Thanks to poor company performance, Starbucks employees won’t be getting their full bonuses this year—and some won’t even get merit raises
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Many Starbucks employees will find their annual bonus checks noticeably lighter this year. After a dismal fiscal year, the coffee chain’s corporate workers will receive 60% year-end bonuses, Bloomberg first reported.
The annual payouts, doled out in December, are based on both individual and company performance, but a whopping 70% is dependent on operating income and net revenue for senior executives, and about 30% of annual bonuses are based on inclusion and diversity goals and personal performance. For other corporate employees, the weightings used to calculate bonus payments are split 50-50 between individual and business performance. This past year, Starbucks’ revenue stagnated, growing less than 1%, while operating income faltered about 8%. While some workers will be eligible for merit raises, senior and executive management will not. Fortune confirmed Bloomberg’s report.
The hit to bonuses comes after the company altered its compensation plan for senior executives in fiscal 2023. The company now bases 70% of bonus awards on financial performance, compared to 50% in fiscal 2022, and only 15% on individual performance, compared to 30% previously.
As for new CEO Brian Niccol, his $23 million annual equity award is locked in. According to an amended offer letter dated Nov. 19, Niccol will get the millions he was promised when he accepted the job in August. The Starbucks board amended his agreement to include this new note: “The Board will have the authority to adjust the target value of your annual equity award after FY25, based on your performance.” It explicitly gives the board discretion to adjust Niccol’s annual payout up or down next year, while guaranteeing his $23 million award for fiscal 2025—just in time for the holidays.
Meanwhile, Starbucks has struggled to remain the go-to coffee spot for busy commuters or remote workers and has been hobbled by cautious consumers cutting back on their out-of-the-house caffeine fix. In Niccol’s first earnings call since he became CEO in September, the company cut its guidance after a weaker-than-expected quarter, with same-store sales—referring to sales at stores open at least a year—falling 6% in the U.S. during the quarter, and ultimately dipping 2% over the course of the fiscal year. It’s the first same-store sales loss since it was crushed by the pandemic in 2020 with a 9% drop in the metric in the U.S. over the fiscal year.
The coffee chain has been beleaguered by long lines and complicated custom orders with ballooning price tags, thanks to myriad add-ons. In April, former CEO Laxman Narasimhan identified intense early-morning traffic as a hindrance to the company, as customers grew frustrated with long lines and dwindling product available, some even abandoning their orders.