Last year, Howard Schultz stepped down as Starbucks CEO for a third time, but his departure was not exactly a good one. In 2018, the man who turned the Seattle coffee business into a global empire had negotiated a deal to keep the role of chairman emeritus — for the rest of his life.
According to Starbucks corporate documents, the agreement allows the 71-year-old executive to attend and observe board meetings. Other lifetime benefits include a badge to access the company’s headquarters and a parking space.
The agreement, which can only be modified or waived if both sides agree, is one of many ways Schultz’s ties to the Seattle company endure. His continued influence has become a more pressing issue for management and investors as the challenges facing Starbucks have proliferated this year.
Among them are an activist shareholder pushing for change, unionized baristas pushing for better conditions, a sales slowdown in China and, this week, its second straight week. Quarterly earnings missed targets. Its shares have fallen 20 percent this year.
The former CEO’s ties are not limited to access and position. They range from Starbucks reimbursing Schultz when he uses his private jet for corporate purposes and allowing him to own a stake in a business that produces extra virgin olive oil for one of the company’s coffee drinks.
As Schultz was nearing the end of his third term in office, while traveling in Sicily, he came up with the idea of eating a spoonful of olive oil every day. This inspired him to create Oleato, which Starbucks began offering to its customers earlier this year.
Corporate documents show that Schultz Not only was Partanna the brainchild of the idea, he also owned 19 percent of the family-owned company from which Starbucks buys its oil. Starbucks paid the company, Partanna, about $26 million last year.
“There are a number of investors and people in corporate governance who would say these are signs that the company has very weak governance,” Doug Chia, president of consultancy Soundboard Governance, said of Schultz’s continued ties.
While Starbucks has added six new board members in the past two years, its chairwoman, Ariel Investments co-chief executive Mellody Hobson, has described herself as a close friend of Schultz.
“We have a highly engaged board of directors with the broad experience, sound judgment and deep dedication required to lead a global organization and generate long-term shareholder value,” a Starbucks spokesperson said. “As a company, we consistently apply the highest standards of governance and accountability to the decisions we make, and we are transparent about them.”
A completely clean exit was never likely for Schultz, who served as CEO for about 14 years beginning in 1986, then again from 2008 to 2017, and most recently as interim CEO from 2022 to 2023. With an equity stake of about $1.6 billion, he remains Starbucks’ largest individual investor.
Headhunters have called Schultz’s repeated returns to the helm of Starbucks are evidence of poor succession planning and a clear sign of his continued influence over the board. The company’s own filings report that shareholders said Schultz’s return to the top job in 2022 showed that “the board and Starbucks lacked an adequate CEO succession plan.”
Schultz, who briefly ran for president of the United States in 2020, has said his latest stint at the helm of the company was his last. “I will never go back because we found the right person,” he said when Starbucks announced that Laxman Narasimhan, a former PepsiCo executive who ran British consumer group Reckitt, would replace him.
But even as Schultz handed over the job to a successor he had spent months training, the retirement agreement guaranteeing his board rights remained in place, according to a filing. Starbucks also agreed to pay for security services, including “annual security reviews” for Schultz for the next 10 years. Should he die, it would continue to pay for his wife’s security.
Schultz’s air travel also remains tied to the coffee chain. According to filings, he owns a plane used by Starbucks, for which the company paid an entity he controlled about $1 million last year. He has also stored his plane in a Starbucks hangar, the filings show: In 2023, an entity controlled by Schultz paid Starbucks about $1.3 million to cover rent and other maintenance costs.
“Given the celebrity nature and larger-than-life aspect of Howard Schultz at the company and the continuing influence he’s had, I’m surprised, but not surprised, that these things are out there,” Chia said.
Schultz has not exercised his power to attend board meetings since resigning, according to a person familiar with the matter, and does not have access to meeting minutes, another person said. The board can bar him from attending meetings, the documents show, but the arrangement is unusual for a publicly traded company, according to corporate governance specialists.
“He doesn’t have the legal responsibilities of a director, but he does have some of the power, in a subtle way, associated with being a director,” said Ann Lipton, a Tulane University law professor who specializes in securities and corporate litigation. “That creates problems for shareholders in the sense that [that] “It is not clear what kind of power he exercises or what his legal responsibilities are.”
There are other examples in American corporate life. Nike founder Phil Knight became chairman emeritus in 2016, and the shoe company extended him a “standing invitation” to be a “non-voting observer” at board meetings, according to Nike filings. Jack Welch, the late chief executive of General Electric, retired in 2001 with benefits ranging from a chauffeured limousine to unlimited use of GE airplanes.
Schultz’s continued influence adds complexity to the firm’s negotiations with Elliott Investment Management, the Financial Times reported. reported Narasimhan has pushed for board representation. Narasimhan said on the company’s earnings call Tuesday that his conversations with the activist “to date have been constructive.”
Schultz, however, has made it known to some board members that he opposes a deal with Elliott. The company, which this week told investors it was preparing a turnaround, has not announced any deal with the activist. Elliott declined to comment.
Citing an interview with a former executive, Bernstein analysts wrote in a note last week: “Decision-making processes are still heavily influenced by the presence of Howard Schultz, albeit informally.”
For his part, Schultz maintains that he has cut the cord. “I’m watching from afar and cheering Starbucks on,” he said. Acquired June podcast. However, he has also shared public criticism of his successors, saying: “The company has not acted in the way I think it should have.”
When asked to comment for this story, Schultz declined to do so.
Weeks before he stepped down last year, Starbucks released a statement praising the “historic” moment when it came up with Oleato, quoting Schultz as saying, “In more than 40 years, I can’t remember a time when I’ve been more excited.”
This week, months after the product went on sale, Oleato was not mentioned on his former company’s earnings call.