Howard Schultz stood down as chief executive of Starbucks for a third time last year, but his exit only went so far. In 2018, the man who built the Seattle coffee business into a global empire had negotiated an agreement to retain an chair emeritus role — for the rest of his life.
The deal lets the 71-year-old attend and observe board meetings, according to Starbucks corporate filings. Other lifetime perks include a badge to access the company’s headquarters and a parking space.
The deal — which can only be modified or waived if both parties agree — is one of several ways Schultz’s connections 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 pressing for changes, unionised baristas pushing for better terms, slowing sales in China, and this week, its second consecutive quarterly earnings miss. Its stock is down 20 per cent this year.
The former CEO’s ties do not stop at access and a title. They range from Starbucks reimbursing Schultz when it uses his private jet for corporate purposes to him owning a stake in a business making extra virgin olive oil for one of the company’s coffee drinks.
As Schultz was ending his third spell in charge, he was introduced while travelling in Sicily to the idea of eating a spoonful of olive oil every day. It inspired him to create Oleato, which Starbucks began rolling out to customers earlier this year.
Corporate filings show that Schultz did not just originate the idea; he also owned 19 per cent of the family-controlled business from which Starbucks buys its oil. Starbucks paid the company, Partanna, about $26mn 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, the president of consultancy Soundboard Governance, said of Schultz’s continuing ties.
While Starbucks has added six new members to the board in the past two years, its chair, Ariel Investments co-CEO Mellody Hobson, has described herself as a close friend of Schultz.
“We have a highly engaged board with the broad expertise, strong judgment and deep dedication required to lead a global organisation and drive long-term stakeholder value,” a Starbucks spokesperson said. “As a company, we consistently apply the highest governance and accountability standards to the decisions we make, and we are transparent about them.”
An entirely clean exit was never likely for Schultz, who served as chief executive for about 14 years starting in 1986, then again from 2008 to 2017, and most recently as interim CEO from 2022 to 2023. With a shareholding worth about $1.6bn he is still Starbucks’ biggest individual investor.
Headhunters have called Schultz’s repeated returns to the helm of Starbucks evidence of poor succession planning and a clear signal 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 appropriate CEO succession plan”.
Schultz, who in 2020 pursued a shortlived run for the US presidency, has said his most recent spell in charge was his last. “I’m never coming back because we found the right person,” he said when Starbucks announced that Laxman Narasimhan, a former PepsiCo executive who had been running UK consumer group Reckitt, would replace him.
Even when Schultz handed over to a successor he had spent months training up, however, the retirement agreement guaranteeing his board rights stayed in place, according to a filing. Starbucks also agreed to pay for security services, including “annual security studies” for Schultz for the next 10 years. In the event of his death, it would continue paying for his wife’s security.
Schultz’s air travel also remains intertwined with the coffee chain. He owns a jet used by Starbucks, according to filings, for which the company last year paid an entity he controlled about $1mn. He has also stored his plane in a Starbucks hangar, the filings show: in 2023, an entity controlled by Schultz paid Starbucks about $1.3mn to cover rent and other maintenance costs.
“Given the celebrity nature and larger than life aspect of Howard Schultz on the company and the continuing sway he’s had. I’m surprised — but not surprised — that these things are there,” Chia said.
Schultz has not exercised his ability to attend board meetings since he stepped down from his role, according to a person familiar with the matter, and he does not have access to meeting minutes, a separate person said. The board can block him from attending meetings, filings show, but the agreement is unusual for a public company, according to corporate governance specialists.
“He doesn’t have the legal responsibilities of a director, but he has some of the power in a soft way associated with being a director,” said Ann Lipton, a Tulane University law professor specialising in securities and corporate litigation. “That creates problems for shareholders in the sense [that] it’s not clear what kind of power he exercises or what his legal responsibilities are.”
Other examples exist in US corporate life. Phil Knight, founder of Nike, transitioned to chair emeritus in 2016, with the shoe company extending a “standing invitation” for him to be a “non-voting observer” in board meetings, according to Nike filings. Jack Welch, the late CEO of General Electric, retired in 2001 with perks ranging from a chauffeured limousine to unlimited use of GE’s aircraft.
Schultz’s continued influence adds complexity to the company’s negotiations with Elliott Investment Management, which the Financial Times reported has pushed for board representation. Narasimhan said on the company’s earnings call on Tuesday that its conversations with the activist “to date have been constructive”.
Schultz has made his opposition to an agreement with Elliott known to some board members, however. The company, which told investors this week a turnaround was in the works, has not announced any agreement 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 he has cut the cord. “I’m watching from afar and rooting and cheering for Starbucks,” he told the Acquired podcast in June. Yet he has also shared critiques of his successors publicly, saying: “The company has not executed the way that I think it should have.”
Asked to comment for this story, Schultz declined.
Weeks before he stepped down last year, Starbucks put out a statement hailing the “milestone” moment when he hit on Oleato, quoting Schultz saying: “In over 40 years, I can’t remember a moment in time where I’ve been more excited.”
This week, months after the product went on sale, Oleato went unmentioned on his former company’s earnings call.
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