Millions of jaded employees and executives enjoy the traditional summer vacation in the northern hemisphere, flocking to beaches and beauty spots. But for Starbucks’ new CEO, Brian Niccol, a visit to the beach may be within reach all year round.
Niccol’s appointment, announced this week, came with an unusual perk: Instead of moving to the coffee company’s Seattle headquarters, the new boss persuaded the company to set up a “small remote office” in Newport Beach, California.
The deal marks a departure from that of his ousted predecessor, Laxman Narasimhan, whose effort to get to grips with Starbucks included four weeks of working with front-line staff to earn his barista certification.
Niccol’s plan to set up base in Newport Beach, California, where he moved the headquarters of his former employer, Chipotle Mexican Grill, has divided opinion.
“It’s not prudent and sets a terrible example,” said Samuel Johar, chairman of board advisory firm Buchanan Harvey.
“It seems like one rule for CEOs and another for everyone else,” he argued, adding that given the magnitude of the challenges Starbucks faces, the remote arrangement seemed “a little complacent.”
Starbucks office staff in Seattle are expected to come into the office three days a week. Many employers are trying to increase attendance rates in the name of greater cohesion and productivity.
“Good luck trying to get anyone else to come into the office if your CEO doesn’t have to,” said Peter Cappelli, the George W. Taylor Professor of Management at The Wharton School.
It’s “hard to change organizational culture” remotely, but that would be part of Niccol’s goal at Starbucks, Cappelli said.
The Niccol deal may be a sign that lifestyle benefits are becoming more important in attracting senior executives, just as they have for rank-and-file staff.
However, other board experts agreed that having a boss working remotely while colleagues were at company headquarters risked demoralising teams and limiting the leader’s effectiveness.
“Leadership often involves a lot of environmental interactions, such as networking, observation, and nonverbal forms of communication. Physical presence can be an important part of this,” said André Spicer, executive dean of Bayes Business School and professor of organizational behavior.
Mark Freebairn, partner and head of board practice at Odgers Berndtson, the UK’s largest headhunting firm, added: “What is a cultural leader if they’re not in the culture?”
Others are less alarmed by the deal, while investors welcomed Niccol’s appointment this week, with the share price rising sharply following its announcement.
“It’s just a sign of the times,” said Job van der Voort, CEO and co-founder of payroll and workforce management IT company Remote. Company bosses “are basically always on and a lot of people are always working from their phone or in transit, so making this formal makes a lot of sense,” said van der Voort, who works remotely full time.
Several experts argued that in large companies CEOs inevitably spend enormous amounts of time travelling, regardless of their formal base.
“[At] “In a multinational like Starbucks, the CEO travels a lot to visit subsidiaries, suppliers, talk to shareholders and government representatives,” said Lynda Gratton, professor of management practice at London Business School. So even if they are based at headquarters, they won’t be there for long.
A public filing showed that Niccol would not be required to move to Seattle, but must travel to the company’s headquarters “as required to perform [his] functions” and may use the company’s aircraft to make the trips.
Starbucks said in a statement that Niccol’s “main office and the majority of his time” would be spent in Seattle or visiting staff and customers in stores, offices and other facilities around the world.
“I would be able to overcome hybrid work guidelines and workplace expectations” that apply to all employees and would also likely get a home in Seattle, he added.
A 2021 study on the economics of CEOs working remotely found that the arrangement had benefits, but that these were generally outweighed by the drawbacks.
“On the one hand, the flexibility of remote management may allow boards to secure high-profile CEOs who might otherwise be unwilling to relocate to perform the job,” said Ran Duchin, a finance professor at Boston College’s Carroll School of Management and co-author of the study.
“On the other hand, some argue that managing remotely may favor the CEO’s own interests at the expense of shareholders.”
Duchin said his research on remote leaders before the pandemic had found “lower operating performance and valuations when the CEO has a remote work arrangement.” In specific cases, such as being “close to the beach or a golf course, or owning a boat, CEOs consume more leisure, and this corresponds to a weaker company,” he added.
The drawback was mitigated, he said, for companies that were geographically dispersed and in cases where the chief executive lived near a local office.
While recruiters say CEOs working entirely remotely are rare, Niccol is not the first to try such an arrangement.
Wells Fargo CEO Charles Scharf has run the San Francisco-based bank from New York since his appointment in 2019. HSBC non-executive chairman Mark Tucker also has a home in New York, while Barclays CEO CS Venkatakrishnan splits his time between London and New York.
AstraZeneca boss Pascal Soriot, the highest-paid CEO in the FTSE, was temporarily in Australia during pandemic restrictions, though he worked through the night to stay in step with colleagues in Europe and North America before returning to the UK.
Some investors have been reluctant: Jack Dorsey abandoned a plan in 2020 to temporarily move to Africa while continuing to run Twitter and Square after pressure from Elliott Management.
But the importance of headquarters has declined in recent years, a trend that has accelerated since the pandemic, said Kit Bingham, a partner at headhunting firm Heidrick & Struggles.
“The model of a giant central office where everyone has to be is historic,” he said. “In London, I often go to the headquarters of a large company and there are six people working there.”
Others are skeptical that the Niccol deal will mark a radical change. “I would be surprised if it became more normal than it is now,” Freebairn said.