New York Mayor-elect Zohran Mamdani and Sen. Bernie Sanders (I-Vermont) want to make sure everyone knows that Starbucks CEO Brian Niccol made over $95 million last year. They are spreading the word to aid Starbucks Workers United, the union that is on strike at about 140 of the chain’s roughly 18,000 North American locations.
But economic populists love to shout about executive compensation regardless of whether anyone’s on strike. They point to a number far greater than most people will earn in a lifetime as manifest evidence of unfairness. No further argument needed, it seems.
Why are these executives paid so much? Niccol’s career offers an interesting example. He is among the highest-paid CEOs in the food industry, and he previously worked for Taco Bell and Chipotle. Both times, he led successful turnaround efforts, and Starbucks needs one. The company has been closing stores and cutting its workforce while its stock price has stagnated for several years.
It’s too early to tell how Niccol will do at Starbucks, but his record at Chipotle is complete, and it’s remarkable. Niccol became the CEO of Chipotle in 2018. By the time he left for Starbucks in 2024, Chipotle’s revenue had doubled and its stock value had octupled.
Niccol’s compensation fluctuated significantly from year to year. He was paid over $30 million in his first year to attract him away from Taco Bell and earned his highest pay, $38 million, in 2020, when shareholders were impressed by his performance during the pandemic.
In total, he made $167.3 million in his six years as CEO of Chipotle. A lot of money, no doubt. But the largest chunk of that money came in the form of Chipotle stock. The CEO’s performance is ultimately measured by the stock price. And Niccol worked miracles for Chipotle’s stock price.
Of course, the CEO is not the only person responsible for a company’s stock performance. Overall economic conditions and industry trends matter. Within the company, everyone contributes something. But the CEO is the one calling the shots. He or she gets the blame when things go wrong, so it’s only fair to get the credit when things go right.
The question becomes: How much credit does the CEO deserve? Ten percent? Five percent? Chipotle’s answer during Niccol’s tenure: less than 1 percent.
The company’s market capitalization, the total value of all outstanding shares of its stock, on the day Niccol became CEO in March 2018 was about $9 billion. When he left in August of last year, it was about $77 billion.
That means, over six years, the shareholders of Chipotle paid Brian Niccol a mere $167.3 million to increase their wealth by $68 billion. He got paid about 0.2 percent of the wealth he helped create.
This isn’t a pity party for Niccol. It’s just a reality check on how supposedly out-of-control CEO compensation might actually be a small fraction of the value that the best CEOs can bring.
The $68 billion didn’t go only to other rich people. It also went to basically anyone with a retirement account, as most index funds include Chipotle as a component. Chipotle employees with over a year of service are also able to purchase the company’s stock at a discount, allowing them to build their own wealth beyond their wages.
It’s no wonder that Starbucks shareholders were willing to pay big money for Niccol’s talents. The $95 million payday is largely a fluke, as it included $75 million in one-time compensation for Niccol’s forfeiting his shares of Chipotle. This year’s compensation will show up as a big pay cut.
And his pay could go to zero relatively soon if his turnaround plans don’t work. Starbucks’s board fired his predecessor, Laxman Narasimhan, after less than two years. It’s been a rough start for Niccol, with the company’s share price currently at the lower end of its 52-week range. Shareholders knew they were asking a lot from him. But without more signs of life soon, he might miss out on tens of millions of dollars in performance-based pay, and the shareholders might start looking for a replacement.
The downside risk to Starbucks is that Niccol gets fired after having been paid a sliver of the company’s $37 billion in annual revenue. But if Niccol can do for Starbucks what he did for Chipotle, that’s worth every cent of what they’re paying him. At that point, the right question would be why he is paid so little.
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