeting.
The question and answer session will include questions submitted in advance of, and questions submitted live during, the Annual Meeting. You may submit a question in advance of the meeting at www.proxyvote.com after logging in with your Control Number. Questions may be submitted during the Annual Meeting through www.virtualshareholdermeeting.com/SBUX2023.
We encourage you to access the Annual Meeting before it begins. Online check-in will start approximately thirty minutes before the meeting on March 23, 2023. If you have difficulty accessing the meeting, please call 1-844-986-0822 (toll free) or 303-562-9302 (international). Technicians will be available to assist you.
We will also make the Annual Meeting viewable to anyone interested in a webcast at www.virtualshareholdermeeting.com/SBUX2023. Interested persons who were not shareholders as of the close of business on January 13, 2023 may view, but will not be able to vote or ask questions.
Asking Questions
You have multiple opportunities to submit questions to Starbucks for the Annual Meeting. If you wish to submit a question in advance, you may do so at either www.proxyvote.com or on our Annual Meeting website, www.virtualshareholdermeeting.com/SBUX2023. You also can submit questions live during the meeting. You can access copies of the proxy statement and Annual Report at our Annual Meeting website.
Accessibility
Starbucks is committed to providing an accessible experience. The event will be interpreted in American Sign Language and real-time captioning will be provided. If you have a disability accommodation request, please email us at investorrelations@starbucks.com by March 1, 2023.
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STARBUCKS CORPORATION 2401 UTAH AVENUE SOUTH SEATTLE, WASHINGTON 98134 | | | SCAN TO VIEW MATERIALS & VOTE | |
| VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the above QR code from your mobile device. Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the website and follow the instructions. During The Meeting - Go to www.virtualshareholdermeeting.com/SBUX2023. You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign, and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | |
D63825-P64987 | KEEP THIS PORTION FOR YOUR RECORDS |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
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| STARBUCKS CORPORATION | | | | | | | | | | |
| The Board of Directors recommends you vote FOR each of the following nominees: | | | | | | | |
| 1. | Election of Directors | | | | | | | | | | |
| | Nominees: | For | Against | Abstain | | The Board of Directors recommends you vote FOR 1 Year on the following proposal: | 1 Year | 2 Years | 3 Years | Abstain |
| | 1a. | Richard E. Allison, Jr. | ☐ | ☐ | ☐ | | 3. | Approval, on a nonbinding basis, of the frequency of future advisory votes on executive compensation | ☐ | ☐ | ☐ | ☐ |
| | 1b. | Andrew Campion | ☐ | ☐ | ☐ | | | | | | |
| | 1c. | Beth Ford | ☐ | ☐ | ☐ | | The Board of Directors Recommends you vote FOR the following proposal: | For | Against | Abstain | |
| | 1d. | Mellody Hobson | ☐ | ☐ | ☐ | | 4. | Ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2023 | ☐ | ☐ | ☐ | |
| | 1e. | Jørgen Vig Knudstorp | ☐ | ☐ | ☐ | | | | | | |
| | 1f. | Satya Nadella | ☐ | ☐ | ☐ | | The Board of Directors recommends you vote AGAINST the following shareholder proposals: | |
| | 1g. | Laxman Narasimhan | ☐ | ☐ | ☐ | | | | For | Against | Abstain | |
| | 1h. | Howard Schultz | ☐ | ☐ | ☐ | | 5. | Report on Plant-Based Milk Pricing | ☐ | ☐ | ☐ | |
| | | | | | | | 6. | CEO Succession Planning Policy Amendment | ☐ | ☐ | ☐ | |
| The Board of Directors recommends you vote FOR the following proposal: | For | Against | Abstain | | 7. | Annual Reports on Company Operations in China | ☐ | ☐ | ☐ | |
| 2. | Approval, on a nonbinding basis, of the compensation paid to our named executive officers. | ☐ | ☐ | ☐ | | 8. | Assessment of Worker Rights Commitments | ☐ | ☐ | ☐ | |
| | | | | | | | 9. | Creation of Board Committee on Corporate Sustainability | ☐ | ☐ | ☐ | |
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| Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | |
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| Signature [PLEASE SIGN WITHIN BOX] | Date | | Signature (Joint Owners) | Date | | |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders:
The Notice of Annual Meeting, Proxy Statement, and Fiscal 2022 Annual Report are available at www.proxyvote.com.
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| D63826-P64987 | |
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STARBUCKS CORPORATION Annual Meeting of Shareholders March 23, 2023, 10:00 AM Pacific Time This proxy is solicited by the Board of Directors
The shareholder(s) hereby appoint(s) Howard Schultz and Zabrina Jenkins, or either of them, as proxies, each with the power to appoint their substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this proxy, all of the shares of stock of STARBUCKS CORPORATION that the shareholder(s) is/are entitled to vote at the Annual Meeting of Shareholders to be held at 10:00 AM Pacific Time on Thursday, March 23, 2023, virtually at www.virtualshareholdermeeting.com/SBUX2023, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. In their discretion, the proxies are each authorized to vote upon other business as may properly come before the Annual Meeting.
Continued and to be signed on reverse side | |
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