Under federal law, every year, American public companies must release what their CEOs make and compare it to the median compensation of their employees. CEO pay is often several hundred times what employees make. In the case of the Starbucks (NASDAQ: SBUX) CEO, the ratio is a huge 1,028 to 1, based on data from the 2023 fiscal year.
According to the proxy, “The fiscal year 2023 annual total compensation for our median employee, a part-time barista in the U.S., was $14,209, including salary and Bean Stock awards. “ Laxman Narasimhan, the CEO, made $14,604,531.
Narasimhan is new to his job. He took over from long-time CEO Howard Schultz on March 20, 2023. He was named to the role on September 1, 2022. According to Starbucks, that gave him a long time to learn about the company.
Management’s relationship with store workers has often been shaky at Starbucks. This started under Schultz but continued under Narasimhan. According to a Bloomberg report last June, “Over the past eight months, Starbucks has lost 16 of 17 cases decided by National Labor Relations Board administrative law judges. The violations cited in the rulings include worker intimidation, discriminatory rules, and unlawful discipline and termination of union organizers.”
The union activity has continued. Earlier this month, approximately 400 workers at 21 Starbucks stores registered petitions with the National Labor Relations Board to join the Starbucks Workers United union. So, the tension between labor and Starbucks management will continue.
Whatever happens to the labor battle, eventually, Narasimhan will be judged by the Starbucks share price. Therein lies his problem. In the last two years, Starbucks shares are up 3%. The S&P 500 is up 17%. His pay ratio compared to his employees may not be as large as last year’s unless he can turn the share price around.
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