Value Beyond Paychecks: The Real Worth of High-Powered CEOs
I recently followed the announcement of Brian Niccol as the new CEO of Starbucks, which reignites the debate over whether high compensation for CEOs, especially at large firms, is justified.
On August 13, Starbucks, the multinational coffee giant, announced the hiring of Brian Niccol, who previously served as CEO of Chipotle, another successful international chain of fast-casual restaurants. Given Niccol’s impressive track record at Chipotle, where he significantly increased the company’s value, this is undoubtedly a strong hire for Starbucks.
Before Niccol’s appointment, Starbucks shares were stable around $77. However, following the announcement, the stock price surged to $94. This means that merely by hiring Niccol, Starbucks saw an instant increase in its market value by over $19 billion.
Niccol’s compensation package includes a $1.6 million salary, a $10 million bonus, and potential equity incentives that could exceed $100 million if the stock continues to perform well. While these figures may seem extravagant, they represent only a small fraction of the immense value the market expects Niccol to generate for both consumers and investors.
Niccol’s leadership at Chipotle was remarkable, driving the stock price from about $6 to $56. Therefore, it wasn’t surprising that following the announcement of his departure, Chipotle’s stock fell from $56 to $46, though it later recovered to around $52. This drop in value, roughly $5.5 billion, underscores the market’s high regard for Niccol’s leadership, despite the presence of strong talent like Scott Boatwright, Chipotle’s number two.
But does this disparity in the value of talent matter? In sports, we see similar dynamics. At Barcelona, Messi’s salary far exceeded that of Suarez and Neymar. The same was true for Cristiano Ronaldo at Real Madrid and Mbappé at PSG. Even now, Mbappé’s annual gross salary at Madrid at € 31m towers over Alaba’s, the second highest earner, at € 22.5m. The point is, the star of the team is always valued more than the second best, and the market reflects that.
Last year, Chipotle paid Niccol a total compensation package worth about $22.5 million. While some criticize such high compensation, the market’s response to Niccol’s resignation — a $5 billion drop in Chipotle’s value — speaks volumes. The market expects Niccol to raise Starbucks’ value even more than he did at Chipotle, making this move a net gain for society.
So, the next time you hear complaints about CEOs earning too much, look beyond the rhetoric. CEO pay is not just about incentives; it’s about value allocation. Companies like Dangote Cement didn’t hire the Indian Arvind Pathak at an annual salary of N609 million out of sheer generosity — they did so because losing someone of his caliber would cost them far more. High-performing CEOs like Niccol and Pathak command their salaries because they deliver substantial returns.
As a new internet sensation wisely said, “It’s not about listening to people who say, ‘God told me to tell you gimme, gimme, gimme to bless you.’ The question is, what value do you carry that the market can pay for?”
In the estimation of those who put their money where their mouth is, Niccol is worth every penny.
