New Starbucks CEO Could Finally Tame Howard Schultz
(Bloomberg Opinion) -- Incoming Starbucks Corp. CEO Brian Niccol is a star executive who is widely considered the best in the business.
Quite frankly, it’s surprising the company was able to hire him. Despite the coffee giant being one of the world’s most iconic and powerful brands, Starbucks has a problem for any incoming CEO. And that problem is named Howard Schultz.
As Starbucks’ longtime CEO who became synonymous with the company he all but founded, Schultz can’t seem to let go. He’s twice boomeranged back into the top job when the company hit turbulence. And since he departed from the board a year ago, he has become a meddler — criticizing his successor Laxman and the board in a LinkedIn post and on a podcast, even though he handpicked
It’s only the latest example in Schultz’s long history of undermining his replacements. He wrote in a leaked memo in 2007 that said under then-CEO Jim Donald the company’s stores “no longer have the soul of the past.” After Kevin Johnson left the company as CEO in 2022, Schultz said that he had returned to the helm because Starbucks had “lost its way.”
Schultz seems to have orchestrated his latest official departure from company leadership to make it impossible for Starbucks to disentangle itself from his grasp. He is the company’s largest individual shareholders and has negotiated to be chairman emeritus for life. A piece in the Financial Times earlier this month detailed Schultz’s ongoing ties to the company: he can attend and observe board meetings; he has a badge that gives him access to headquarters — where he also has his own parking space; the board reimburses him for the use of his private jet for corporate purposes; and he owns a stake in a business making olive oil for one of the company’s coffee drinks. The piece also cited a recent Bernstein analyst report, which notes, “Decision-making processes are still heavily influenced by the presence of Howard Schultz, albeit informally.” (“We consistently apply the highest governance and accountability standards to the decisions we make, and we are transparent about them,” a Starbucks spokesperson told the FT.)
That dynamic even played out in the selection of Niccol. Mellody Hobson, Starbucks board chair, said she ran the choice by Schultz a week ago, who gave his approval. However, the two known activist firms that are circling the company — Elliott Investment Management and Starboard Value — reportedly were not given a heads up.
It’s all more than enough to give any CEO candidate pause, especially a highly coveted one like Niccol, who could take his pick of companies. In addition to his track record executing a massive turnaround at Chipotle Mexican Grill Inc., his time there gave him experience dealing with activist investors as well as iconic founders. In 2018, Niccol replaced Chipotle co-founder and longtime CEO Steve Ells, who struggled to right the company after a slew of food safety disasters. Ells stepped away as executive chairman two years later, saying at the time, “Brian has proven that he is absolutely the right person to lead Chipotle forward and I’ve never been more confident about the future of this great company.”
With Schultz still lurking in the background, Starbucks likely had to make some serious concessions to lure Niccol — among them naming him chairman as well as CEO. Hobson was previously the company’s chair and is giving up the title to become lead independent director. Niccol had added the chairman title at Chipotle in 2020 and probably made it a requirement for joining Starbucks. But it also raises more governance issues for a board that is already under scrutiny. Corporate America has increasingly moved away from having a single person hold both titles. Just 4% of new S&P 1500 CEOs were also named board chair upon appointment last year, according to executive search firm Spencer Stuart, which has also reported that 41% of S&P 500 companies had a CEO with the dual title in 2023 — down 25% from a decade ago.
Schultz built Starbucks into a retail juggernaut over four decades, so it’s understandable that the board and executive team would want to keep someone like him on speed dial. But Starbucks is now turning into an example of why longtime CEOs need to make cleaner breaks with their companies. Otherwise, they risk tarnishing their legacies by turning themselves from an asset into a liability.
More From Bloomberg Opinion:
- New Starbucks CEO Must Strike While the Coffee Is Hot: Andrea Felsted
- Howard Schultz, Delete Your Account: Beth Kowitt
- What Comes After Elliott Buys a Stake? Some M&A: Chris Hughes
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Beth Kowitt is a Bloomberg Opinion columnist covering corporate America. She was previously a senior writer and editor at Fortune Magazine.
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