ESG Measures Added to CEO Short and Long-term Pay Plans
March 22, 2022
As part of his 2020 individual performance assessment, Starbucks’ CEO Kevin Johnson was rewarded for “shaping and clarifying Starbucks long-term strategy as it relates to environmental, social, and corporate governance goals by elevating our ‘social impact agenda’ to a new model.” The results of that work were clearly on display in Starbucks’ newly filed proxy as ESG metrics comprised 40% of the 2021 STI award determination.
Starbucks has both internal and external long-term goals:
- By 2025, reach representation goals, including achieving black, indigenous, and people of color (BIPOC) representation of at least 30% at all corporate levels and at least 40% in all retail and manufacturing roles.
- By 2030, have a direct impact on the environment by reducing:
- Carbon: 50% absolute reduction in scope 1, 2, and 3 greenhouse gas emissions representing all of Starbucks’ direct operations and value chain
- Water: 50% of water withdrawal across direct operations, stores, packaging, and agricultural supply chain will be conserved or replenished, prioritizing action in high-risk water basins while supporting watershed health, ecosystem resilience, and water equity
- Waste: 50% reduction in waste sent to landfills from stores (including packaging that leaves stores) and direct operations, driven by a broader shift toward a circular economy”
In Fiscal Year 2021, all NEOs were judged against three areas of ESG, some with quantifiable metrics:
- People Positive (10% of award): Maintain a BIPOC retention rate of more than 90%; demonstrate leadership in diversity activities; provide mentorship to BIPOC partners
- Planet Positive (10%): Farm-level methane reduction; personal cup solutions; pilot coffee supply chain options; Increase plant-based choices; eliminate plastic straws
- Living Our Mission and Values/Helping Others Succeed (20%): Creating a culture of warmth and belonging, where everyone is welcome; being present, connecting with transparency, dignity, and respect
CEO Johnson earned 102% of target for his individual performance factor, which included the three areas detailed above and a profit measure, which comprised an additional 10%.
Starbucks also introduced a modifier in its long-term pay plan tied to the improvement in BIPOC representation at the manager level. An increase in representation of 5% or more over the three-year performance period will increase the number of shares award by 10%. A reduction in representation will reduce the number of shares awarded by 10% in 2023.