This is good to see the great disconnect in the récent years between CEO compensation and workers compensation.
Imagine that is is getting 10 millions as sign-in bonus, just because he joins. When it easily represent a thousand years of work of a Barista that is the one really working hard every day to bring the cash in.
Sure, the CEO work value is important, but not that multiple thousand years of employees.
I like to translate such a CEO compensation into the number of products that you have to sell every year just to cover for the pay of this single person.
Here if we think something like 5 to 15 millions of dollars per year, and a Starbucks drink is probably sold around 7 dollars:
With that, employees have to sell around 710 000 to 2 142 000 drinks per year just to pay a standard year of this guy. My brain has hard time comprehending such a number.
Maybe that's the source of the real issue... But that'd be hard to fix - at least across industries. For Starbucks it'd be easy (i.e. limiting the number of branches or similar via legislation) - but it'd be pretty much impossible for online companies selling digital goods or similar
More like limiting the obvious catastrophic effects of wealth (aka power) disparity. People here seem to align on its existence being a moral hazard. Hard to argue against when the poor are still getting their water supply poisoned in developed countries.
Compensation isn’t determined by worth, it’s determined by competition in the job market. The question to ask is why the job market has such a limited supply of semi-competent CEO candidates that it commands that level of compensation.
My reaction to this whole controversy is “meh”. I am not sure why this story has the traction it does. It’s literally a global brand that has become synonymous with overpriced coffee and does nearly $25B a year in profit. Does anyone really believe that there aren’t CEO perks like this associated with an organization this size?
I have worked for regional orgs making a fraction of that revenue where the CEO had a corporate jet.
Starbucks is forcing people to return to office while their new CEO can reside in California and commute by private jet. That is the controversy in a nutshell.
Not only does the CEO get the privilege of choosing whether he wants to relo to Seattle (with a chartered jet for transportation, no less), but Starbucks is also willing to expense up to three months of temporary residence while he's in Seattle until he finds "permanent secondary housing", at which point Starbucks will expense relocation costs.
The average worker that moved to Boise during COVID? RTO, on your dime.
The offer letter also allows the CEO to use the jet for personal travel, up to $250k/year (which is negotiable). Keep in mind that any travel he does while he's with vendors, suppliers, corp customers, etc counts as business travel that hits various corporate budgets and DOES NOT count towards this limit. So if he's into golf and wants to fly himself and his friends to Augusta or something, that's covered by Starbucks (and can also be considered a business expense depending on who's with him; see the previous sentence).
Meanwhile, an employee (that isn't in Sales) who wants to fly Economy to a conference FOR WORK within the continental US has to charge the entire thing against their training budget (usually less than $3000) and, in some cases, provide evidence that they were there.
And people on here wonder why founders, by and large, don't make startups for the love of it anymore.
That argument might get SV crowd all riled up, but the bulk of Starbucks employees were and are not WFH. Pretty sure the average Starbucks barista, shop worker, coffee roaster, factory floor worker, delivery driver, etc.. never left “the office”.
So some PMs, SWEs, HR workers, and accounting folks are butt hurt? They can quit and find remote work for another company.
Indeed, we should actually have a CEO take all of the surplus value. Or at least a continuously increasing amount.
Not based on their performance or the value they can be measured to add, nor comparing against any sort of alternative structure that might be more efficient, but simply because they deserve it for their hard work ensuring the company is operational and ever-growing.
Indeed, really it should be the case among all companies. And if employees dislike it, they should simply try to employ themselves and join in on the action; so often are people simply lazy whiners who should go make their own profitable business before rent's due.
Actually, in retrospect, the CEOs should probably leave some surplus for the landlords to share -- without their herculean work, how would so many have a home to live in?
[not OP] I suppose because any verticistic org can be sustainable for long. To have a resilient enterprise you need value spread across the entire pyramid, if not what happen when a CEO change mind or die suddenly?
Beside that, why travel to be in an office, so doing the same thing he do at home? It's not efficient, it's stupid and stupid thing done for political reasons, like justify RTO because big corps need cities while humanity today need the opposite, could not led to anything than bad lands and dire scenarios.
I take that as a proof we are essentially in a falling, failed society, where we lost the substantial propulsion force, industry and open research. Or this change quickly AND SUBSTANTIALLY or we will end up like any other failed empire before, in dire conditions.
Well, it's a current hot topic, since it's clearly imposed for reasons clearly against worker's interests and not direct interest of the companies they work for. So... It's natural to find many discussions who end up touching that topic...
Indeed what do you think reading about someone who works from home most of the time, but took a jet to be a 1000km from home some day per week to show up in the office, something clearly not technically needed since office works is still at a desktop, not physical conference, not factory inspections or something like that. Hard to talk about something else.
As I mentioned previously on HN, Niccols is literally the most successful CEO in the restaurant market today - having grown Chipotle's stock from $200 to $1300 (before the stock split last year), and helped shepherd Chipotle in the aftermath of it's food safety scandal.
With that kind of a CEO you have to bend over backwards to poach them (eg. Making them Chair and CEO - very rare for non-founder CEOs to be granted this role)
Starbucks is simply extremely desperate to have good leadership after Laks didn't fit in well.
> With that kind of a CEO you have to bend over backwards to poach them (eg. Making them Chair and CEO - very rare for non-founder CEOs to be granted this role)
According to the article roughly half of public companies have the same person as Chair and CEO. They cite this [1] to support that. I don't think there are enough CEO founders to account for a majority of those.
Starbucks never clubbed the chair and CEO position before and only did it for Niccols because he negotiated the same deal at Chipotle after he was poached from Taco Bell.
Also, the CorpGov blog (love it btw - highly recommend RSSing it) also shows the same trend over the past several years - that companies increasingly split the CEO position and Chair position.
And as an investor, I tend to demand that unless the CEO is an absolute rainmaker due to conflict of interest, and Sbux's closest competitors (Dunkin's and RBI) do the same split.
Not going to disagree with your comment but I find it so socially interesting that “the most successful CEO in the restaurant market” is judged by something that has nothing to do with the quality of the food.
> I find it so socially interesting that “the most successful CEO in the restaurant market” is judged by something that has nothing to do with the quality of the food.
Great observation!
Different industries have different margins. High margin industries give breathing room for stronger Product-Market Fit to emerge. PMF forces companies to try and optimize for customer satisfaction, and protects against commodification by keeping customers happy.
On the other hand, in industries with low margins (eg. Restaurants), commodification is extremely high so penny pinching is critical in order to manage your operating costs. Furthermore, you will be dependent on outside investors to raise capital, so Investor Relations becomes critical.
I think you're foolish if you think that stock price "has nothing to do with the quality of the food." Repeat customers are a big part of the profitability for any business and they're a big part of the success of Chipotle. Unless you think that the quality of the food doesn't matter to the customers, I think the real challenge for any restaurant is to come up with an acceptable level of quality for an acceptable price. The stock price shows that he achieved that for an increasing number of customers.
In theory, the stock price is at least partially tied to sales and brand perception, which in turn correlates with the perceived quality/price ratio by the public.
And in practice? Asking seriously, I never had Chipotle (because it’s not even a thing here) so has the product actually improved all that much under this guy’s guide?
> so has the product actually improved all that much under this guy’s guide
Food Safety wise absolutely.
Menu Diversity wise absolutely not.
Pre-Niccols, Chipotle gave more leeway to restaurants to modify the menu in non-standard manners as well as play around with sizing and with limited corporate oversight.
This was great for customers, but the limited oversight and lack of standardization lead to an E Coli and Salmonella breakout at a handful of Chipotle branches, which collapsed customer confidence, the Chipotle stock, and became a massive PR nightmare.
When Niccols was brought in, corporate cracked down on customer option and diversity in order to better manage the risk profile.
Standardization is great for margins by minimizing risk and overhead, but this comes at the expensive of diversity (every consumer likes a high touch sales cycle).
Thomas Middelhoff commuted with helicopter from Bielefeld to Essen (about 100 Miles) for some time while he was CEO of Arcandor.
Reportedly 28 flights for about 80 k€ total.
"Peanuts" as they say here in Germany but it became a big deal after Arcandor went bancrupt. Thomas Middelhoff was in the end convicted of embezzlement and tax evasion (the flights were part of the trials but not the main one).
People make such a big deal out of this and rightfully so but Bank of America CEO Brian Moynihan did the same thing for years. At least Niccols is successful at running a major company (strictly) from an investment perspective. Moynihan did absolutely nothing.
Many large companies (f50) have fleets of jets and salaried pilots. Its not uncommon at all for commuting by jet to be the standard. Not sure why this is such a big deal or any different than the thousands of c-suites that commute this way.
This shouldn't be the standard for anybody. It's insanely wasteful and polluting. We should call out this guy and anybody else doing it. Absolutely ridiculous, it would be far cheaper and better for the environment to pay for relocation and arguably C-suites don't even need the help. Don't want to move? Then you're the wrong person for the job.
The problem is the perception of a very rare skillset - ie. being a CEO that did x/y/z at companies in a similar space that the board would like to acquire to achieve for their own company. If they can accomplish the same, the value of that far exceeds the cost, environmental impact, and public perception of something like this.
You might start with 5 or so candidates and then whittle it down to 1 or 2 that are the right person for a job. These people are already wealthy with all that goes along with it and the idea of relocating could be a hard ask. From a successful CEO's perspective, it's probably much easier for them to land another gig that caves to their demands than the other way around.
At this comp level you could say it's similar to a sports star that gets traded to another team, and it is in a way, but that's part of what comes along with being someone like that... in the span of 20 years they may have to uproot their life 3-4x. Their career even starts off like that, where they get selected to a team and boom, they have to move to somewhere they may have never even visited before their life even gets somewhat calcified by having generational wealth.
I think it's pretty clear that commuting 1000 miles by private jet very easily puts you in the top 0.1% of individual polluters even by Western standards. They emit like 2 tonnes of CO_2 in an hour and the average American does like 14 tonnes in an entire year. So even if only goes to Seattle once a week that's like 8 tonnes (assuming 500 MPH flying speed, roundtrip). Every two weeks he's emitting what an average American does, JUST COMMUTING.
Ok phew, for a second there I thought you were going to suggest that the average American made changes in their lives to reduce their environmental impact.
> Not sure why this is such a big deal or any different than the thousands of c-suites that commute this way.
Starbucks pretends to care about the environment and sustainability much more than most. Or at least they used to, he may dial that back since his commute will be mentioned in news articles for at least the next few years.
Having jets contrary to many believes it's not a bad thing, using it for stupid thing is.
If you need to travel, for instance to expect a new remote production site, a potential acquisition, getting to know well something up somewhere where you have interests, it's not wrong at all. Travel just to show up in the office, like a religious act, a ritual probably to justify RTO policies needed by the company to stay alive not because they need people in the office but because they live on cities and with WFH as the default, having already lost industries with '80s globalization, cities are simply dead with their Barnum circus including therein Starbucks that have no substantial reason to exist in business without the "ritual, polite, city-stile suit and tie/tailleur" way of living.
This act means a thing: Starbucks is a no future company, desperately attached to a past model that can't exists anymore, so having no substantial reason they switch to rituals, imposing them on their own, chiefs included, to trying keeping up.
We don’t know how often he will use this corporate jet. They are going to stand up a remote office with his own assistant. He could very well be in Seattle once a week and everything else handled via Zoom.
That's not the point, is not a matter of frequency, how many miles or so, it's a matter of WHY showing up in a office if your work could be done from remote, even in the company jet, reading their news? Why having an office at all, if that's not needed in modern time, since we haven't paper anymore and so we do not need a unique physical place to work and keep a paper archive?
My unproven response is that's simply a ritual because Starbucks will die without modern cities, or will die without mid/high income office workers with a certain mindset who like being in places like Starbuks. A cohort of people who will change mindset if WFH.
Did you see the impact of the "covid" switch on airlines, hotels NOT due to the lack of tourist but due to the change in working travelers, with conferences moved to remote meeting, business trips much reduced due to remote meetings and so on? That's the point: could Starbucks live without the office, not it's own office, but the office model, or the modern city model, since most factories are not in cities anymore and in modern city the economy, at least in the west is essentially driven by the tertiary sector and could such modern city model live?
My personal take it's a double no. I expect cities slowly evolve in ghetto's for poor and desperate people, a cohort not likely to buy Starbucks, and so despite the substantial ritual of "being in an office at least some days per week", their business model is doomed IMVHO, not tomorrow morning, things do change slowly, but in not much years in the future anyways, rituals do work only a bit, if the economy underneath is flawed they can keep things up for a bit more, but not save the game.
“ could Starbucks live without the office, not it's own office, but the office model, or the modern city model, since most factories are not in cities anymore and in modern city the economy, at least in the west is essentially driven by the tertiary sector and could such modern city model live?”
Plenty of people go to Starbucks that don’t live in big cities. Lots of rural people love SB and those who live in towns of 20-30k or less even.
“ Did you see the impact of the "covid" switch on airlines, hotels NOT due to the lack of tourist but due to the change in working travelers, with conferences moved to remote meeting, business trips much reduced due to remote meetings and so on?”
Yes and it was a shame because we never should have shutdown.
“ A cohort of people who will change mindset if WFH.”
People still went to Starbucks during the shutdown.
> Plenty of people go to Starbucks that don’t live in big cities. Lots of rural people love SB and those who live in towns of 20-30k or less even.
People in small or medium cities I do not know, but rural people I doubt for a simple reason: where is SB outside cities? To sustain their costs they need a certain size, not available in spread area, while the small Old Joe pub perfectly can.
> Yes and it was a shame because we never should have shutdown.
I agree about the shutdown, but I'm not talking about it but SINCE it or the fact many realize that there is no damn need to meet in person for countless of activities from the till today simply decide there is no sense doing in-person conferences and so on. That's the impact I'm talking about, of course airlines for cargoes have compensate much of the loss because we still need to move goods for a distance that a cargo is the cheapest not only the fastest option, tourism still exists (and that's perfectly fine) but no need to move for many business activities.
> People still went to Starbucks during the shutdown.
No doubt, but when you decide to leave the city, perhaps a very expensive and even very small apartment for a home in a nice place with plenty of nature, a nice garden, a nice veranda depending on the climate, why going to a luxury bar when you can have it at home, without the need to dress and with anything you like done as you like? Restaurants it's another thing, you go to eat something you do not typically cook at home, but a bar? I'm Italian, living in France, my cappuccino is definitively better than a SB one, I do not need to register myself, I only need the good roasted coffee and some sufficiently fat milk. Why bother to get dressed and go somewhere if I can just open a door and have a better alternative? In a dense city, full of noise, things are different but in nature with plenty of space I can have friends at home, outside, inside, in both in total comfort.
The fact that you are Italian and not familiar with American habits nor a Native American makes it hard for me to relate people’s obsession with SB with you. Sorry
It's not really about the jets. Rank and file employees are asked to RTO on their dime (usually) while executives have the choice of living elsewhere and having their transportation covered by the company. That's horribly unfair.
> Its not uncommon at all for commuting by jet to be the standard
Companies (F500s and below) are increasingly moving away from this for efficiency and cost reasons, but I agree with you that it's a bit of a nothingburger.
Meanwhile the same HNers complaining about Niccols contract are the same ones who oppose the unrealized capital gains tax proposal that literally only affects people with $100M and above in undeployed capital
First $100M, then when that's not enough it'll be $50M, then $10M, then $1M, then $500k. The definition of "rich" will keep being adjusted down.
And for what? So politicians can spend it on some photo-op project for themselves? Maybe sending "aid" to other countries (bullets and bombs)? Using it to spy on it's own citizens and quell dissidents? Surely individuals can on average invest the money more productively.
That’s personal use, his commute doesn’t count though does it? Doesn’t read to me like it does.
"You will be eligible to use the Company aircraft for (i) business-related travel in accordance with the Company’s travel policy, (ii) travel between your city of residence and the Company’s headquarters in Seattle, Washington and (iii) your personal travel in accordance with the Company’s policies, up to a maximum amount of $250,000 per year, which amount will be based on the aggregate incremental cost to the Company."
A quick google says that it costs anywhere between 3k and 18k per hour to operate a private jet. Lets give it a round number and say that the Starbucks jet costs $10k/hr to operate. By that metric, he gets to use the plane for 25hrs/year. It's not a staggering amount of time but also not nothing either. Guy could probably go to Europe and back 2-3 times on that amount, or ~5 cross-country trips.
Who cares if you're eating at Per Se when you're stuck with other people vying for your job or trying to push their agenda.
You have almost no time for personal enjoyment, and you're almost entirely stuck with coworkers so you can't let loose.
C-Suite and C-Suite adjacent end up working 60-80 hour weeks, and you have to be always on because that is what the role entails
> I'm sure can arrange to go to Europe "for work"
CEOs report to boards, and we ask their C-Suite peers about each other and any issues.
And even before it could reach that level, the CFO would absolutely push back on a frivolous expense like that.
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Best bang for your buck between luxury and free time is Staff/Principal Engineer - you earn enough that you can afford to take fancy vacations, but you are still an experienced IC so you can shop around for jobs if god forbid you lose yours, and you aren't expected to work most weekends
When you put it that way, I makes it harder to hate the C-suite. But I'm conditioned by all of the haters on social media to think that socialism will some how fix all of this.
The only mention I see in the article that he will be using the plane to commute is in an annotation:
> For his commute, he'll be covering the 1,600km each way via corporate jet.
No mention of how often he'll make that trip. One might read the requirement of "in the office three days each week" and infer these would be weekly trips, but there's no support given for this inference in TFA.
...which gives the article a distinct air of outrage chum. Instead of reporting on what someone is doing, it is trying to stir up resentment about what someone might do, based on their employment contract?
I would take those numbers with a grain of salt. CEOs aren't usually accountable to anyone for how they calculate their hours, so the statistics tend to be self-reported, but they have an incentive to make the numbers as high as possible to seem like they are working hard and deserve their salaries, sand as a result, it seems like they often tend to do things like include activities that everyone has to do but wouldn't normally be allowed to count as hours of work.
For example, the wall street journal had this infamous infographic a while ago where 20 hours of CEOs' supposed working hours go to a "miscellaneous" category which includes "exercise" and "personal appointments": https://imgur.com/jkQZ0YX
It’s true; CEOs and direct reports to the CEO are often working long hours.
It’s important to note that, motivation-wise, running a company is very different from being a worker at a company under a manager. From experience running my own (very small) company, its very easy to put in long hours for something that’s your own, something where anything that goes wrong is your responsibility, something where success is defined by and depends on you. It’s much harder to motivate long hours as a regular employee, especially if the extra hours aren’t your choice and/or are the result of problems other people created. Being in charge is not for everyone, but for some, sixty hours a week is relatively light.
If a normal employee claimed to still be working full time while on vacation they would call it "quiet vacationing" and probably fire them if they found out.
I’ve been in a hotel/resort for the past week. I didn’t take time off or notify my employer, though my direct manager is aware. No one cares, because my work still gets done.
I don't believe the typical CEO is working harder or longer hours than the workers. The few that are may be as part of a lifestyle, because they want to.
If you enjoy your work, 62.5 hours per week doesn’t seem excessive, especially if you spread some of that time over the weekends. At that point, you could compare it to how long artists and scientists typically work.
Eight hours of sleep is generally sufficient for most people. Personally, I consider physical activity at the CEO level to be part of their work time.
The small article aptly points out the unique ‘perk’ (or in their eyes necessary for conducting CEO business) use of the Starbucks jet for commuting by jet. However it tries to paint a comparison to Starbuck’s environmental initiative that speaks to giving back more than it takes in terms of agriculture. This seems like a false comparison. Two have nothing to do with each other.
The reason is because he wants to live in his home in Newport Beach, California vs moving to Seattle.
Quoted text from SEC notification:
“ During your employment with the Company, you will not be required to relocate to the Company’s headquarters (currently in Seattle, Washington). You agree to commute from your residence to the Company’s headquarters (and engage in other business travel) as is required to perform your duties and responsibilities.
From the Start Date until such time as you secure permanent secondary housing arrangements in Seattle, Washington (up to three months following the Start Date), the Company will pay directly, or reimburse you for, the costs of your reasonable temporary housing arrangements in Seattle, Washington and a driver to transport you as necessary while you are in Seattle, Washington.
If you decide to relocate to the Seattle, Washington area, you will be eligible for reimbursement for qualified relocation expenses to Seattle, Washington, pursuant to the Company’s relocation policy.
Remote Office: Promptly following the Start Date, the Company will establish, with your assistance, a small remote office in Newport Beach, California. The Company will employ an assistant of your choosing for such office, subject to the reasonable consent of the Company. This office location will be maintained at the expense of the Company.”
CTRL+F for jet comes up empty. It does say they will provide a driver. So maybe it’s implied he will use the jet.
"You will be eligible to use the Company aircraft for (i) business-related travel in accordance with the Company’s travel policy, (ii) travel between your city of residence and the Company’s headquarters in Seattle, Washington and (iii) your personal travel in accordance with the Company’s policies, up to a maximum amount of $250,000 per year, which amount will be based on the aggregate incremental cost to the Company."
A commuter jet and a quarter of a million dollars of personal travel!
> However it tries to paint a comparison to Starbuck’s environmental initiative that speaks to giving back more than it takes in terms of agriculture. This seems like a false comparison. Two have nothing to do with each other.
Of course they are related. How can a company say with a straight face on the one hand that they are committed to environmental initiatives while on the other hand their CEO uses one of the most environmentally harmful forms of travel for a regular commute?
I took it as the environmental initiatives were more agricultural related and not related to forcing the CEOs to use all forms of environmentally friendly forms of everything to operate. It’s not feasible to be good at environmental everything
It uses the word "aircraft", not "jet". There is a whole section about it:
> You will be eligible to use the Company aircraft for (i) business-related travel in accordance with the Company’s travel policy, (ii) travel between your city of residence and the Company’s headquarters in Seattle, Washington and (iii) your personal travel in accordance with the Company’s policies, up to a maximum amount of $250,000 per year, which amount will be based on the aggregate incremental cost to the Company.
> A relevant one for this purpose is they've pledged to cut carbon by 50% between 2020 and 2030.
I wonder if thats even possible given how much dairy they use. While I cant find any official numbers on their dairy use, one site estimated it at 750 million liters a year. Another site suggests Starbucks actually sells more dairy than coffee (a drink like a latte or mocha is 90% milk).
Imagine that is is getting 10 millions as sign-in bonus, just because he joins. When it easily represent a thousand years of work of a Barista that is the one really working hard every day to bring the cash in.
Sure, the CEO work value is important, but not that multiple thousand years of employees.
I like to translate such a CEO compensation into the number of products that you have to sell every year just to cover for the pay of this single person.
Here if we think something like 5 to 15 millions of dollars per year, and a Starbucks drink is probably sold around 7 dollars:
With that, employees have to sell around 710 000 to 2 142 000 drinks per year just to pay a standard year of this guy. My brain has hard time comprehending such a number.