Starbucks has craftily persuaded caffeine-craving consumers to overlook the high cost of its coffees. But the company’s lawyers -- prodded, perhaps, by the Securities and Exchange Commission’s crackdown on hidden compensation -- are giving investors a more detailed view of how much executive perks are costing the Seattle-based outfit’s shareholders. In an SEC filing last month, Starbucks disclosed for the first time what it has spent on personal security services for its chairman, Howard Schultz, over the past three years. In an e-mail to Institutional Investor, the company said it made the revelation “in the spirit of adopting evolving best practices for proxy disclosure.”
Turns out Schultz’s security services are worth quite a few caffè lattes: In fiscal 2005, Starbucks paid $413,734 to protect him. That was down from $522,372 in 2004 and $677,334 in 2003. Starbucks provided similar perks for three other top execs, but it appears that Schultz is the only one to get bodyguards. The company declines to provide details of its security arrangements.
Starbucks’ move comes as new SEC chairman Chris Cox is pushing to update the agency’s rules so that disclosure of executive pay better reflects today’s complex arrangements. “Too often,” Cox said in a December speech to the New York Financial Writers Association, “technical compliance with disclosure rules doesn’t adequately capture the details of the latest compensation packages.”
Paul Hodgson, a researcher with the Corporate Library, a Portland, Maine based company that advises investors on corporate governance policies, says that just 2 percent of big companies disclose security costs for specific executives. “Once they start disclosing them, everyone thinks, ‘Why are we paying for this particular benefit for this person who is earning hundreds of thousands or millions of dollars?’” he says. But Starbucks may set a trend. “I think the SEC will insist on enough improvement in disclosure for this to become fairly widespread.”
