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OMB APPROVAL |
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OMB Number:
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3235-0059 |
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Rule 14a-101
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant o |
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Starbucks Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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þ No fee required. |
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o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
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SEC 1913 (11-01) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
Seattle, Washington
January 17, 2007
Dear Shareholders:
You are cordially invited to attend the Starbucks Corporation
Annual Meeting of Shareholders on Wednesday, March 21,
2007, at 10 a.m. (Pacific Time). The meeting will be held
at Marion Oliver McCaw Hall at the Seattle Center, located
on Mercer Street, between Third and Fourth Avenues, in Seattle,
Washington. Directions to McCaw Hall and transportation
information appear on the back cover of this notice of annual
meeting and proxy statement. Enclosed within the proxy
statement are two admission tickets for the Annual Meeting. Each
attendee must present an admission ticket enclosed within this
proxy statement.
The matters to be acted upon are described in the accompanying
notice of annual meeting and proxy statement. At the meeting, we
will also report on Starbucks Corporations operations and
respond to any questions you may have.
As always, we anticipate a large number of attendees at our
Annual Meeting of Shareholders. We have taken several steps to
accommodate as many people as possible, including providing
additional seating in the main hall and overflow seating in the
Exhibition Hall next door to view a live video feed.
While we will make every effort to accommodate all attendees, we
cannot guarantee seating availability. We strongly recommend
that shareholders arrive at McCaw Hall at least one hour prior
to the event. Doors will open at 8 a.m. the day of the
event.
YOUR VOTE IS VERY IMPORTANT. Whether or not you
plan to attend the Annual Meeting of Shareholders, we urge you
to vote and submit your proxy by the Internet, telephone or mail
in order to ensure the presence of a quorum. If you attend the
meeting, you will, of course, have the right to revoke the proxy
and vote your shares in person. If you hold your shares through
an account with a brokerage firm, bank or other nominee, please
follow the instructions you receive from them to vote your
shares.
Very truly yours,
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Howard Schultz
chairman
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James L. Donald
president and chief
executive officer
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STARBUCKS CORPORATION
2401 Utah Avenue South
Seattle, Washington 98134
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
The Annual Meeting of Shareholders of Starbucks Corporation (the
Company) will be held at Marion Oliver McCaw Hall at
the Seattle Center, located on Mercer Street, between Third and
Fourth Avenues, in Seattle, Washington, on Wednesday,
March 21, 2007, at 10 a.m. (Pacific Time) for the
following purposes:
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1.
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To elect 11 directors to serve until the 2008 Annual
Meeting of Shareholders;
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2.
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To approve the material terms of the Starbucks Executive
Management Bonus Plan;
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3.
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To ratify the selection of Deloitte & Touche LLP as the
Companys independent registered public accounting firm for
the fiscal year ending September 30, 2007; and
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4.
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To transact such other business as may properly come before the
meeting.
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Only shareholders of record at the close of business on
January 12, 2007 will be entitled to notice of and to vote
at the Annual Meeting of Shareholders and any adjournments
thereof.
The Companys proxy statement is attached hereto. Financial
and other information concerning the Company is contained in the
Companys Annual Report to Shareholders for the fiscal year
ended October 1, 2006.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to
attend the Annual Meeting of Shareholders, we urge you to vote
and submit your proxy by the Internet, telephone, or mail in
order to ensure the presence of a quorum.
Registered holders may vote:
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By Internet: go to http://www.proxyvoting.com/sbux to vote on
the Internet;
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By toll-free telephone: call 1-866-540-5760 to vote by
phone; or
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3.
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By mail: mark, sign, date and promptly mail the enclosed proxy
card in the postage-paid envelope. Any proxy may be revoked at
any time prior to its exercise at the meeting.
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Beneficial Shareholders. If your shares are
held in the name of a broker, bank or other holder of record,
follow the voting instructions you receive from the holder of
record to vote your shares.
By Order of the Board of Directors,
Paula E. Boggs
secretary
Seattle, Washington
January 17, 2007
TABLE OF
CONTENTS
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A-1
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See outside
back cover
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STARBUCKS
CORPORATION
2401 Utah Avenue South
Seattle, Washington 98134
for the
ANNUAL MEETING OF
SHAREHOLDERS
This proxy statement is furnished by and on behalf of the board
of directors (the Board of Directors or
Board) of Starbucks Corporation, a Washington
corporation (Starbucks or the Company),
in connection with the solicitation of proxies for use at the
Annual Meeting of Shareholders of the Company to be held at
10 a.m. (Pacific Time) on Wednesday, March 21, 2007
(the Annual Meeting), at Marion Oliver McCaw Hall
(McCaw Hall) at the Seattle Center, located on
Mercer Street, between Third and Fourth Avenues, in Seattle,
Washington, and at any adjournment thereof. Directions to McCaw
Hall and a map are provided on the back cover of this proxy
statement. This proxy statement and the enclosed proxy card will
be first mailed on or about January 29, 2007 to the
Companys shareholders of record on January 12, 2007
(the Record Date). On the Record Date, there were
753,576,146 shares of Common Stock outstanding and there
were no outstanding shares of any other class of stock. Holders
of shares of Common Stock are entitled to cast one vote per
share on all matters.
A shareholder who delivers an executed proxy pursuant to this
solicitation may revoke it at any time before it is exercised by
(i) executing and delivering a later dated proxy card to
the secretary of the Company prior to the Annual Meeting,
(ii) delivering written notice of revocation of the proxy
to the secretary of the Company prior to the Annual Meeting, or
(iii) attending and voting in person at the Annual Meeting.
Attendance at the Annual Meeting, in and of itself, will not
constitute a revocation of a proxy. Proxies will be voted as
instructed by the shareholder or shareholders granting the
proxy. Unless contrary instructions are specified, if the
enclosed proxy is executed and returned (and not revoked) prior
to the Annual Meeting, the shares of common stock,
$0.001 par value per share (the Common Stock),
of the Company represented thereby will be voted:
(1) FOR the election of the 11 director
candidates nominated by the Board of Directors; (2) FOR
the approval of the material terms of the Starbucks
Executive Management Bonus Plan; (3) FOR the
ratification of the selection of Deloitte & Touche LLP
as the Companys independent registered public accounting
firm for the fiscal year ending September 30, 2007
(fiscal 2007); and (4) in accordance with the
best judgment of the named proxies on any other matters properly
brought before the Annual Meeting.
The presence, in person or by proxy, of holders of a majority of
the outstanding shares of Common Stock is required to constitute
a quorum for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes (shares held by a
broker or nominee that does not have the authority, either
express or discretionary, to vote on a particular matter) are
counted for purposes of determining the presence or absence of a
quorum for the transaction of business at the Annual Meeting.
Under Washington law, if a quorum is present, a nominee for
election to a position on the Board of Directors will be elected
as a director if the votes cast for the nominee exceed the votes
cast for any other nominee for that position. If a quorum is
present, approval of the proposal to approve the material terms
of the Starbucks Executive Management Bonus Plan, approval of
the proposal to ratify the selection of Deloitte &
Touche LLP as the Companys independent registered public
accounting firm for fiscal 2007, and all other matters that
properly come before the meeting require that the votes cast in
favor of such actions exceed the votes cast against such
actions. Abstentions and broker non-votes will have no effect on
the election of nominees for director, the proposal to approve
the material terms of the Starbucks Executive Management Bonus
Plan, the proposal to ratify the selection of
Deloitte & Touche LLP or other proposals. Proxies and
ballots will be received and tabulated by Mellon Investor
Services LLC, the Companys transfer agent and the
inspector of elections for the Annual Meeting.
The expense of preparing, printing and mailing this proxy
statement and the proxies solicited hereby will be borne by the
Company. Proxies will be solicited by mail and may also be
solicited by directors, officers and other partners (employees)
of the Company in person, by the Internet, by telephone or by
facsimile transmission, without additional remuneration. The
Company will also request brokerage firms, banks, nominees,
custodians and fiduciaries to forward proxy materials to the
beneficial owners of shares of Common Stock as of the Record
Date and will reimburse such persons for the cost of forwarding
the proxy materials in accordance with customary
practice. Your cooperation in promptly voting your shares and
submitting your proxy by the Internet or telephone or by
completing and returning the enclosed proxy card, will help to
avoid additional expense.
PROPOSAL 1
ELECTION OF DIRECTORS
In accordance with the Companys Amended and Restated
Bylaws, by resolution the Board of Directors has set the size of
the Board at 12 members. Currently there are 11 members of the
Board of Directors, with one vacancy created by one director
leaving the Board in fiscal 2006. As approved by the
Companys shareholders at the 2006 Annual Meeting of
Shareholders, the Board of Directors no longer is divided into
three classes, and all members of the Board of Directors now
serve for terms of one year and until their respective
successors have been elected and qualified.
The terms of the current directors, who are identified below,
expire upon the election and qualification of the directors to
be elected at the Annual Meeting. The Board of Directors has
nominated each of the current directors for re-election to the
Board of Directors at the Annual Meeting, to serve until the
2008 Annual Meeting of Shareholders and until their respective
successors have been elected and qualified.
Unless otherwise directed, the persons named in the proxy intend
to vote all proxies FOR the election to the Board of
Directors of each of the current directors of the Company, as
listed below. The nominees have consented to serve as directors
of the Company if elected. If, at the time of the Annual
Meeting, any of the nominees is unable or declines to serve as a
director, the discretionary authority provided in the enclosed
proxy will be exercised to vote for a substitute candidate
designated by the Board of Directors, unless the Board chooses
to reduce the number of directors serving on the Board. The
Board of Directors has no reason to believe any of the nominees
will be unable or will decline to serve as a director. Proxies
cannot be voted for more than 11 persons.
Set forth below is certain information furnished to the Company
by the director nominees. There are no family relationships
among any directors or executive officers of the Company. None
of the corporations or other organizations referenced in the
biographical information below is a parent, subsidiary or other
affiliate of the Company.
Nominees
HOWARD SCHULTZ, 53, is the founder of the Company and the
chairman of the Board. From June 2000 to February 2005,
Mr. Schultz also held the title of chief global strategist.
From the Companys inception in November 1985 to June 2000,
he served as chairman of the Board and chief executive officer.
From November 1985 to June 1994, Mr. Schultz was also the
Companys president. From January 1986 to July 1987,
Mr. Schultz was the chairman of the board, chief executive
officer and president of Il Giornale Coffee Company, a
predecessor to the Company. From September 1982 to December
1985, Mr. Schultz was the director of retail operations and
marketing for Starbucks Coffee Company, a predecessor to the
Company. Mr. Schultz also serves on the board of directors
of DreamWorks Animation SKG, Inc.
BARBARA BASS, 55, has been a director of the Company since
January 1996. Since 1993, Ms. Bass has been the president
of the Gerson Bakar Foundation. From 1989 to 1992, Ms. Bass
was president and chief executive officer of the Emporium
Weinstock Division of Carter Hawley Hale Stores, Inc.
Ms. Bass also serves on the board of directors of DFS Group
Limited, a retailer of luxury branded merchandise, and bebe
stores, inc., a retailer of contemporary sportswear and
accessories.
HOWARD P. BEHAR, 62, has been a director of the Company since
January 1996. Mr. Behar came out of retirement to serve as
the Companys president, North America from September 2001
through December 2002. He continues to be employed by the
Company in an advisory capacity. Mr. Behar served as
president of Starbucks Coffee International, Inc. from June 1994
until his retirement in late 1999. From February 1993 to June
1994, Mr. Behar served as the Companys executive vice
president, Sales and Operations. From February 1991 to February
1993, Mr. Behar served as the Companys senior vice
president, Retail Operations and from August 1989 to January
1991, he served as the Companys vice president, Retail
Stores. Mr. Behar also serves on the board of directors of
The Gap, Inc.
WILLIAM W. BRADLEY, 63, has been a director of the Company since
June 2003. Mr. Bradley is a managing director of
Allen & Company LLC. From 2001 until 2004, he acted as
chief outside advisor to McKinsey & Companys
non-profit practice. In 2000, Mr. Bradley was a candidate
for the Democratic nomination for President
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of the United States. Mr. Bradley served as a senior
advisor and vice chairman of the International Council of
JP Morgan & Co., Inc. from 1997 through 1999.
During that time, Mr. Bradley also worked as an essayist
for CBS Evening News, a visiting professor at
Stanford University, Notre Dame University and the University of
Maryland. Mr. Bradley served in the U.S. Senate from
1979 until 1997, representing the State of New Jersey. Prior to
serving in the U.S. Senate, Mr. Bradley was an Olympic
gold medalist in 1964, and from 1967 through 1977 he played
professional basketball for the New York Knicks, during which
time they won two world championships. Mr. Bradley also
serves on the board of directors of Willis Group Holdings
Limited and Seagate Technology.
JAMES L. DONALD, 52, has been president and chief executive
officer and a director of the Company since April 2005. From
October 2004 to April 2005, Mr. Donald served as the
Companys ceo designate. From the time he joined the
Company in October 2002 to October 2004, Mr. Donald served
as president, North America. From October 1996 to October 2002,
Mr. Donald served as chairman, president and chief
executive officer of Pathmark Stores, Inc. and prior to
that time he held a variety of senior management positions with
Albertsons, Inc., Safeway, Inc. and Wal-Mart Stores, Inc.
MELLODY HOBSON, 37, has been a director of the Company since
February 2005. Ms. Hobson has served as the president and a
director of Ariel Capital Management, LLC, a Chicago-based
investment management firm, and a Trustee of Ariel Mutual Funds
since 2000. She previously served as senior vice president and
director of marketing at Ariel Capital Management, Inc. from
1994 to 2000, and as vice president of marketing at Ariel
Capital Management, Inc. from 1991 to 1994. Ms. Hobson
works with a variety of civic and professional institutions,
including serving as a director of the Chicago Public Library as
well as its foundation and as a board member of the Field Museum
and the Chicago Public Education Fund. In 2004, the Wall
Street Journal named her as one of its 50 Women
to Watch. Ms. Hobson also serves on the board of
directors of DreamWorks Animation SKG, Inc. and The Estee Lauder
Companies Inc.
OLDEN LEE, 65, has been a director of the Company since June
2003. Mr. Lee worked with PepsiCo, Inc. for 28 years
in a variety of positions, including serving as senior vice
president of human resources of its Taco Bell division and
senior vice president and chief personnel officer of its KFC
division. Mr. Lee currently serves as principal of Lee
Management Consulting.
JAMES G. SHENNAN, JR., 65, has been a director of the Company
since March 1990. Mr. Shennan served as a general partner
of Trinity Ventures, a venture capital organization, from
September 1989 to July 2005, when he became general partner
emeritus. Prior to joining Trinity Ventures, he served as the
chief executive of Addison Consultants, Inc., an international
marketing services firm, and two of its predecessor companies.
Mr. Shennan also serves on the board of directors of P.F.
Changs China Bistro, Inc.
JAVIER G. TERUEL, 56, has been a director of the Company since
September 2005. Mr. Teruel has served as vice chairman of
Colgate-Palmolive Company since July 2004. Prior to being
appointed vice chairman, Mr. Teruel served as
Colgate-Palmolives executive vice president responsible
for Asia, Central Europe, Africa and Hills Pet Nutrition.
Since joining Colgate in Mexico in 1971, Mr. Teruel has
served as vice president of Body Care in Global Business
Development in New York, and president and general manager of
Colgate-Mexico. He also has served as president of
Colgate-Europe, and as chief growth officer responsible for the
companys growth functions.
MYRON E. ULLMAN, III, 60, has been a director since January
2003. Mr. Ullman has served as the chairman of the board of
directors and chief executive officer of J.C. Penney Company,
Inc. since December 2004. Mr. Ullman served as directeur
general, group managing director of LVMH Möet Hennessy
Louis Vuitton, a luxury goods manufacturer and retailer, from
July 1999 to January 2002. From January 1995 to June 1999,
Mr. Ullman served as chairman and chief executive officer
of DFS Group Limited, a retailer of luxury branded merchandise.
From 1992 to 1995, Mr. Ullman served as chairman and chief
executive officer of R.H. Macy & Co., Inc.
CRAIG E. WEATHERUP, 61, has been a director of the Company since
February 1999. Mr. Weatherup worked with PepsiCo, Inc. for
24 years and served as chief executive officer of its
worldwide Pepsi-Cola business and President of PepsiCo, Inc.
Mr. Weatherup also led the initial public offering of The
Pepsi Bottling Group, Inc., where he served as chairman and
chief executive officer from March 1999 to January 2003.
Mr. Weatherup also serves on the board of directors of
Federated Department Stores, Inc.
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THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE
ELECTION OF EACH OF THE NOMINEES TO THE BOARD OF
DIRECTORS.
The
Companys Director Nominations Process
The Companys Board of Directors adopted a Director
Nominations Policy (the Nominations Policy), which
is available at
www.starbucks.com/aboutus/corporategovernance.asp. The purpose
of the Nominations Policy is to describe the process by which
candidates for possible inclusion in the Companys
recommended slate of director nominees (the
Candidates) are selected. The Nominations Policy is
administered by the Nominating and Corporate Governance
Committee (the Nominating Committee) of the Board.
Minimum
Criteria for Board Members
Each Candidate must possess at least the following specific
minimum qualifications:
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Each Candidate shall be prepared to represent the best interests
of all of the Companys shareholders and not just one
particular constituency;
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Each Candidate shall be an individual who has demonstrated
integrity and ethics in
his/her
personal and professional life and has established a record of
professional accomplishment in
his/her
chosen field;
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No Candidate, or family member (as defined in the Marketplace
Rules of The Nasdaq Stock Market, Inc. (NASDAQ)), or
affiliate or associate (each as defined in Rule 405 under
the Securities Act of 1933, as amended) of a Candidate, shall
have any material personal, financial or professional interest
in any present or potential competitor of the Company;
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Each Candidate shall be prepared to participate fully in Board
activities, including active membership on at least one Board
committee and attendance at, and active participation in,
meetings of the Board and the committee(s) of which he or she is
a member, and not have other personal or professional
commitments that would, in the Nominating Committees sole
judgment, interfere with or limit his or her ability to do
so; and
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Each Candidate shall be willing to make, and financially capable
of making, the required investment in the Companys stock
in the amount and within the timeframe specified in the
Companys Corporate Governance Principles and Practices and
described on page 8 of this proxy statement.
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Desirable
Qualities and Skills
In addition, the Nominating Committee also considers it
desirable that Candidates possess the following qualities or
skills:
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Each Candidate should contribute to the Boards overall
diversity diversity being broadly construed to mean
a variety of opinions, perspectives, personal and professional
experiences and backgrounds, such as gender, race and ethnicity
differences, as well as other differentiating characteristics;
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Each Candidate should contribute positively to the existing
chemistry and collaborative culture among Board members; and
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Each Candidate should possess professional and personal
experiences and expertise relevant to the Companys goal of
being one of the worlds leading consumer brands. At this
stage of the Companys development, relevant experiences
might include, among other things, large company CEO experience,
senior level international experience, senior level
multi-unit
small box retail or restaurant experience and relevant senior
level expertise in one or more of the following
areas finance, accounting, sales and marketing,
organizational development, information technology and public
relations.
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Internal
Process for Identifying Candidates
The Nominating Committee has two primary methods for identifying
Candidates (other than those proposed by the Companys
shareholders, as discussed below). First, on a periodic basis,
the Nominating Committee solicits ideas
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for possible Candidates from a number of sources
members of the Board; senior level Company executives;
individuals personally known to the members of the Board; and
research, including database and Internet searches.
Second, the Nominating Committee may from time to time use its
authority under its charter to retain at the Companys
expense one or more search firms to identify Candidates (and to
approve such firms fees and other retention terms). If the
Nominating Committee retains one or more search firms, they may
be asked to identify possible Candidates who meet the minimum
and desired qualifications expressed in the Nominations Policy,
to interview and screen such candidates (including conducting
appropriate background and reference checks), to act as a
liaison among the Board, the Nominating Committee and each
Candidate during the screening and evaluation process, and
thereafter to be available for consultation as needed by the
Nominating Committee.
The Nominations Policy divides the process for Candidates
proposed by shareholders into the general nomination right of
all shareholders and proposals by Qualified
Shareholders (as defined below).
General
Nomination Right of All Shareholders
Any shareholder of the Company may nominate one or more persons
for election as a director of the Company at an annual meeting
of shareholders if the shareholder complies with the notice,
information and consent provisions contained in the
Companys Amended and Restated Bylaws. The Company has an
advance notice bylaw provision. In order for the director
nomination to be timely, a shareholders notice to the
Companys executive vice president, general counsel and
secretary must be delivered to the Companys principal
executive offices not less than 120 days prior to the
anniversary of the date of the Companys proxy statement
released to shareholders in connection with the previous
years annual meeting. In the event that the Company sets
an annual meeting date that is not within 30 days before or
after the anniversary of the date of the immediately preceding
annual shareholders meeting, notice by the shareholder must be
received no later than the close of business on the
10th day following the day on which notice of the date of
the annual meeting was mailed or public disclosure of the date
of the annual meeting was made, whichever occurs first. The
procedures described in the next paragraph are meant to
establish an additional means by which certain shareholders can
have access to the Companys process for identifying and
evaluating Candidates, and is not meant to replace or limit
shareholders general nomination rights in any way.
Proposals
by Qualified Shareholders
In addition to those Candidates identified through its own
internal processes, in accordance with the Nominations Policy,
the Nominating Committee will evaluate a Candidate proposed by
any single shareholder or group of shareholders that has
beneficially owned more than 5% of the Common Stock for at least
one year (and will hold the required number of shares through
the annual shareholders meeting) and that satisfies the notice,
information and consent provisions in the Nominations Policy (a
Qualified Shareholder). All Candidates (whether
identified internally or by a Qualified Shareholder) who, after
evaluation, are then recommended by the Nominating Committee and
approved by the Board, will be included in the Companys
recommended slate of director nominees in its proxy statement.
In order to be considered by the Nominating Committee for an
upcoming annual meeting of shareholders, a notice from a
Qualified Shareholder regarding a potential Candidate must be
received by the Nominating Committee not less than 120 calendar
days before the anniversary of the date of the Companys
proxy statement released to shareholders in connection with the
previous years annual meeting. If the Company changes its
annual meeting date by more than 30 days from year to year,
the notice must be received by the Nominating Committee no later
than the close of business on the 10th day following the
day on which notice of the date of the upcoming annual meeting
is publicly disclosed.
Any Candidate proposed by a Qualified Shareholder must be
independent of the Qualified Shareholder in all respects as
determined by the Nominating Committee or by applicable law. Any
Candidate submitted by a Qualified Shareholder must also meet
the definition of an independent director under
NASDAQ rules.
Evaluation
of Candidates
The Nominating Committee will consider all Candidates identified
through the processes described above, and will evaluate each of
them, including incumbents, based on the same criteria.
5
If, based on the Nominating Committees initial evaluation,
a Candidate continues to be of interest to the Nominating
Committee, the Chair of the Nominating Committee will interview
the Candidate and communicate the Chairs evaluation to the
other Nominating Committee members, the chairman of the Board,
and the president and chief executive officer. Later reviews
will be conducted by other members of the Nominating Committee
and senior management. Ultimately, background and reference
checks will be conducted and the Nominating Committee will meet
to finalize its list of recommended Candidates for the
Boards consideration.
Timing of
the Identification and Evaluation Process
The Companys fiscal year ends each year on the Sunday
closest to September 30. The Nominating Committee usually
meets in September and November to consider, among other things,
Candidates to be recommended to the Board for inclusion in the
Companys recommended slate of director nominees for the
next annual meeting and the Companys proxy statement. The
Board usually meets each November to vote on, among other
things, the slate of director nominees to be submitted to and
recommended for election by shareholders at the annual meeting,
which is typically held in February or March of the following
calendar year.
Future
Revisions to the Nominations Policy
The Nominations Policy is intended to provide a flexible set of
guidelines for the effective functioning of the Companys
director nominations process. The Nominating Committee intends
to review the Nominations Policy at least annually and
anticipates that modifications will be necessary from time to
time as the Companys needs and circumstances evolve, and
as applicable legal or listing standards change. The Nominating
Committee may amend the Nominations Policy at any time, in which
case the most current version will be available on the
Companys web site.
Affirmative
Determinations Regarding Director Independence and Other
Matters
The Board has determined that each of the following directors is
an independent director as such term is defined
under NASDAQ rules:
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Barbara Bass
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James G. Shennan, Jr.
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William W. Bradley
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|
Javier G. Teruel
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Mellody Hobson
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Myron E. Ullman, III
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Olden Lee
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Craig E. Weatherup
|
In this proxy statement the directors who have been
affirmatively determined by the Board to be independent
directors under this rule are referred to individually as
an Independent Director and collectively as the
Independent Directors.
The Board of Directors also has determined that each member of
the three committees of the Board meets the independence
requirements applicable to those committees prescribed by NASDAQ
and the Securities and Exchange Commission (SEC).
The Board of Directors has further determined that all members
of the Audit and Compliance Committee of the Board of Directors
(the Audit Committee) Javier G. Teruel,
Mellody Hobson, James G. Shennan, Jr. and Craig E.
Weatherup are audit committee financial
experts as such term is defined by SEC rules.
With the assistance of legal counsel to the Company, the
Nominating Committee reviewed the applicable legal standards for
Board member and Board committee independence and the criteria
applied to determine audit committee financial
expert status, as well as the answers to annual
questionnaires completed by each of the Independent Directors.
On the basis of this review, the Nominating Committee delivered
a report to the full Board of Directors and the Board made its
independence and audit committee financial expert
determinations based upon the Nominating Committees report
and each members review of the information made available
to the Nominating Committee.
6
Presiding
Director; Executive Sessions of Independent Directors
Biennially, at the first meeting of the Board following the
annual meeting of shareholders, the Independent Directors select
an Independent Director to preside at all meetings of the
Independent Directors. The presiding director is limited to two
consecutive two-year terms. Mr. Shennan was selected after
the 2006 Annual Meeting of Shareholders as the presiding
director under the current guidelines and his current term
expires at the Board meeting immediately following the 2008
Annual Meeting, assuming he is re-elected by shareholders at the
Annual Meeting. The Independent Directors meet in an executive
session at each Board meeting.
Compensation
of Directors
Annual
Compensation of Non-Employee Directors
Only non-employee directors are compensated for serving as
directors of the Company. Pursuant to guidelines approved by the
Board of Directors on recommendation from the Nominating
Committee, for each fiscal year of service non-employee
directors receive a retainer of $100,000, which may be in the
form of cash or stock options, and $100,000 in equity
compensation in the form of stock options. New non-employee
directors first become eligible to receive the regular annual
non-employee director compensation in the first full fiscal year
after they join the Board of Directors. Stock options are
granted under the 2005 Non-Employee Director
Sub-Plan to
the Starbucks Corporation 2005 Long-Term Equity Incentive Plan
(the Non-Employee Director Stock Plan). The number
of stock options granted is determined by dividing the dollar
amount of compensation to be received in the form of stock
options by the closing market price of the Common Stock on the
grant date, multiplied by three. These stock options vest one
year after the date of grant and have an exercise price equal to
the closing market price of the Common Stock on the grant date.
Stock options granted to non-employee directors generally cease
vesting as of the date a non-employee director no longer serves
on the Board. However, unvested stock options held by
non-employee directors will vest in full upon a non-employee
directors death or retirement (generally
defined as leaving the Board after attaining age 55 and at
least six years of Board service).
Fiscal
2006 Compensation of Non-Employee Directors
The table below sets forth, for each non-employee director, the
amount of cash compensation paid and the number of stock options
received for his or her service during fiscal 2006.
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Non-Employee Director
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Cash($)
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Stock Options
(#)(1)
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Barbara Bass
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0
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19,724
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William W. Bradley
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100,000
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9,862
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Mellody Hobson
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0
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19,724
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Olden Lee
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0
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19,724
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James G. Shennan, Jr.
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100,000
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9,862
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Javier G. Teruel
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0
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19,724
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Myron E. Ullman, III
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0
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19,724
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Craig E. Weatherup
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0
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19,724
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Gregory B.
Maffei(2)
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0
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19,724
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|
(1) |
|
All stock options included in the table were granted on
November 16, 2005, with an exercise price of
$30.42 per share, and vested in full on November 16,
2006 other than with respect to Mr. Maffei, as explained
below. |
|
(2) |
|
Mr. Maffei resigned from the Board of Directors in March
2006. Under the terms of the Non-Employee Director Stock Plan,
the options listed in the table and granted to Mr. Maffei
did not vest and were cancelled upon his resignation. |
7
Initial
Stock Option Grant for New Non-Employee Directors
Upon first joining the Board of Directors, non-employee
directors are granted an initial stock option to acquire
30,000 shares of Common Stock under the Non-Employee
Director Stock Plan. These options vest in equal annual
installments over a three-year period and have an exercise price
equal to the fair market value of the Common Stock on the date
of grant. None of the directors in the table above was granted
an initial stock option in fiscal 2006.
Former
Deferred Compensation Plan
Non-employee directors formerly could choose to defer all or a
portion of their compensation in the form of unfunded deferred
stock units under the Starbucks Corporation Directors Deferred
Compensation Plan, as amended and restated effective
September 29, 2003 (the Non-Employee Director
Deferral Plan). The Board of Directors terminated future
deferrals under the Non-Employee Director Deferral Plan during
fiscal 2005, so no further compensation may be deferred under
the plan. Amounts previously deferred under the Non-Employee
Director Deferral Plan are unaffected and deferred stock units
credited to non-employee directors who had previously deferred
compensation under the Non-Employee Director Deferral Plan
remain outstanding. Deferred stock units are settled in an equal
number of shares of Common Stock when plan participants leave
the Board. Deferred stock units cannot be voted or transferred.
Director
Stock Ownership Guidelines
Under stock ownership guidelines approved by the Board and
included in the Corporate Governance Principles and Practices
for the Board, each non-employee director is required to have
invested at least $200,000 to purchase shares of Common Stock
within four years of May 7, 2003 (the date of adoption of
the guidelines) for non-employee directors serving on the Board
at that time, or within four years of being elected to the
Board, for non-employee directors elected after May 7,
2003. Vested stock options do not count toward meeting the
requirement. Each non-employee director must continue to hold
the shares purchased as a result of this investment for so long
as such director serves on the Board.
Compensation
of Employee Directors
Messrs. Schultz and Donald are executive officers of the
Company and are compensated as such, as described in the section
Executive Compensation on pages 14 through 28
of this proxy statement. As more fully discussed on page 28
of this proxy statement, Mr. Behar is an employee of the
Company and is compensated as an advisor.
Board
Committees
During fiscal 2006, the Board of Directors had three standing
committees: the Audit Committee, the Compensation and Management
Development Committee (the Compensation Committee)
and the Nominating Committee. Committee and committee chair
assignments are made annually by the Board at its meeting
immediately following the annual meeting of shareholders. Each
of the committees has included a report in this proxy statement.
The composition of each Board committee is as follows.
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Compensation and
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Nominating and Corporate
|
Audit and Compliance
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Management Development
|
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Governance
|
|
Javier G. Teruel (Chair)
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|
Barbara Bass (Chair)
|
|
Craig E. Weatherup (Chair)
|
Mellody Hobson
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William W. Bradley
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Barbara Bass
|
James G. Shennan, Jr.
|
|
Olden Lee
|
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William W. Bradley
|
Craig E. Weatherup
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Myron E. Ullman, III
|
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James G. Shennan, Jr.
|
8
Board and
Committee Meetings
During fiscal 2006, the Board of Directors held six meetings,
the Audit Committee held seven meetings, the Compensation
Committee held four meetings and the Nominating Committee held
four meetings. It is the policy of the Board of Directors and
each of the Boards committees to hold an executive session
without management present at each of their respective meetings.
During fiscal 2006, each director attended at least 75% of all
meetings of the Board of Directors and Board committees on which
he or she served.
Nominating
and Corporate Governance Committee Report
During fiscal 2006, Messrs. Weatherup, Shennan and Bradley
and Ms. Bass served on the Nominating and Corporate
Governance Committee, with Mr. Weatherup serving as Chair.
Each of the members of the Nominating and Corporate Governance
Committee has been affirmatively determined by the Board of
Directors to be an independent director as defined
in NASDAQ Marketplace Rule 4200(a)(15).
The Nominating and Corporate Governance Committee is responsible
for developing and implementing policies and procedures that are
intended to constitute and organize appropriately the Board of
Directors to meet its fiduciary obligations to the Company and
its shareholders on an ongoing basis. Among its specific duties,
the Nominating and Corporate Governance Committee makes
recommendations to the Board of Directors about the
Companys corporate governance processes, assists in
identifying and recruiting candidates for the Board, administers
the Director Nominations Policy, considers nominations to the
Board received from shareholders, makes recommendations to the
Board regarding the membership and chairs of the Boards
committees, oversees the annual evaluation of the effectiveness
of the organization of the Board and of each of its committees,
biennially recommends to the other Independent Directors for
their selection the Independent Director who will preside at all
meetings of the Independent Directors for the following two
years, periodically reviews the type and amount of Board
compensation for Independent Directors, makes recommendations to
the full Board regarding such compensation and reviews its
charter at least annually to assess whether updates or revisions
are appropriate.
Together with the Chair of the Compensation and Management
Development Committee, the Chair of the Nominating and Corporate
Governance Committee at the direction of the full Board annually
reviews the performance of the Companys chairman and its
president and chief executive officer and meets with each such
officer to share the findings of such review. The Nominating and
Corporate Governance Committee also annually reports findings of
fact to the Board of Directors that permit the Board to make
affirmative determinations regarding each Board and committee
member with respect to independence, expertise criteria and
outside director status established by NASDAQ, SEC and IRS rules
and applicable law.
In fiscal 2006, the Nominating and Corporate Governance
Committee reviewed several potential Board candidates. The
Nominating and Corporate Governance Committee also considered a
variety of corporate governance issues during fiscal 2006, and
made recommendations both to management and the full Board with
respect to those issues. Among the corporate governance issues
the Committee considered was the Companys proposal to
declassify the Board, which shareholders approved at the 2006
Annual Meeting of Shareholders on February 8, 2006.
Respectfully submitted,
Craig E. Weatherup (Chair)
Barbara Bass
William W. Bradley
James G. Shennan, Jr.
9
Audit
and Compliance Committee Report
During fiscal 2006, Gregory B. Maffei, Ms. Hobson, and
Messrs. Shennan, Teruel and Weatherup served on the Audit
Committee. Mr. Maffei resigned from the Board of Directors
and as Chair of the Audit Committee on March 3, 2006. The
Board appointed Mr. Teruel to serve as Chair of the Audit
Committee on May 3, 2006. Each of Ms. Hobson and
Messrs. Shennan, Teruel and Weatherup (i) meets the
independence criteria prescribed by applicable law and the rules
of the SEC for audit committee membership and is an
independent director as defined in NASDAQ rules,
(ii) meets NASDAQS financial knowledge and
sophistication requirements, and (iii) has been determined
by the Board of Directors to be an audit committee
financial expert under SEC rules. The Audit Committee
operates pursuant to a written charter, which complies with the
applicable provisions of the Sarbanes-Oxley Act of 2002 and
related rules of the SEC and NASDAQ. The charter is available on
the Companys web site at
www.starbucks.com/aboutus/corporategovernance.asp. As more fully
described in its charter, the Audit Committee is responsible for
overseeing the Companys accounting and financial reporting
processes, including the quarterly review and the annual audit
of the Companys consolidated financial statements by
Deloitte & Touche LLP (Deloitte), the
Companys independent registered public accounting firm. As
part of fulfilling its responsibilities, the Audit Committee
reviewed and discussed the audited consolidated financial
statements for fiscal 2006 with management and Deloitte and
discussed those matters required by Statement on Auditing
Standards No. 61, Communication with Audit
Committees, as amended, with Deloitte. The Audit Committee
received the written disclosures and the letter required by
Independent Standards Board Statement No. 1,
Independence Discussions with Audit Committee, from
Deloitte, and discussed that firms independence with
representatives of the firm.
Based upon the Audit Committees review of the audited
consolidated financial statements and its discussions with
management, the internal audit function and Deloitte, the Audit
Committee recommended to the Board of Directors that the audited
consolidated financial statements for the fiscal year ended
October 1, 2006 be included in the Companys Annual
Report on
Form 10-K
filed with the SEC.
Respectfully submitted,
Javier G. Teruel (Chair)
Mellody Hobson
James G. Shennan, Jr.
Craig E. Weatherup
Compensation
Committee Interlocks and Insider Participation
During fiscal 2006, Ms. Bass and Messrs. Bradley, Lee
and Ullman served on the Compensation Committee. No member of
the Compensation Committee was at any time during fiscal 2006 or
at any other time an officer or employee of the Company, and no
member had any relationship with the Company requiring
disclosure as a related-party transaction in the section
Certain Relationships and Related Transactions of
this proxy statement. No executive officer of the Company has
served on the board of directors or compensation committee of
any other entity that has or has had one or more executive
officers who served as a member of the Board of Directors or the
Compensation Committee during fiscal 2006.
10
Corporate
Governance
The following materials related to the Companys corporate
governance are available publicly on the Companys web site
at www.starbucks.com/aboutus/corporategovernance.asp.
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Corporate Governance Principles and Practices
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Restated Articles of Incorporation
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Amended and Restated Bylaws
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Audit and Compliance Committee Charter
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Compensation and Management Development Committee Charter
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Nominating and Corporate Governance Committee Charter
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Director Nominations Policy
|
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Standards of Business Conduct (applicable to directors, officers
and partners)
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Code of Ethics for CEO and Senior Finance Leaders
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Procedure for Communicating Complaints and Concerns
|
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Audit and Compliance Committee Policy for Pre-Approval of
Independent Auditor Services
|
Copies may also be obtained, free of charge, by writing to:
executive vice president, general counsel and secretary,
Starbucks Corporation, 2401 Utah Avenue South, S-LA1, Seattle,
Washington, 98134. Please specify which document you would like
to receive.
The Procedure for Communicating Complaints and Concerns (the
Complaints and Concerns Procedure) describes the
manner in which interested persons can send communications to
the Board, the committees of the Board and to individual
directors and describes the Companys process for
determining which communications will be relayed to Board
members. The Complaints and Concerns Procedure provides that
interested persons may telephone their complaints and concerns
by calling the Starbucks Auditline at
1-800-300-3205
or sending written communications to the Board, committees of
the Board and individual directors by mailing those
communications to our third party service provider for receiving
these communications at:
Starbucks
Corporation
[Addressee*]
P.O. Box 34507
Seattle, WA 98124
|
|
* |
Audit and Compliance Committee of the Board of Directors
Compensation and Management Development Committee of the Board
of Directors
Nominating and Corporate Governance Committee of the Board of
Directors
Name of individual director
|
The Corporate Governance Principles and Practices require each
Board member to attend the Companys annual meeting of
shareholders except for absences due to causes beyond the
reasonable control of the director. There were 12 directors
at the time of the 2006 Annual Meeting of Shareholders and all
12 attended the meeting.
11
BENEFICIAL
OWNERSHIP OF COMMON STOCK
The following table sets forth information concerning the
beneficial ownership of Common Stock of the Company of
(i) those persons known by management of the Company to own
beneficially more than 5% of the Companys outstanding
Common Stock, (ii) the directors of the Company,
(iii) the Named Executive Officers listed in the Summary
Compensation Table on page 21 of this proxy statement, and
(iv) all current directors and executive officers of the
Company as a group. Information provided for Capital Research
and Management Company and Sands Capital Management, LLC is
based on the most recent Schedule 13G filings by those
firms, each filed with the SEC on February 10, 2006.
Information for all other persons is provided as of
December 1, 2006. Except as otherwise noted, the beneficial
owners listed have sole voting and investment power with respect
to shares beneficially owned. An asterisk in the percent of
class column indicates beneficial ownership of less than 1%.
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Amount and Nature of
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Name of Beneficial Owner
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Beneficial Ownership
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Percent of
Class(1)
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Capital Research and Management
Company
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44,788,400
|
(2)
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5.9
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|
Sands Capital Management, LLC
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42,254,297
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(3)
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5.6
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Howard Schultz
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31,594,204
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(4)
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4.1
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James L. Donald
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2,238,824
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(5)
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*
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Barbara Bass
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662,794
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(6)
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*
|
|
Howard P. Behar
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917,581
|
(7)
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*
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|
William W. Bradley
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87,410
|
(8)
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*
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|
Mellody Hobson
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40,224
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(9)
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*
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Olden Lee
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160,004
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(10)
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*
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James G. Shennan, Jr.
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713,402
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(11)
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*
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Javier G. Teruel
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39,724
|
(12)
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*
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|
Myron E. Ullman, III
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|
|
181,082
|
(13)
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*
|
|
Craig E. Weatherup
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539,458
|
(14)
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|
*
|
|
Martin Coles
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214,231
|
(15)
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|
|
*
|
|
Michael Casey
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2,173,117
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(16)
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|
*
|
|
David A. Pace
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362,853
|
(17)
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|
|
*
|
|
All Current Directors and
Executive Officers as a Group (18 persons)
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41,603,360
|
(18)
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|
5.3
|
|
|
|
|
(1) |
|
Based on 755,088,567 shares of Common Stock outstanding on
December 1, 2006. In accordance with SEC rules, percent of
class as of December 1, 2006 is calculated for each person
and group by dividing the number of shares beneficially owned by
the sum of the total shares outstanding plus the number of
shares subject to options exercisable by that person or group
within 60 days. |
|
(2) |
|
Capital Research and Management Company stated in its
Schedule 13G filing with the SEC on February 10, 2006
that it disclaims beneficial ownership of these shares under SEC
Rule 13d-4.
According to the 13G filing, of the 44,788,400 shares
beneficially owned, Capital Research and Management (a) has
sole voting power with respect to 19,300,000 shares,
(b) sole dispositive power with respect to all
44,788,400 shares, and (c) shares neither voting nor
dispositive power with respect to any shares. The address of
Capital Research and Management Company is 333 South Hope
Street, Los Angeles, California 90071. |
|
(3) |
|
Sands Capital Management, LLC stated in its Schedule 13G
filing with the SEC on February 10, 2006 that, of the
42,254,297 shares beneficially owned, it (a) has sole
voting power with respect to 29,629,905 shares,
(b) sole dispositive power with respect to all
42,254,297 shares, and (c) shares neither voting nor
dispositive power with respect to any shares. The address of
Sands Capital Management, LLC is 1100 Wilson Blvd.,
Suite 3050, Arlington, Virginia 22209. |
|
(4) |
|
Includes 14,465,264 shares subject to options exercisable
within 60 days of December 1, 2006. Also includes
124,144 shares of Common Stock held by the Schultz Family
Foundation as to which Mr. Schultz disclaims |
12
|
|
|
|
|
beneficial ownership, and 6,756,164 shares of Common Stock
that remain subject to a variable prepaid forward contract
between Mr. Schultz and an unaffiliated third party. Under
the variable prepaid forward contract, Mr. Schultz received
a cash payment in March 2001 in exchange for a promise to
deliver at the maturity of the contract up to
6,756,164 shares of Common Stock (as adjusted for stock
splits since March 2001) or an equivalent amount of cash,
in accordance with a formula set forth in the contract. On
February 17, 2004, the contract was amended to revise the
formula and extend the maturity date to March 16, 2007. As
more fully discussed on page 18 of this proxy statement,
also includes 3,394,184 deferred stock units representing stock
option gains that were deferred in 1997 into an equivalent
number of deferred stock units under the Companys 1997
Deferred Stock Plan. In the event of a stock split, the number
of deferred stock units is adjusted proportionately. On
November 13, 2006, Mr. Schultz elected to re-defer the
distribution of these stock units into an equal number of shares
of Common Stock from December 21, 2007 until the earliest
to occur of (i) his termination of employment with the
Company and (ii) December 21, 2012, subject to any
additional deferral elections made in accordance with the terms
and conditions of the 1997 Deferred Stock Plan and approved by
the Compensation Committee. |
|
(5) |
|
Includes 2,238,824 shares subject to options exercisable
within 60 days of December 1, 2006. |
|
(6) |
|
Includes 628,228 shares subject to options exercisable
within 60 days of December 1, 2006. Also includes
28,000 shares held indirectly by trust and 6,566 deferred
stock units under the Non-Employee Director Deferral Plan. |
|
(7) |
|
Includes 880,000 shares subject to options exercisable
within 60 days of December 1, 2006. |
|
(8) |
|
Includes 80,844 shares subject to options exercisable
within 60 days of December 1, 2006 and 6,566 deferred
stock units under the Non-Employee Director Deferral Plan. |
|
(9) |
|
Includes 39,724 shares subject to options exercisable
within 60 days of December 1, 2006 |
|
(10) |
|
Includes 141,082 shares subject to options exercisable
within 60 days of December 1, 2006. |
|
(11) |
|
Includes 448,918 shares subject to options exercisable
within 60 days of December 1, 2006, 62,440 shares
held by the Shennan Family Partnership, a partnership of which
Mr. Shennan is a general partner, and 180,000 shares
held in trusts of which Mr. Shennan or his wife is a
trustee for the benefit of members of the Shennan family. |
|
(12) |
|
Includes 39,724 shares subject to options exercisable
within 60 days of December 1, 2006. |
|
(13) |
|
Includes 141,082 shares subject to options exercisable
within 60 days of December 1, 2006. |
|
(14) |
|
Includes 499,458 shares subject to options exercisable
within 60 days of December 1, 2006, and
40,000 shares held in a trust of which Mr. Weatherup
and his wife are trustees for the benefit of members of the
Weatherup family. |
|
(15) |
|
Includes 206,937 shares subject to options exercisable
within 60 days of December 1, 2006. |
|
(16) |
|
Includes 2,105,832 shares subject to options exercisable
within 60 days of December 1, 2006. |
|
(17) |
|
Includes 362,328 shares subject to options exercisable
within 60 days of December 1, 2006. |
|
(18) |
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Includes 23,841,900 shares subject to options exercisable
within 60 days of December 1, 2006. |
13
EXECUTIVE
COMPENSATION
Compensation
and Management Development Committee Report on Executive
Compensation
The Compensation Committee is comprised entirely of Independent
Directors who are also non-employee directors as defined in
Rule 16b-3
under the Securities Exchange Act of 1934
(Rule 16b-3)
and outside directors as defined under Section 162(m) of
the Internal Revenue Code (Section 162(m)).
Role of the Committee. The Committee regularly
reviews and approves the Companys executive compensation
strategy and principles to ensure that they are aligned with the
Companys business strategy and objectives, shareholder
interests, desired behaviors and corporate culture. The primary
responsibilities of the Committee are to:
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Conduct an annual review of all compensation elements for the
Companys executive officers, including any special
compensation and benefits, and submit recommendations for review
and approval by a panel consisting of all the Independent
Directors, each of whom is an outside director as defined under
Section 162(m) and a non-employee director as defined in
Rule 16b-3.
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Annually review, approve and submit to the Independent Directors
for review and approval performance measures and targets for all
executive officers participating in the annual bonus plan.
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Review and approve compensation for the Companys senior
officers below the executive officer level, oversee the
compensation practices applicable to the Companys partners
(employees) generally, and approve, change when necessary and
administer partner-based equity plans and the annual bonus plan.
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The Committee chair, together with the chair of the Nominating
and Corporate Governance Committee, annually reviews the
performance of the chairman and the president and chief
executive officer and meets with them to discuss the findings of
the review.
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Annually review and approve the Companys management
development and succession planning practices and strategies.
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The Committees charter reflects these various
responsibilities, and the Committee periodically reviews and
revises the charter. To assist in carrying out its
responsibilities, the Committee regularly receives reports and
recommendations from management and from an outside compensation
consultant it selects and retains and, as appropriate, consults
with its own legal, accounting or other advisors, all in
accordance with the authority granted to the Committee in its
charter.
Overview of Compensation Philosophy and
Program. The Committee believes that compensation
paid to executive officers should be closely aligned with the
performance of the Company on both a short-term and a long-term
basis, and that such compensation should assist the Company in
attracting and retaining key executives critical to its
long-term success. To that end, the Committee believes that the
compensation packages for executive officers should consist of
three principal components:
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annual base salary;
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annual incentive bonus, the amount of which is dependent on
Company and, for most executives, individual performance during
the prior fiscal year; and
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long-term incentive compensation, currently delivered in the
form of stock options that are awarded each year based on the
prior years performance and other factors described below,
and that are designed to align executive officers
interests with those of shareholders by rewarding outstanding
performance and providing long-term incentives.
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The Committee considers multiple factors when it determines the
amount of total direct compensation (the sum of base salary,
incentive bonus and long-term compensation delivered through
stock option awards) to award to executive officers each year.
Among these factors are:
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how proposed amounts of total direct compensation to the
Companys executives compare to amounts paid to similar
executives by targeted peer group companies both for the prior
year and over a multi-year period;
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the value of stock options awarded in prior years;
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internal pay equity considerations; and
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broad trends in executive compensation generally.
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Management partners are eligible to participate in a management
deferred compensation plan, described below, which closely
mirrors the Companys tax-qualified 401(k) plan that is
available to all U.S. partners. As more fully described
below, Mr. Schultz participates in the Companys 1997
Deferred Stock Plan, under which he has deferred receipt of
shares of Common Stock issuable to him as a result of a stock
option exercise in 1997.
Total Compensation and Peer Comparisons. In
establishing total annual compensation for the chairman, the
president and chief executive officer and the other executive
officers, the Committee reviews each component of the
executives compensation against executive compensation
surveys prepared by the Committees outside compensation
consultant.
The surveys used for comparison reflect compensation levels and
practices for persons holding comparable positions at targeted
peer group companies. The Committee, with assistance from its
outside consultant, approved changes to the compensation
comparator group in fiscal 2006. The changes added three new
companies and removed two others. The comparator group includes
an array of companies in specialty retail and other industries
with a combination of the following primary characteristics:
(i) market capitalization and annual revenues similar to
the Companys, and (ii) high revenue and
earnings-per-share
growth. Application of these criteria resulted in a comparator
group representing a cross section of 18 leading companies,
spanning three Standard & Poors 500 industry
sectors: Consumer Discretionary, Consumer Staples and
Industrial. One-half of the companies in the comparator group
are also in the Standard & Poors 500 Consumer
Discretionary Sector used in the performance comparison graph on
page 20 of this proxy statement.
In addition to reviewing executive officers compensation
against the comparator group companies, the Committee also
solicits appropriate input from the Companys president and
chief executive officer regarding total compensation for those
executives reporting directly to him.
The Committees philosophy is to target annual cash
compensation to executives, which includes base salary plus
target bonus, at the median among comparator group companies.
Actual total direct compensation, however, may vary depending on
the Companys financial and market performance, each
executives individual performance, and internal equity
considerations among all senior executives. Based on the
Companys fiscal 2006 performance, the Committee
recommended that total direct compensation for executive
officers for fiscal 2006 should be positioned at approximately
the 75th percentile of the comparator group companies. The
most recent data available to the Committee shows that, among
comparator group companies, Starbucks ranked (i) first in
three-year revenue growth and total shareholder return,
(ii) in the top quartile in one-year revenue growth and
total shareholder return and one- and three-year earnings per
share growth, and (iii) in the top one-third in one- and
three-year net income growth.
Elements
of Executive Compensation
Base Salary. Base salaries for executive
officers are reviewed on an annual basis and at the time of
promotion or other change in responsibilities. Increases in
salary are based on subjective evaluation of such factors as the
level of responsibility, individual performance, level of pay
both of the executive in question and other similarly situated
executives, and the comparator group companies pay levels.
Annual Incentive Bonus. Incentive bonuses are
generally granted based on a percentage of each executive
officers base salary. During fiscal 2006, the president
and chief executive officer, the chairman, the president,
Starbucks Coffee U.S., the president, Starbucks Coffee
International and the executive vice presidents of the
Company, a total of eight officers, participated in the
Companys Executive Management Bonus Plan (the EMB
Plan). The Committee approves and recommends to the
Independent Directors the objective performance measure or
measures, bonus target percentages and other terms and
conditions of awards under the EMB Plan. During fiscal 2006,
target bonus amounts under the EMB Plan were expressed as a
percentage of base salary and were established according to the
overall intended competitive position and competitive survey
data for comparable positions in
15
comparator group companies. For fiscal 2006, the bonus targets
for participating officers ranged from 50% to 100% of base
salary depending on position. After the end of the fiscal year,
the Committee determined the extent to which the performance
goals were achieved, and approved and recommended to the
Independent Directors the amount of the award to be paid to each
participant.
Under the EMB Plan as in effect during fiscal 2006, 80% of the
target bonus was based on the achievement of the specified
objective performance goal approved by the Committee and the
Independent Directors for the fiscal year (other than for the
chairman and the president and chief executive officer, for whom
100% of the target bonus was based on the objective performance
goal). In fiscal 2006, an earnings per share target was the
objective performance measure upon which the objective
performance goal was based. The terms of the objective
performance goal permit bonus payouts of up to 200% of the
target bonus in the event (as was the case in fiscal
2006) that the Companys actual financial performance
was better than the earnings per share target based on a scale
approved by the Committee and the Independent Directors within
the first 90 days of fiscal 2006. Twenty percent of the
target bonus for each executive officer other than the chairman
and the president and chief executive officer was based on
specific individual performance goals, which change somewhat
each year according to strategic plan initiatives and the
responsibilities of the positions. Relative weights assigned to
each individual performance goal typically range from 5% to 35%
of the 20% target bonus.
The total bonus award is determined according to the level of
achievement of both the objective performance and individual
performance goals. Below a minimum threshold level of
performance, no awards may be granted pursuant to the objective
performance goal, and the Independent Directors, acting on the
recommendation of the Committee may, in their discretion, reduce
the awards pursuant to either objective or individual
performance goals.
Long-Term Incentive Compensation. In fiscal
2006, long-term performance-based compensation of executive
officers took the form of stock option awards. The
Companys equity compensation plan is broad-based, with
over 57,000 partners at all levels, including certain part-time
retail partners, receiving stock option awards in fiscal 2006.
The Committee continues to believe in the importance of equity
ownership for all executive officers and the broad-based partner
population, for purposes of incentive, retention and alignment
with shareholders. In 2005 the Company proposed and shareholders
approved a new equity incentive plan that permits a variety of
equity award vehicles. The Committee believes the plan provides
the Company with flexibility to achieve a balance between
continuing its successful practice of providing equity-based
compensation for partners at all levels, and creating and
maintaining long-term shareholder value.
In determining the size of stock option grants to executive
officers, the Committee bases its determinations and
recommendations to the Independent Directors on such
considerations as the value of total direct compensation for
comparable positions in comparator group companies, Company and
individual performance against the strategic plan for the prior
fiscal year, the number and value of stock options previously
granted to the executive officer, the allocation of overall
share usage attributed to executive officers and the relative
proportion of long-term incentives within the total compensation
mix. All stock options granted by the Company during fiscal 2006
were granted as nonqualified stock options with an exercise
price equal to the closing price of the Common Stock on the date
of grant and, accordingly, will have value only if the market
price of the Common Stock increases after that date. The stock
options granted to the executive officers vest in three equal
annual installments beginning November 16, 2006. Beginning
in fiscal 2007, the vesting period for stock options granted to
executive officers was extended to four equal annual
installments. The stock options granted to non-management
partners generally vest in four equal annual installments.
Executive Benefits. The Company also provides
certain personal benefits to executive officers. Under a program
to enhance the safety and effectiveness of management in support
of Company business and operations, corporate-owned aircraft are
made available to management partners for essential business
trips and other Company activities. The chairman, the president
and chief executive officer, the chief financial officer and
other members of management with the approval of the chairman or
president and chief executive officer, are permitted limited
personal use of the corporate-owned aircraft. Aggregate
non-business use of the corporate-owned aircraft generally may
not exceed 20% of total flight hours in any fiscal year. Also
under the Companys executive security program, the
chairman, the president and chief executive officer and the
president, Starbucks Coffee International, are provided security
services, including home security systems and monitoring and, in
the case of the chairman,
16
personal security services. These security services are provided
for the Companys benefit, and the Committee considers the
related expenses to be appropriate business expenses rather than
personal benefits. The Company also provides executive life and
disability insurance and annual physicals to all executive
officers. In fiscal 2005, the Company terminated its obligations
to pay premiums with respect to split-dollar life insurance
arrangements with Mr. Schultz, as described on pages 27-28
of this proxy statement, in exchange for an annual cash payment
to replace the lost benefit.
Change-in-Control
and Severance Arrangements. The Company has no
severance arrangements with its executive officers. Its only
change-in-control
arrangements, which apply to all partners, are accelerated
vesting of stock options. Accelerated vesting generally will
occur under the Companys 2005 Long-Term Equity Incentive
Plan and its
sub-plans,
for options granted February 2005 and later, only if a
change-in-control
of the Company occurs and either a partners employment is
terminated (or the partner resigns for good reason) within one
year or the acquiring company does not assume outstanding awards
or substitute equivalent awards (double trigger).
Accelerated vesting generally will occur for options granted
before February 2005 under the Companys former stock
option plans (under which options are still outstanding) upon a
change in control (single trigger).
Stock Option Grant Timing Practices. During
fiscal 2006, the Committee and the Board adopted guidelines for
stock option grant timing practices. The guidelines approved by
the Board are as follows:
Regular Annual Stock Option Grant Dates. The
regular annual stock option grant date for partners and
non-employee members of the Board is the second business day
after the public release of fiscal year-end earnings. Annual
stock option grants are approved at the November Board and
Committee meetings, which occur before fiscal year-end earnings
are released. The grants are approved as formulas; the number of
options and exercise price are determined based on the closing
market price of the Common Stock on the grant date.
Partner New Hires/Promotions Grant
Dates. Grant dates for stock options granted in
connection with new hires and promotions of partners are
determined as follows:
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Standard New Hire/Promotion Grants to Vice Presidents and
Below. Stock option grants to newly-hired or
newly-promoted partners with titles of vice president or below
that fall within parameters previously set by the Committee are
approved by written action of the chief executive officer acting
pursuant to delegation by the Committee. These grants generally
occur on the same date each month and cover partners whose offer
letters are signed and who are working in their new positions as
of an earlier date in that month.
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All Other Grants. All other stock option
grants are approved by resolution of the Committee, and, unless
a future effective date is specified, are effective as of the
date of the meeting at which they are approved or, in the case
of written consents, as of the date the last Committee member
signs the consent. Other stock option grants include stock
options granted (1) to senior vice presidents or above
under all circumstances and (2) to vice presidents or below
(a) for new hire or promotion grants outside of the
parameters the Committee has delegated the chief executive
officer authority to approve, or (b) for special awards for
exceptional performance or increases in responsibilities.
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Initial Stock Option Grant Dates for Newly-Elected
Non-Employee Directors. Initial stock options
granted to newly-elected non-employee members of the Board are
granted as of the date of election to the Board, if such date is
a date that is open for trading under the Companys
blackout policy, or as of the first open trading day after the
date of election to the Board, if such date is not open for
trading under the Companys blackout policy.
Compensation
of the Chief Executive Officer and the Chairman
Base Salary. In fiscal 2006,
Mr. Donalds annualized base salary, which was also
determined in accordance with the factors used for all executive
officers, was $1,000,000. His salary falls slightly below the
median of salaries paid to chief executive officers by the
comparator group companies.
Annual Incentive Bonus. For Mr. Donald,
the EMB Plan provided a bonus target of $1,000,000, or 100% of
base salary, for achievement of the objective performance goal.
Under the terms of the EMB Plan, Mr. Donald earned a bonus
of $2,000,000 for fiscal 2006. Because the Company achieved
earnings per share at a level permitting payout of 200% of the
target bonus, as approved by the Committee and the Independent
Directors, the
17
bonus paid to Mr. Donald was above the competitive target
of the 50th percentile of bonuses paid to chief executive
officers by target peer group companies.
Long-Term Incentive Compensation. On
November 16, 2005, Mr. Donald was granted a stock
option to purchase 966,469 shares of Common Stock. This
grant, like the stock options granted to the other executive
officers on the same date, reflects the Companys and
Mr. Donalds performance for fiscal 2005.
Compensation of the Chairman. The Committee
also annually approves the compensation of Mr. Schultz, the
founder of the Company and its chairman. In approving
Mr. Schultzs compensation, the Committee considers
the factors described above for all executive officers as well
as Mr. Schultzs active role in a number of areas. In
addition to Mr. Schultzs responsibilities as chairman
of the Board, he also has a significant role in:
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global strategy and development;
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new business development and innovation;
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global brand development;
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category management; and
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values and culture of Starbucks.
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Mr. Schultz did not receive a salary increase for fiscal
2006 and his base salary has remained at $1,190,000 since fiscal
2004. Mr. Schultzs EMB Plan bonus target was
approximately $1,190,000, or 100% of base salary, for
achievement of the objective earnings per share performance
goal. Under the terms of the EMB Plan, Mr. Schultz earned a
bonus of $2,380,000 for fiscal 2006, because the Company
achieved earnings per share at a level permitting payout of 200%
of the target bonus, as approved by the Committee and the
Independent Directors. On November 16, 2005,
Mr. Schultz was granted a stock option to purchase
966,469 shares of Common Stock. This grant, like the stock
options granted to the other executive officers on the same
date, reflects the Companys and Mr. Schultzs
performance for fiscal 2005.
Deferred
Compensation
Management Deferred Compensation
Plan. Management partners, including executive
officers, are eligible to participate in the Starbucks
Management Deferred Compensation Plan (the MDCP),
which provides an opportunity for eligible partners to defer up
to 70% of annual base salary and 100% of bonus compensation into
an account that will be credited with earnings at the same rate
as one or more investment indices chosen by the partner, which
mirror the investment funds available under the Companys
401(k) plan. The Company makes a matching contribution on up to
4% of matchable compensation (maximum $220,000 for 2006). In
general, such compensation is matched at rates ranging from 25%
to 150%, depending on the length of the partners service
with the Company, with an offset for matching contributions made
on the partners behalf to the 401(k) plan. Annual matching
contributions to the 401(k) plan on behalf of partners
considered highly compensated are limited to $300.
1997 Deferred Stock Plan. Pursuant to the
Companys 1997 Deferred Stock Plan, key partners designated
by the Committee could elect to defer gains from stock option
exercises by being credited with deferred stock units payable in
shares of Common Stock upon the expiration of the deferral
period specified in the election form submitted by the
executive. In September 1997, Mr. Schultz elected to defer
until December 2007 (or earlier if his employment with the
Company terminates) receipt of 3,394,184 shares of Common
Stock (as adjusted for stock splits since 1997), which
represents the net number of shares of Common Stock issuable to
him upon the exercise of stock options originally granted to him
in December 1992. In November 2006, with the consent of the
Committee, Mr. Schultz elected to re-defer receipt of the
deferred shares until December 2012 (or earlier if his
employment with the Company terminates), subject to any
additional deferral elections made in accordance with the terms
and conditions of the 1997 Deferred Stock Plan and approved by
the Committee.
Review of All Components of Executive
Compensation. The Committee and the Independent
Directors have reviewed information about all components of the
compensation provided to the Companys executive officers,
including base salary, annual bonus, equity compensation
(including realized gains and accumulated unrealized values on
stock options), perquisites and other personal benefits, the
accumulated balance under the
18
Companys non-qualified deferred compensation program, and
the effect of retirement and change in control of the Company on
stock option vesting. A summary of the Companys
compensation programs, practices and internal controls, and
tables quantifying the estimated values of these components for
each executive, were presented to and reviewed by the Committee.
Compliance with Section 162(m) of the Internal Revenue
Code. Section 162(m) disallows a federal
income tax deduction to publicly held companies for certain
compensation paid to the companys chief executive officer
and four other most highly compensated executive officers to the
extent that compensation exceeds $1 million per executive
officer covered by Section 162(m) in any fiscal year. The
limitation applies only to compensation that is not considered
performance-based as defined in the
Section 162(m) rules.
In designing the Companys compensation programs, the
Committee carefully considers the effect of Section 162(m)
together with other factors relevant to the Companys
business needs. The Company has historically taken, and intends
to continue taking, appropriate actions, to the extent it
believes desirable, to preserve the deductibility of annual
incentive and long-term performance awards. However, the
Committee has not adopted a policy that all compensation paid
must be tax-deductible and qualified under Section 162(m).
Base Salary. The Company believes that the
2006 base salary paid to the individual executive officers
covered by Section 162(m) will not exceed the
Section 162(m) limit and will be fully deductible under
Section 162(m), except for $143,691 of the salary paid to
the chairman.
Annual Incentive Bonus. The EMB Plan, as in
effect during fiscal 2006, was designed to enable at least 80%
of the target amounts of incentive bonuses paid to the covered
officers (100% for the chairman and the president and chief
executive officer) to qualify as Section 162(m)
performance-based and therefore be deductible under
Section 162(m).
Stock Options. Stock options granted to the
executive officers covered by Section 162(m) are designed
to qualify as Section 162(m) performance-based
compensation, and the executive officers gain upon
exercise of the options will therefore be fully deductible under
Section 162(m).
Other. Other compensation paid to the
executive officers covered by Section 162(m) that is not
considered performance-based under
Section 162(m) is not deductible to the extent that it,
together with other non-performance based compensation, exceeds
$1 million in any fiscal year. For fiscal 2006, these
amounts included the chairmans (i) income imputed for
personal use of corporate aircraft and life and long-term
disability insurance premiums paid by the Company and
(ii) payment to replace a split-dollar life insurance
benefit formerly provided to him, as more fully explained on
pages 27-28 of this proxy statement.
Committee Membership in Fiscal 2006. Each of
the current members of the Committee served on the Committee for
the entirety of fiscal 2006.
Compensation and Management Development
Committee
Barbara Bass (Chair)
William W. Bradley
Olden Lee
Myron E. Ullman, III
19
Performance
Comparison Graph
The following graph depicts the Companys total return to
shareholders from September 30, 2001 through
October 1, 2006, relative to the performance of
(i) the Standard & Poors 500 Index,
(ii) the NASDAQ Composite Index, and (iii) the
Standard & Poors 500 Consumer Discretionary
Sector, a peer group that includes Starbucks. All indices shown
in the graph have been reset to a base of 100 as of
September 30, 2001, assume an investment of $100 on that
date and the reinvestment of dividends paid since that date. The
Company has never paid cash dividends on its Common Stock. The
points represent index levels based on the last trading day of
the Companys fiscal year. The chart set forth below was
prepared by Research Data Group, Inc., which holds a license to
provide the indices used herein. The stock price performance
shown in the graph is not necessarily indicative of future price
performance.
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09/30/01
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09/29/02
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09/28/03
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10/03/04
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10/02/05
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10/01/06
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Starbucks Corporation
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$
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100
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$
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141
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$
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198
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$
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316
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$
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335
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$
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456
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Standard & Poors 500
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$
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100
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$
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80
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$
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99
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$
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113
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$
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126
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$
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140
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NASDAQ Composite
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$
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100
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$
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81
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$
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121
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$
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131
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$
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150
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$
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160
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Standard & Poors
Consumer Discretionary
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$
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100
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$
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89
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$
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109
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$
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124
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$
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131
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$
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142
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20
Summary
Compensation Table
The following table sets forth the compensation paid to or
earned by (including deferred amounts) (i) the
Companys president and chief executive officer and
(ii) the Companys four other most highly compensated
executive officers in fiscal 2006 (collectively, the Named
Executive Officers), during each of the Companys
last three fiscal years.
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Long-Term
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Annual Compensation
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Compensation
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Other
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Number of
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Annual
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Securities
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All Other
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Fiscal
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Salary
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Bonus
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Compensation
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Underlying
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Compensation
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Name and Principal Position
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Year
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($)
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($)(1)
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($)(2)
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Options(3)
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($)(4)
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James L. Donald
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2006
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978,846
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2,000,000
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26,666
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966,469
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2,100
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president and
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2005
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887,308
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1,800,000
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8,024
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800,000
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2,050
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chief executive officer
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2004
|
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832,308
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1,404,000
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(5)
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83,611
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600,000
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Howard Schultz
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2006
|
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1,190,000
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2,380,000
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950,521
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966,469
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278,224
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|
chairman
|
|
|
2005
|
|
|
|
1,176,269
|
|
|
|
2,380,000
|
|
|
|
683,831
|
|
|
|
1,000,000
|
|
|
|
243,460
|
|
|
|
|
2004
|
|
|
|
1,179,154
|
|
|
|
2,490,000
|
(6)
|
|
|
726,538
|
|
|
|
1,100,000
|
|
|
|
3,000
|
|
Martin Coles
|
|
|
2006
|
|
|
|
629,712
|
|
|
|
825,500
|
|
|
|
11,670
|
|
|
|
120,808
|
|
|
|
46
|
|
president,
|
|
|
2005
|
|
|
|
607,885
|
|
|
|
786,656
|
|
|
|
6,892
|
|
|
|
100,000
|
|
|
|
300
|
|
Starbucks Coffee
|
|
|
2004
|
|
|
|
265,385
|
|
|
|
530,000
|
(7)
|
|
|
502,294
|
|
|
|
400,000
|
|
|
|
|
|
International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Casey
|
|
|
2006
|
|
|
|
622,308
|
|
|
|
635,000
|
|
|
|
36,667
|
|
|
|
400,000
|
(9)
|
|
|
6,300
|
|
executive vice president,
|
|
|
2005
|
|
|
|
571,827
|
|
|
|
574,138
|
|
|
|
19,764
|
|
|
|
|
|
|
|
6,150
|
|
chief financial officer and
|
|
|
2004
|
|
|
|
555,192
|
|
|
|
585,000
|
(8)
|
|
|
8,489
|
|
|
|
1,050,000
|
(9)
|
|
|
5,700
|
|
chief administrative officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David A. Pace
|
|
|
2006
|
|
|
|
465,769
|
|
|
|
470,000
|
|
|
|
4,204
|
|
|
|
86,982
|
|
|
|
1,800
|
|
executive vice president,
|
|
|
2005
|
|
|
|
445,769
|
|
|
|
450,000
|
|
|
|
3,107
|
|
|
|
110,000
|
|
|
|
2,050
|
|
Partner Resources
|
|
|
2004
|
|
|
|
424,231
|
|
|
|
470,000
|
(10)
|
|
|
187,633
|
|
|
|
160,000
|
|
|
|
2,000
|
|
|
|
|
(1) |
|
The amounts shown represent annual bonuses paid to each Named
Executive Officer under the EMB Plan for performance during each
of the fiscal years shown, except as noted by additional
footnote. |
|
(2) |
|
As shown in the table below, Other Annual
Compensation for some of the Named Executive Officers
includes the aggregate incremental cost to the Company of one or
more of: (A) personal use by executives, their families and
invited guests of Company aircraft (Aircraft);
(B) security services (Security);
(C) relocation and temporary housing expenses paid to the
Named Executive Officer (Relo); (D) a physical
examination provided to the Named Executive Officer
(Physical); (E) imputed income for group life
insurance premiums paid by the Company for greater coverage than
is provided to partners generally (Life); and
(F) imputed income for long-term disability insurance
premiums paid by the Company for greater coverage than is
provided to partners generally (Disability). Amounts
in fiscal 2004 and fiscal 2005 for Life and
Disability have been reclassified from All
Other Compensation. Additional information regarding each
item, including the methodology used for calculating incremental
cost where such methodology may not be readily apparent, is set
forth below. |
|
|
|
|
|
Aircraft. The Company calculates the aggregate
incremental cost of the personal use of Company aircraft based
on a methodology that includes the average weighted cost of
fuel, crew hotels and meals, on-board catering, trip-related
maintenance, landing fees, trip-related hangar/parking costs and
smaller variable costs. Because Company aircraft are used
primarily for business travel, the methodology excludes the
fixed costs that do not change based on usage, such as
pilots salaries, the purchase or lease costs of the
aircraft and the cost of maintenance not related to personal
travel. Executives and their families and invited guests
occasionally fly on Company aircraft as additional passengers on
business flights or personal flights requested by a different
executive. In those cases, the aggregate incremental cost to the
Company is a de minimis amount and so no amount is
reflected in the table, except for the Named Executive Officer,
if any, who requested a personal flight.
|
21
|
|
|
|
|
Security. Under the Companys executive
security program, Messrs. Donald, Schultz and Coles have
been provided security services, including home security systems
and monitoring and, in the case of Mr. Schultz, personal
security services. The Company provides these security services
for the Companys benefit and considers the related
expenses to be appropriate business expenses. However, because
SEC guidance states that an item is a perquisite if it confers a
direct or indirect benefit that has a personal aspect, without
regard to whether it may be provided for some business reason or
for the convenience of the Company (unless it is generally
available on a non-discriminatory basis to all partners), the
Company is reporting these expenses as Other Annual
Compensation.
|
|
|
|
Relo. The Company agreed to pay the relocation
and temporary housing expenses identified in the table below in
connection with recruiting Messrs. Donald, Coles and Pace
to join the Company. For Mr. Pace, Relo for
fiscal 2004 represents the amount paid to Mr. Pace for
expenses related to the sale of his house in connection with his
relocation to Seattle after joining the Company.
|
|
|
|
Physical. The Company offers to pay for an
annual physical examination for each executive officer. Amounts
shown in the table below represent the aggregate incremental
cost to the Company of examinations provided.
|
Other
Annual Compensation ($) (footnote 2
continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fiscal Year
|
|
|
Aircraft
|
|
|
Security
|
|
|
Relo
|
|
|
Physical
|
|
|
Life
|
|
|
Disability
|
|
|
Total
|
|
|
James L. Donald
|
|
|
2006
|
|
|
|
10,899
|
|
|
|
9,047
|
|
|
|
|
|
|
|
|
|
|
|
5,520
|
|
|
|
1,200
|
|
|
|
26,666
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
4,092
|
|
|
|
|
|
|
|
|
|
|
|
2,732
|
|
|
|
1,200
|
|
|
|
8,024
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
62,441
|
|
|
|
16,879
|
|
|
|
988
|
|
|
|
2,460
|
|
|
|
843
|
|
|
|
83,611
|
|
Howard Schultz
|
|
|
2006
|
|
|
|
475,685
|
|
|
|
467,759
|
|
|
|
|
|
|
|
|
|
|
|
5,877
|
|
|
|
1,200
|
|
|
|
950,521
|
|
|
|
|
2005
|
|
|
|
265,808
|
|
|
|
413,734
|
|
|
|
|
|
|
|
|
|
|
|
3,089
|
|
|
|
1,200
|
|
|
|
683,831
|
|
|
|
|
2004
|
|
|
|
199,928
|
|
|
|
522,372
|
|
|
|
|
|
|
|
|
|
|
|
3,038
|
|
|
|
1,200
|
|
|
|
726,538
|
|
Martin Coles
|
|
|
2006
|
|
|
|
|
|
|
|
4,408
|
|
|
|
|
|
|
|
844
|
|
|
|
5,218
|
|
|
|
1,200
|
|
|
|
11,670
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
2,000
|
|
|
|
941
|
|
|
|
678
|
|
|
|
2,430
|
|
|
|
843
|
|
|
|
6,892
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
501,600
|
|
|
|
|
|
|
|
467
|
|
|
|
227
|
|
|
|
502,294
|
|
Michael Casey
|
|
|
2006
|
|
|
|
18,484
|
|
|
|
|
|
|
|
|
|
|
|
895
|
|
|
|
15,821
|
|
|
|
1,467
|
|
|
|
36,667
|
|
|
|
|
2005
|
|
|
|
9,473
|
|
|
|
|
|
|
|
|
|
|
|
771
|
|
|
|
8,134
|
|
|
|
1,386
|
|
|
|
19,764
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,082
|
|
|
|
6,021
|
|
|
|
1,386
|
|
|
|
8,489
|
|
David A. Pace
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
844
|
|
|
|
2,517
|
|
|
|
843
|
|
|
|
4,204
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
482
|
|
|
|
1,782
|
|
|
|
843
|
|
|
|
3,107
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
184,457
|
|
|
|
936
|
|
|
|
1,610
|
|
|
|
630
|
|
|
|
187,633
|
|
|
|
|
(3) |
|
Amounts shown for number of securities underlying options have
been adjusted to give effect to the Companys
two-for-one
stock split on October 21, 2005. |
|
(4) |
|
As shown in the table below, All Other Compensation
for some of the Named Executive Officers includes:
(A) matching contributions by the Company to the
Companys 401(k) Plan on behalf of the Named Executive
Officer (401(k)); (B) matching contributions by
the Company to the MDCP on behalf of the Named Executive Officer
(MDCP); and (C) for Mr. Schultz, payments
in consideration for the replacement of a split-dollar life
insurance benefit formerly provided by the Company, as more
fully explained on pages 27-28 of this proxy statement
(Other). Due to a change in the timing of when the
Company credits participants in the 401(k) Plan with matching
contributions, no matching contributions were awarded during
fiscal 2006. |
22
All
Other Compensation ($) (footnote 4 continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fiscal Year
|
|
|
401(k)
|
|
|
MDCP
|
|
|
Other
|
|
|
Total
|
|
|
James L. Donald
|
|
|
2006
|
|
|
|
|
|
|
|
2,100
|
|
|
|
|
|
|
|
2,100
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
2,050
|
|
|
|
|
|
|
|
2,050
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard Schultz
|
|
|
2006
|
|
|
|
|
|
|
|
2,850
|
|
|
|
275,374
|
|
|
|
278,224
|
|
|
|
|
2005
|
|
|
|
300
|
|
|
|
2,775
|
|
|
|
240,385
|
|
|
|
243,460
|
|
|
|
|
2004
|
|
|
|
300
|
|
|
|
2,700
|
|
|
|
|
|
|
|
3,000
|
|
Martin Coles
|
|
|
2006
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
46
|
|
|
|
|
2005
|
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
300
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Casey
|
|
|
2006
|
|
|
|
|
|
|
|
6,300
|
|
|
|
|
|
|
|
6,300
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
6,150
|
|
|
|
|
|
|
|
6,150
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
5,700
|
|
|
|
|
|
|
|
5,700
|
|
David A. Pace
|
|
|
2006
|
|
|
|
|
|
|
|
1,800
|
|
|
|
|
|
|
|
1,800
|
|
|
|
|
2005
|
|
|
|
300
|
|
|
|
1,750
|
|
|
|
|
|
|
|
2,050
|
|
|
|
|
2004
|
|
|
|
300
|
|
|
|
1,700
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
(5) |
|
The amount shown includes a $60,000 discretionary bonus paid in
recognition of extraordinary performance during the first
quarter of fiscal 2004. |
|
(6) |
|
The amount shown includes a $110,000 discretionary bonus paid in
recognition of extraordinary performance during the first
quarter of fiscal 2004. |
|
(7) |
|
The amount shown includes a $200,000 hiring bonus. |
|
(8) |
|
The amount shown includes a $25,000 discretionary bonus paid in
recognition of extraordinary performance during the first
quarter of fiscal 2004. |
|
(9) |
|
In fiscal 2004, the Compensation Committee recommended and a
panel of Independent Directors approved a grant to
Mr. Casey of an option to purchase three times the number
of shares he otherwise would have been granted, with standard
vesting in equal annual installments over three years. The
Company did not expect to grant Mr. Casey additional stock
options prior to fiscal 2007. However, for retention purposes,
in the first quarter of fiscal 2006 the Compensation Committee
recommended and a panel of Independent Directors approved an
additional stock option grant to Mr. Casey to purchase
400,000 shares of Common Stock. These additional stock
options will vest in full on November 16, 2007, after the
option granted in fiscal 2004 vested in full on October 1,
2006. |
|
(10) |
|
The amount shown includes a $40,000 discretionary bonus paid in
recognition of extraordinary performance during the first
quarter of fiscal 2004. |
23
Stock
Option Grants in Fiscal 2006
The following table sets forth information regarding options to
purchase shares of Common Stock granted to the Named Executive
Officers during fiscal 2006. The amounts shown for each Named
Executive Officer below as potential realizable values are based
entirely on hypothetical annualized rates of stock appreciation
of five percent and ten percent compounded over the full
ten-year terms of the options. These assumed rates of growth
were selected by the SEC for illustration purposes only and are
not intended to predict future stock prices, which will depend
upon overall stock market conditions and the Companys
future performance and prospects. Consequently, there can be no
assurance that the Named Executive Officers will receive the
potential realizable values shown in this table.
Option
Grants in Fiscal
2006(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential Realizable Value
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
at Assumed Annual Rates of
|
|
|
|
Securities
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
Stock Price Appreciation
|
|
|
|
Underlying
|
|
|
Total Options
|
|
|
|
|
|
|
|
|
for Option Term
|
|
|
|
Options
|
|
|
Granted to
|
|
|
Exercise Price
|
|
|
|
|
|
Five Percent
|
|
|
Ten Percent
|
|
Name
|
|
Granted
|
|
|
Employees
|
|
|
per Share
|
|
|
Expiration Date
|
|
|
($)
|
|
|
($)
|
|
|
James L. Donald
|
|
|
966,469
|
(2)
|
|
|
7.2
|
|
|
$
|
30.42
|
|
|
|
11/16/15
|
|
|
|
18,489,494
|
|
|
|
46,856,008
|
|
Howard Schultz
|
|
|
966,469
|
(2)
|
|
|
7.2
|
|
|
$
|
30.42
|
|
|
|
11/16/15
|
|
|
|
18,489,494
|
|
|
|
46,856,008
|
|
Martin Coles
|
|
|
120,808
|
(3)
|
|
|
0.9
|
|
|
$
|
30.42
|
|
|
|
11/16/15
|
|
|
|
2,311,175
|
|
|
|
5,856,971
|
|
Michael Casey
|
|
|
400,000
|
(4)
|
|
|
3.0
|
|
|
$
|
30.42
|
|
|
|
11/16/15
|
|
|
|
7,652,390
|
|
|
|
19,392,658
|
|
David A. Pace
|
|
|
86,982
|
(5)
|
|
|
0.7
|
|
|
$
|
30.42
|
|
|
|
11/16/15
|
|
|
|
1,664,050
|
|
|
|
4,217,030
|
|
|
|
|
(1) |
|
Stock options granted to the executive officers are typically
granted in the first quarter of each fiscal year and reflect the
Companys and such officers performance for the prior
fiscal year. All stock options shown in this table were granted
under the 2005 Key Employee
Sub-Plan to
the Starbucks Corporation 2005 Long-Term Equity Incentive Plan
(the 2005 Key Employee Plan) and have an exercise
price equal to the closing market price of the underlying Common
Stock on the date of grant. The stock options will become fully
vested and exercisable (i) if the executive terminates his
employment after the age of 55 and at least 10 years of
credited service with the Company (other than with respect to
Mr. Casey, as explained in note 4 below), and
(ii) upon a change in control of the Company, under the
circumstances described on page 27 of this proxy statement
relative to the 2005 Key Employee Plan. |
|
(2) |
|
Mr. Donalds and Mr. Schultzs options
become exercisable in one 322,157 share increment on
November 16, 2006 and two 322,156 share increments on
November 16, 2007 and 2008, respectively. |
|
(3) |
|
Mr. Coless options become exercisable in one
40,270 share increment on November 16, 2006 and two
40,269 share increments on November 16, 2007 and 2008,
respectively. |
|
(4) |
|
Mr. Caseys options become exercisable in full on
November 16, 2007. Mr. Casey voluntarily agreed that
the grant agreement for the options shown would specifically
exclude the provisions of the 2005 Key Employee Plan that would
cause the options shown to vest in full if he terminates his
employment after the age of 55 and at least 10 years of
credited service with the Company, which he had already attained
at the time of grant. |
|
(5) |
|
Mr. Paces options become exercisable in three
28,994 share increments on November 16, 2006, 2007 and
2008, respectively. |
24
Exercises
of Stock Options in Fiscal 2006
The following table sets forth information regarding stock
option exercises during fiscal 2006 by the Named Executive
Officers and the value of each Named Executive Officers
exercised and unexercised stock options on October 1, 2006.
Aggregated
Option Exercises in Fiscal 2006 and Fiscal Year-End Option
Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Unexercised
|
|
|
|
Shares
|
|
|
|
|
|
Number of Securities
|
|
|
In-the-Money
Options at
|
|
|
|
Acquired
|
|
|
Value
|
|
|
Underlying Unexercised
|
|
|
Fiscal Year
End(2)
|
|
|
|
on Exercise
|
|
|
Realized(1)
|
|
|
Options at Fiscal Year End
|
|
|
($)
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
James L. Donald
|
|
|
150,000
|
|
|
|
2,916,116
|
|
|
|
1,666,667
|
|
|
|
1,549,802
|
|
|
|
28,459,369
|
|
|
|
11,774,513
|
|
Howard Schultz
|
|
|
3,160,060
|
|
|
|
99,405,779
|
|
|
|
14,143,107
|
|
|
|
1,299,802
|
|
|
|
367,494,271
|
|
|
|
5,751,614
|
|
Martin Coles
|
|
|
100,000
|
|
|
|
1,703,350
|
|
|
|
166,667
|
|
|
|
354,141
|
|
|
|
1,893,669
|
|
|
|
3,552,864
|
|
Michael Casey
|
|
|
|
|
|
|
|
|
|
|
2,105,832
|
|
|
|
400,000
|
|
|
|
46,026,207
|
|
|
|
1,452,000
|
|
David A. Pace
|
|
|
80,000
|
|
|
|
1,941,948
|
|
|
|
433,334
|
|
|
|
123,648
|
|
|
|
8,364,738
|
|
|
|
562,507
|
|
|
|
|
(1) |
|
Value realized is calculated by subtracting the aggregate
exercise price of the options exercised from the aggregate
market value of the shares of Common Stock acquired on the date
of exercise. |
|
(2) |
|
The value of unexercised options is calculated by subtracting
the aggregate exercise price of the options from the aggregate
market value of the shares of Common Stock subject thereto as of
September 29, 2006 (the last trading day prior to the
Companys fiscal year end on October 1, 2006). These
values are provided pursuant to SEC rules, but there can be no
guarantee that, if and when these stock options are exercised,
they will have this value. |
Equity
Compensation Plan Information
The following table provides information as of October 1,
2006 regarding total shares subject to outstanding stock options
and purchase rights and total additional shares available for
issuance under the Companys existing equity incentive and
employee stock purchase plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
Number of Securities
|
|
|
Weighted-Average
|
|
|
Future Issuance Under
|
|
|
|
to be Issued Upon
|
|
|
Exercise Price of
|
|
|
Equity Compensation
|
|
|
|
Exercise of
|
|
|
Outstanding
|
|
|
Plans (Excluding
|
|
|
|
Outstanding Options,
|
|
|
Options, Warrants
|
|
|
Securities Reflected in
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
and Rights
|
|
|
Column (a))
|
|
|
Equity compensation plans approved
by security holders
|
|
|
57,436,083
|
|
|
$
|
17.20
|
|
|
|
83,975,375
|
|
Equity compensation plans not
approved by security holders
|
|
|
11,983,788
|
|
|
$
|
15.08
|
|
|
|
2,444,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
69,419,871
|
|
|
$
|
16.83
|
|
|
|
86,420,227
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes 18,154,482 shares remaining available for issuance
under employee stock purchase plans and 68,265,745 shares
under equity incentive plans. |
The shares to be issued under plans not approved by shareholders
relate to the Companys 1991 Company-Wide Stock Option Plan
(the 1991 Bean Stock Plan), the Companys UK
Share Save Plan and the Companys UK Share Incentive
Plan, the successor to the UK Share Save Plan.
The 1991 Bean Stock Plan is the Companys former
broad-based stock option plan and provided for the annual
issuance of stock options to eligible partners. The 1991 Bean
Stock Plan was approved and adopted by the Board in 1991 and did
not require shareholder approval. Generally, options were
granted annually under the 1991 Bean Stock
25
Plan. These grants required Board approval, were linked to
performance goals of the Company and were granted to partners as
a percentage of base salary. The 1991 Bean Stock Plan was
effectively replaced by the 2005 Company-Wide
Sub-Plan to
the Starbucks Corporation 2005 Long-Term Equity Incentive Plan.
The Starbucks Corporation 2005 Long-Term Equity Incentive Plan
was approved by the Companys shareholders on
February 9, 2005.
The Companys UK Share Save Plan, which is a
Save-As-You-Earn plan approved by Her Majestys
Revenue & Customs of the United Kingdom, allows
eligible partners in the United Kingdom to save for a three-year
period through payroll deductions toward the purchase of the
Common Stock at a discount from the fair market value on the
first day of business of a three-year offering period. The total
number of shares issuable under the plan is 1,200,000, of which
133,278 were issued as of October 1, 2006. During fiscal
2003, the Compensation Committee accepted the recommendation of
management to suspend future offerings under the UK Share Save
Plan, and effectively replaced the UK Share Save Plan with the
UK Share Incentive Plan in fiscal 2004. The last offering under
the UK Share Save Plan was in December 2002 and matured in
February 2006. As a result, no additional shares will be issued
under the UK Share Save Plan.
The Companys UK Share Incentive Plan, which is a plan
approved by Her Majestys Revenue & Customs of the
United Kingdom, allows eligible partners in the United Kingdom
to purchase shares of the Common Stock through payroll
deductions during six-month offering periods at the lower of the
market price at the beginning and the market price at the end of
the offering period. The Company awards one matching share for
each six shares purchased under the plan. The total number of
shares issuable under the plan is 1,400,000, of which
21,870 shares were issued as of October 1, 2006.
Employment,
Severance and
Change-in-Control
Arrangements
Employment
Arrangements
James L.
Donald, Martin Coles, Michael Casey and David A. Pace
Each of Messrs. Donald, Coles, Casey and Pace has entered
into a letter agreement with the Company describing the material
terms of his employment. Each letter agreement was entered into,
in part, in order to terminate the respective executives
severance benefits under his original employment offer letter
from the Company. Mr. Donald and the Company entered into
his current letter agreement primarily in connection with his
promotion to president and chief executive officer.
Messrs. Donald, Coles, Casey and Pace (i) are employed
at-will without any guaranteed term or severance protection,
(ii) continue to be eligible to participate in bonus,
equity incentive and benefit plans as determined by the
eligibility criteria set forth in those plans, and
(iii) have no other special benefits or protections under
their agreements other than the maximum life insurance benefit
offered by the Company (currently $2,000,000).
Mr. Donalds letter also memorializes the additional
stock option grant he received in connection with his promotion
to president and chief executive officer.
Severance
Arrangements
None of the Companys executive officers, including the
Named Executive Officers, has a severance arrangement with the
Company pursuant to which any of them would be entitled to
receive a severance payment in the event he or she is terminated
by the Company. As noted above, since the beginning of fiscal
2005, each of Messrs. Donald, Coles, Casey and Pace entered
into a new employment letter agreement with the Company which
removed his severance protection.
Change-in-Control
Arrangements
None of the Named Executive Officers will be entitled to any
payment or accelerated benefit in connection with a
change-in-control
of the Company, or a change in his responsibilities following a
change-in-control
of the Company, except for accelerated vesting of stock options
issued under the Companys Amended and Restated Key
Employee Stock Option Plan 1994 (the 1994 Key
Employee Plan) for options granted prior to February 2005
and under the 2005 Key Employee Plan for options granted
February 2005 and later.
The 1994 Key Employee Plan is a single trigger plan,
meaning that option acceleration occurs upon a
change-in-control
of the Company even if the partner (employee) remains with the
Company after the control
26
change. Under the 1994 Key Employee Plan, all unvested stock
options vest immediately under the following circumstances:
(i) anyone acquires 25% or more of the stock of the Company
(other than directly from the Company);
(ii) a turnover of at least one-third of the members of the
Board (not including new Board members who are approved by at
least two-thirds of the then-current Board);
(iii) upon the execution of a definitive agreement for a
merger (or similar transaction), except if (a) the
shareholders of the Company immediately prior to such
transaction continue to own at least 50% of the voting stock, in
substantially the same proportion, of the surviving company,
(b) at least two-thirds of the board of directors of the
surviving corporation (or its holding company) is comprised of
members of the Companys Board immediately prior to the
transaction, and (c) no third party gains control of 25% or
more of the surviving company;
(iv) the consummation of a complete liquidation or
dissolution of the Company; or
(v) upon the execution of a definitive agreement for the
sale or other disposition of all or substantially all of the
Companys assets.
The 2005 Key Employee Plan is a double trigger plan,
meaning that for option acceleration to occur, a
change-in-control
must take place and, if options are assumed or substituted with
stock options of the surviving company, the partner must be
terminated or resign for good reason within one year after the
control change. Under the 2005 Key Employee Plan, all unvested
stock options vest immediately under the following circumstances:
(i) upon the occurrence of a sale, liquidation or other
disposition of all or substantially all of the Companys
assets;
(ii) with respect to any partner who resigns for good
reason (as defined in the plan) or is terminated, in each case
within one year after anyone acquires 25% or more of the stock
of the Company (other than a Board-approved transaction) or
after a turnover of a majority of the members of the Board in
any 36-month
period (not including new Board members who are approved by at
least two-thirds of the then-current Board);
(iii) upon the occurrence of a merger (or similar
transaction) in which the shareholders of the Company
immediately prior to such transaction do not continue to own at
least 50% of the voting stock of the surviving company, where
outstanding stock options of the Company are not assumed
or substituted with stock options of the surviving
company; and
(iv) with respect to any partner who resigns for good
reason (as defined in the plan) or is terminated, in each case
within one year after a merger (or similar transaction) in which
the shareholders of the Company immediately prior to such
transaction do not continue to own at least 50% of the voting
stock of the surviving company, where outstanding stock options
of the Company are assumed or substituted with stock
options of the surviving company.
Certain
Relationships and Related Transactions
In April 2001, Mr. Schultz and a group of investors
organized as The Basketball Club of Seattle, LLC (The
Basketball Club) purchased the franchises for the Seattle
Sonics and the Seattle Storm basketball teams. Until October
2006, Mr. Schultz held a controlling ownership interest in
the teams. The Basketball Club assumed pre-existing team
sponsorship agreements between the former owners of the
franchises and the Company. During fiscal 2005 and fiscal 2006,
the Company entered into new sponsorship agreements with respect
to sponsorship of the Seattle Sonics and Seattle Storm,
respectively. Pursuant to such agreements, the Company paid The
Basketball Club an aggregate of $571,200 in fiscal 2006.
On February 11, 2005, the Company entered into a letter
agreement with Mr. Schultz and the trustee for the Schultz
Irrevocable Trust and the Howard D. Schultz Irrevocable Trust to
terminate split-dollar life insurance agreements with each of
the trusts and the underlying life insurance policies. The
Company agreed to compensate Mr. Schultz annually for the
benefit he lost as a result of the termination of the
agreements, for so long as he remains a full-time employee of
the Company. The amount of additional compensation equals the
Companys annual
27
premium obligation as of the date of the agreement with an
adjustment for related federal income tax consequences. The
Company paid Mr. Schultz $275,374 in fiscal 2006 pursuant
to this agreement. The Company and Schultz trusts also have
agreed to split evenly shares of stock that were issued to
policyholders in connection with a reorganization of the insurer.
Mr. Behar, a member of the Board of Directors who had
previously retired as an executive of the Company in 1999,
returned to serve as the Companys president, North America
from September 2001 through December 2002. Mr. Behar and
the Company entered into an agreement in May 2003 pursuant to
which Mr. Behar deferred $1.8 million in compensation
earned by him as president, North America, and agreed to serve
as an advisor to the Company for a salary of $25,000 per
year. In December 2005, Mr. Behar and the Company amended
the agreement to provide that the Company (i) would pay
Mr. Behar a lump sum of approximately $1.1 million,
which represents the full amount of his previously unpaid
deferred compensation, (ii) continue to employ
Mr. Behar as an advisor at an annual salary of $25,000
through October 31, 2010, and (iii) so long as
Mr. Behar remains employed under the agreement, grant
Mr. Behar an annual award under the 2005 Key Employee Plan
having a fair value of $105,000 on the grant date. Awards under
the 2005 Key Employee Plan that are subject to vesting will vest
in full on the first anniversary of the grant date if
Mr. Behar remains employed at that time and, if in the form
of stock options, will have an exercise price equal to the fair
market value of the Common Stock on the grant date. If
Mr. Behar dies before the end of the term, his spouse (or
estate, if his spouse does not survive him) will be entitled to
the full amount that Mr. Behar would have received through
the full term of the agreement. Before Mr. Behars
agreement was amended, on November 16, 2005 the Company
granted Mr. Behar an option to purchase 10,000 shares
of Common Stock with an exercise price of $30.42 per share.
Like the stock options granted to non-employee directors on the
same day, the options granted to Mr. Behar vested in full
on November 16, 2006. Mr. Behar voluntarily agreed
that the grant agreement for these stock options would
specifically exclude the provisions of the 2005 Key Employee
Plan that would cause the options to vest in full if he
terminates his employment after the age of 55 and at least
10 years of credited service with the Company, which he had
already attained at the time of grant.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the
Companys directors and executive officers, and persons who
beneficially own more than 10% of the Common Stock, to file with
the SEC initial reports of beneficial ownership
(Forms 3) and reports of changes in beneficial
ownership of Common Stock and other equity securities of the
Company (Forms 4). To the Companys
knowledge, no one beneficially owns more than 10% of the Common
Stock. Directors, executive officers and greater than 10%
shareholders of the Company are required by SEC rules to furnish
to the Company copies of all Section 16(a) reports that
they file. The Company files Section 16(a) reports on
behalf of its directors and executive officers to report their
initial and subsequent changes in beneficial ownership of Common
Stock. To the Companys knowledge, based solely on a review
of the reports filed on behalf of its directors and executive
officers by the Company and written representations from such
persons that no other reports were required, all
Section 16(a) filing requirements applicable to its
directors and executive officers were complied with for fiscal
2006.
PROPOSAL 2
APPROVAL OF THE MATERIAL TERMS OF THE COMPANYS
EXECUTIVE MANAGEMENT BONUS PLAN
Introduction
At the Annual Meeting, the Companys shareholders will be
requested to consider and act upon a proposal to approve the
material terms of the Executive Management Bonus Plan, as
amended and restated effective September 19, 2006 (the
EMB Plan), a copy of which is attached as
Appendix A.
The Companys Board of Directors approved amendments to the
EMB Plan in September 2006, and recommended that shareholders
also approve the material terms of the EMB Plan. The purpose of
the EMB Plan is to increase shareholder value by providing an
incentive for the achievement of goals that support Starbucks
strategic plan. Although no shareholder approval is required for
the Company to enact and maintain a bonus plan for its
executives, shareholder approval of the material terms of the
EMB Plan is required at least every five years to
28
qualify bonuses payable under the EMB Plan for tax deductibility
by the Company. Accordingly, shareholders are being asked to
approve the material terms of the EMB Plan because they last
approved its material terms at the 2002 Annual Meeting of
Shareholders.
Description
Set forth below is a summary of the material terms of the EMB
Plan that shareholders are being asked to approve.
Administration. The EMB Plan will be
administered by the Compensation Committee. Among other things,
the Compensation Committee will have the authority to select
participants in the EMB Plan from among the Companys
executive officers and to determine the performance goals,
target amounts and other terms and conditions of awards under
the EMB Plan. The Compensation Committee also will have the
authority to establish and amend rules and regulations relating
to the administration of the EMB Plan. All decisions made by the
Compensation Committee in connection with the EMB Plan will be
made in the Compensation Committees sole discretion and
will be final and conclusive.
Eligibility. The Companys partners
serving in positions of executive vice president and above and
other senior officers of the Corporation, as designated by the
Compensation Committee, are eligible to participate in the EMB
Plan. The executive vice president, Partner Resources and the
chief executive officer have the authority to recommend
participants. The Compensation Committee has the sole authority
to designate participants and designated eight participants for
fiscal 2007.
Terms of Awards. Awards under the EMB Plan
will be payable upon the achievement during each fiscal year of
specified objectives and, if applicable, individual performance
goals. At the beginning of each fiscal year, the Compensation
Committee will establish the performance goals (both objective
and individual) for each plan participant, the relative
weighting between the objective and individual performance goals
and the target amount of the award that will be earned if the
performance goals are achieved in full. After the end of the
performance period, the Compensation Committee will certify the
extent to which the performance goals are achieved and determine
the amount of the award that is payable; provided that the
Compensation Committee will have the discretion to determine
that the actual amount paid with respect to an award will be
less than (but not greater than) the payout calculated under the
EMB Plan.
Objective Performance Goals. The EMB Plan
provides that at the beginning of each plan year (the
Companys fiscal year), the Compensation Committee selects
one or more specific objective performance measures from among
the following: earnings per share, return on capital, sales
growth and volume, return on assets, return on equity, net
income, operating income, economic profit, expense reduction or
controllable expenses, profit margin, total shareholder return,
stock price, and free cash flow (collectively, the
Objective Performance Measures). The September 2006
amendments to the EMB Plan added each of the foregoing other
than earnings per share, return on capital, sales growth and
volume, and return on assets as Objective Performance Measures.
The Compensation Committee then sets within the timeframe
specified in the EMB Plan objective performance goals for each
participant based on the Objective Performance Measure or
Measures selected, together with related target awards.
At the Compensation Committees discretion, objective
performance goals may differ by participant, relate to
performance on a Company-wide or business unit basis, be
expressed on an absolute
and/or
relative basis, and may be based on or employ comparisons based
on internal targets, past performance
and/or the
past or current performance of peer companies. The weighting of
the objective performance goals may vary from participant to
participant. If the objective performance goals are met, the
maximum dollar amount payable to any participant in any one year
under the objective performance goals is $3,500,000, which has
remained unchanged since shareholders last approved the material
terms of the EMB Plan in 2002.
As reported in the Companys Current Report on
Form 8-K
filed with the SEC on September 25, 2006, the Compensation
Committee and the Independent Directors approved earnings per
share (as may be adjusted to exclude the impact of certain
items) as the Objective Performance Measure for fiscal 2007. The
actual awards to be paid under the EMB Plan cannot be determined
at this time since the awards are dependent on the
Companys financial performance for fiscal 2007.
29
Individual Performance Goals. The EMB Plan
provides further that, for those participants who have
individual performance goals for a plan year, the remaining
portion of the total bonus payout available to participants is
to be based on those individual goals with corresponding
percentage weights designed to measure a participants
achievements. The EMB Plan does not require participants to have
individual performance goals. Any individual performance goals
may differ from participant to participant and are established
for each plan year. As reported in the Companys Current
Report on
Form 8-K
filed with the SEC on September 25, 2006, the Compensation
Committee approved individual performance goals for fiscal 2007
for all participants in the EMB Plan other than the chairman and
the president and chief executive officer, whose target bonuses
are based on achievement of the fiscal 2007 Objective
Performance Measure only.
Target Awards. The Compensation Committee will
determine within the timeframe specified in the EMB Plan the
amount of the target awards that will be paid to each plan
participant if the objective performance goals and individual
performance goals are met and the method by which such amounts
will be calculated. The terms of the EMB Plan permit bonus
payouts in excess of the target bonus in the event that the
Companys actual financial performance is better than the
objective performance goal. For fiscal 2007, each executive
officers bonus could be up to 200% of the target amount.
The specific adjusted earnings per share levels required for
increased bonus payouts are based on a scale approved by the
Compensation Committee and the Independent Directors.
Reasons
for Shareholder Approval
The EMB Plan has been designed to take into account certain
limits on the ability of a publicly held corporation to claim
tax deductions for compensation paid to certain highly
compensated executives. Section 162(m) generally denies a
corporate tax deduction for annual compensation exceeding
$1 million paid to the chief executive officer and the four
other most highly compensated officers of a public corporation.
See Executive Compensation Compensation and
Management Development Committee Report on Executive
Compensation above. However, performance-based
compensation, which generally means compensation paid
solely upon the achievement of objective performance goals, the
material terms of which are approved by the shareholders of the
paying corporation, will still qualify for a corporate tax
deduction without regard to the $1 million limit. The
shareholders of the Company are accordingly being asked to
approve the material terms of the EMB Plan, as described above.
If the EMB Plan is not approved by our shareholders, bonus
awards for fiscal 2007 for our chief executive officer and our
four other most highly compensated officers will not be paid
under the EMB Plan and any discretionary bonuses paid to such
individuals may not be deductible under Section 162(m) to
the extent that, when combined with other nonexempt
compensation, they exceed the $1 million limit.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
APPROVAL OF THE MATERIAL TERMS OF THE EMB PLAN.
PROPOSAL 3
RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Independent
Registered Public Accounting Firm Fees
The following table sets forth the aggregate fees billed to the
Company by Deloitte for fiscal 2006 and fiscal 2005:
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2006
|
|
|
Fiscal 2005
|
|
|
Audit Fees
|
|
$
|
4,828,000
|
|
|
$
|
4,025,000
|
|
Audit-Related Fees
|
|
|
113,000
|
|
|
|
138,000
|
|
Tax Fees
|
|
|
93,000
|
|
|
|
96,000
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,034,000
|
|
|
$
|
4,259,000
|
|
Audit Fees consist of fees paid to Deloitte for
(i) the audit of the Companys annual financial
statements included in the Annual Report on
Form 10-K
and review of financial statements included in the Quarterly
Reports
30
on
Form 10-Q;
(ii) the audit of the Companys internal control over
financial reporting with the objective of obtaining reasonable
assurance about whether effective internal control over
financial reporting was maintained in all material respects;
(iii) the attestation of managements report on the
effectiveness of internal control over financial reporting; and
(iv) services that are normally provided by Deloitte in
connection with statutory and regulatory filings or engagements.
Audit-Related Fees consist of fees for assurance and
related services that are reasonably related to the performance
of the audit or review of the Companys financial
statements and are not reported under Audit
Fees. This category includes fees related to
audit and attest services not required by statute or
regulations, due diligence related to mergers, acquisitions and
investments and consultations concerning financial accounting
and reporting standards.
Tax Fees consist of fees for professional services for
tax compliance, tax advice and tax planning. These services
include assistance regarding federal, state and international
tax compliance, return preparation, tax audits and customs and
duties.
The Audit Committee has considered whether the provision of
non-audit services is compatible with maintaining the
independence of Deloitte and has concluded that it is.
Policy on Audit Committee Pre-Approval of Audit and
Permissible Non-Audit Services of the
Independent Registered Public Accounting Firm
The Audit Committee is responsible for appointing, setting
compensation for and overseeing Deloittes work. The Audit
Committee has established a policy requiring its pre-approval of
all audit and permissible non-audit services provided by
Deloitte. The policy is available at
www.starbucks.com/aboutus/corporate governance.asp.
The policy provides for the general pre-approval of specific
types of services and gives detailed guidance to management as
to the specific services that are eligible for general
pre-approval, and provides specific cost limits for each such
service on an annual basis. The policy requires specific
pre-approval of all other permitted services. For both types of
pre-approval, the Audit Committee considers whether such
services are consistent with the rules of the SEC on auditor
independence. The Audit Committees charter delegates to
its Chair the authority to address any requests for pre-approval
of services between Audit Committee meetings, and the Chair must
report any pre-approval decisions to the Audit Committee at its
next scheduled meeting. The policy prohibits the Audit Committee
from delegating to management the Audit Committees
responsibility to pre-approve any permitted services.
Requests for pre-approval for services that are eligible for
general pre-approval must be detailed as to the services to be
provided and the estimated total cost and are submitted to the
Companys controller. The controller then determines
whether the services requested fall within the detailed guidance
of the Audit Committee in the policy as to the services eligible
for general pre-approval. Deloitte and management must report to
the Audit Committee on a timely basis regarding the services
provided by Deloitte in accordance with general pre-approval.
None of the services related to the Audit-Related Fees or
Tax Fees described above was approved by the Audit
Committee pursuant to the waiver of pre-approval provisions set
forth in applicable rules of the SEC.
The Audit Committee requests that shareholders ratify its
selection of Deloitte to serve as the Companys independent
registered public accounting firm for fiscal 2007. Deloitte
audited the consolidated financial statements of the Company and
managements report on internal control over financial
reporting for fiscal 2006. Representatives of Deloitte will be
present at the Annual Meeting and will have an opportunity to
make a statement if they so desire and to respond to questions
by shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP
AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE
COMPANY FOR FISCAL 2007.
31
OTHER
BUSINESS
The Board of Directors knows of no other matters to be brought
before the Annual Meeting. If any other matters are properly
brought before the Annual Meeting, however, the persons
appointed in the accompanying proxy intend to vote the shares
represented thereby in accordance with their best judgment.
PROPOSALS OF
SHAREHOLDERS
Shareholder proposals intended for inclusion in the
Companys fiscal 2007 proxy statement and acted upon at the
Companys 2008 Annual Meeting of Shareholders (the
2008 Annual Meeting) must be received by the Company
at its executive offices at 2401 Utah Avenue South, Mail Stop
S-LA1, Seattle, Washington 98134, Attention: Corporate
Secretary, on or prior to September 19, 2007.
Shareholder proposals submitted for consideration at the 2008
Annual Meeting but not submitted for inclusion in the
Companys fiscal 2007 proxy statement, including
shareholder nominations for candidates for election as
directors, generally must be received by the Company at its
executive offices on or prior to September 19, 2007 in
order to be considered timely under SEC rules and the
Companys Amended and Restated Bylaws. However, if the date
of the 2008 Annual Meeting is a date that is not within
30 days before or after March 21, 2008, the
anniversary date of the Annual Meeting, notice by the
shareholder of a proposal must be received no later than the
close of business on the
10th calendar
day after the first to occur of (i) the day on which notice
of the 2008 Annual Meeting is mailed or (ii) public
disclosure of the date of the 2008 Annual Meeting is made,
including disclosure in a Quarterly Report on
Form 10-Q
filed by the Company with the SEC. Under applicable rules of the
SEC, the Companys management may vote proxies in their
discretion regarding these proposals if (1) the Company
does not receive notice of the proposal on or prior to
September 19, 2007, or (2) the Company receives
written notice of the proposal on or prior to September 19,
2007, describes the proposal in the Companys proxy
statement relating to the 2008 Annual Meeting and states how the
management proxies intend to vote with respect to such proposal.
SHAREHOLDERS
SHARING THE SAME ADDRESS
The Company has adopted a procedure called
householding, which has been approved by the SEC.
Under this procedure, the Company will deliver only one copy of
the Companys Annual Report to shareholders for fiscal 2006
(the 2006 Annual Report) and this proxy statement to
multiple shareholders who share the same address (if they appear
to be members of the same family) unless the Company has
received contrary instructions from an affected shareholder.
Shareholders who participate in householding will continue to
receive separate proxy cards. This procedure reduces the
Companys printing costs, mailing costs and fees, and also
supports Starbucks environmental goals set forth in our annual
report on Corporate Social Responsibility.
The 2006 Annual Report and this proxy statement are available at
the Companys web site at
http://investor.starbucks.com.
The Company will deliver promptly upon written or oral request a
separate copy of the 2006 Annual Report and this proxy statement
to any shareholder at a shared address to which a single copy of
either of those documents was delivered. To receive a separate
copy of the 2006 Annual Report or this proxy statement,
shareholders should contact the Company at:
Investor Relations
Starbucks Corporation
2401 Utah Avenue South, Mail Stop: FP1
Seattle, Washington
98134-1435
(206) 318-7118
investorrelations@starbucks.com
http://investor.starbucks.com
If you are a shareholder, share an address and last name with
one or more other shareholders and would like either to request
delivery of a single copy of the Companys annual reports
or proxy statements for yourself and other shareholders who
share your address or to revoke your householding consent and
receive a separate copy of the Companys annual report or
proxy statement in the future, please contact Automatic Data
Processing, Inc.
32
(ADP), either by calling toll free at
(800) 542-1061
or by writing to ADP, Householding Department, 51 Mercedes
Way, Edgewood, New York 11717. You will be removed from the
householding program within 30 days of receipt of the
revocation of your consent.
A number of brokerage firms have instituted householding. If you
hold your shares in street name, please contact your
bank, broker or other holder of record to request information
about householding.
ANNUAL
REPORT TO SHAREHOLDERS AND
FORM 10-K
The 2006 Annual Report, including the Companys fiscal 2006
Form 10-K
and Amendment No. 1 on
Form 10-K/A
(the 2006
Form 10-K)
(which is not a part of the Companys proxy soliciting
materials), is being mailed to the Companys shareholders
with this proxy statement. The 2006
Form 10-K
and the exhibits filed with it are available at the
Companys web site at http://investor.starbucks.com. Upon
request by any shareholder to Investor Relations at the address
listed above, a copy of any or all exhibits to the 2006
Form 10-K
will be furnished for a fee which will not exceed the
Companys reasonable expenses in furnishing the exhibits.
By Order of the Board of Directors,
Paula E. Boggs
secretary
Seattle, Washington
January 17, 2007
33
Appendix A
EXECUTIVE
MANAGEMENT BONUS PLAN
AMENDED AND RESTATED EFFECTIVE SEPTEMBER 19, 2006
STARBUCKS
CORPORATION
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Approval by Shareholders |
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The material terms of the Objective Performance Goals under this
Executive Management Bonus Plan (the Plan) will be
submitted to the shareholders of Starbucks Corporation
(Starbucks or the Company) on
March 21, 2007. Shareholder approval of the Plan is
required in order for the bonuses paid upon achievement of the
Objective Performance Goals to qualify as performance-based
compensation under Section 162(m) of the Internal Revenue
Code. |
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Plan Term |
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Five fiscal years beginning October 2, 2006. |
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Plan Effective Date |
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October 2, 2006. |
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Plan Year |
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Starbucks fiscal year, which ends on the Sunday closest to
September 30. |
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Purpose |
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The purpose of the Plan is to increase shareholder value by
providing an incentive for the achievement of goals that support
Starbucks strategic plan. |
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Eligibility |
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Starbucks partners serving in positions of executive vice
president and above and other senior officers of the
Corporation, as designated by the Compensation and Management
Development Committee (the Compensation Committee)
of the Board of Directors, are eligible to participate in the
Plan. |
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The executive vice president, Partner Resources and the chief
executive officer have the authority to recommend Participants.
The Compensation Committee has the sole authority to designate
Participants. |
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Eligibility will cease upon termination of the
Participants employment, withdrawal of designation by the
Compensation Committee, transfer to a position compensated
otherwise than as provided in the Plan, termination of the Plan
by Starbucks, or if the Participant engages, directly or
indirectly, in any activity which is competitive with any
Starbucks activity. |
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If a Participant changes from an eligible position to an
ineligible position during the Plan Year, eligibility to
participate will be at the discretion of the Compensation
Committee. |
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Target Bonus |
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The Target Bonus for each Participant shall be established by
the Compensation Committee no later than ninety (90) days
after the beginning of the Plan Year. The Target Bonus shall be
the amount that would be paid to the Participant under the Plan
if 100% of Objective Performance Goals and 100% of Individual
Goals were met. The Target Bonus may be established as a
percentage of Base Pay, a specific dollar amount, or according
to another method established by the Compensation Committee. The
amount of the Target Bonus earned by the Participant shall be
based on the achievement of Objective Performance Goals and, if
applicable, Individual Performance Goals. |
A-1
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Base Pay is the annual pay rate established for the Participant
by Starbucks and in effect on the last day of the Plan Year or,
in the case of a deceased or disabled Participant, on the last
day of participation in the Plan. Starbucks, in conjunction with
the Compensation Committee, may at any time, in its sole
discretion, prospectively revise the Participants Base Pay. |
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Goals |
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Objective Performance Goals |
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In accordance with Section 162(m) of the
Internal Revenue Code, the Compensation Committee shall select
one or more objective performance goal measures from among
Earnings Per Share, Return on Capital, Sales Growth and Volume,
Return on Assets, Return on Equity, Net Income, Operating
Income, Economic Profit, Expense Reduction or Controllable
Expenses, Profit Margin, Total Shareholder Return, Stock Price,
and/or Free
Cash Flow for the Objective Performance Goals. The Compensation
Committee shall select the Objective Performance Goals for each
Participant no later than ninety (90) days after the
beginning of the Plan Year and while the outcome is
substantially uncertain.
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At the Compensation Committees discretion,
objective performance goals may differ by Participant, relate to
performance on a Company-wide or business unit basis, be
expressed on an absolute
and/or
relative basis, and may be based on or employ comparisons based
on internal targets, past performance
and/or the
past or current performance of peer companies.
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The Compensation Committee shall select the amount
of the Target Bonus for each Participant that will be determined
by achievement of the Objective Performance Goals.
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The Compensation Committee may establish any special
adjustments that will be applied in calculating whether the
Objective Performance Goals have been met to factor out
extraordinary items no later than ninety (90) days after
the beginning of the Plan Year and while the outcome is
substantially uncertain.
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If the Objective Performance Goals selected by the
Compensation Committee are not met, no bonus related to those
goals is payable under the Plan.
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Individual Goals |
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The portion of the Target Bonus not determined by
achievement of the Objective Performance Goals shall be
determined by the Participants achievement of Individual
Goals.
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Each Participant with Individual Goals shall submit
such Individual Goals for approval by the Compensation Committee.
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The maximum performance level for each Individual
Goal is 100%.
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Bonus Payout and Eligibility |
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Bonus Payout for each Participant is based on the achievement of
the Objective Performance Goals and the Individual Goals. A
Bonus Payout under this Plan is earned as of the end of the Plan
Year and will be paid according to the Plan, if the Participant: |
A-2
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1) remains a Starbucks partner through the end of the Plan
Year, unless employment is terminated prior to the end of the
Plan Year due to death or disability, and
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2) refrains from engaging during the Plan Year, directly or
indirectly, in any activity that is competitive with any
Starbucks activity.
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The Compensation Committee, in its discretion, may determine
that the Bonus Payout for any Participant will be less than (but
not greater than) the amount earned by such Participant under
the Plan. |
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Bonus Payout Calculation |
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Within ninety (90) days after the beginning of the Plan
Year and while the outcome is substantially uncertain, the
Compensation Committee shall review and approve for each
Participant: the target bonus; the Objective Performance Goals;
and the relative weighting of the Goals for the Plan Year. Those
metrics will be used to calculate the Bonus Payout for each
Participant. The Compensation Committee shall review the Bonus
Payout Calculation for each Participant. The maximum Bonus
Payout for the achievement of Objective Performance Goals is
$3,500,000, to any one Participant in any plan year. |
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Bonus Payout Prorations |
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For any partner who meets eligibility criteria and becomes a
Participant after the start of the Plan Year or whose employment
with Starbucks is terminated prior to the end of the Plan Year
because of disability or death, the Compensation Committee
(1) shall prorate the Bonus Payout related to the Objective
Performance Goals, and (2) in its discretion, may prorate
the Bonus Payout related to Individual Performance Goals. If the
Participant is on a leave of absence for a portion of the Plan
Year, the Compensation Committee in its discretion may reduce
the Participants Bonus Payout on a pro-rata basis. |
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The proration is based on the number of full months during which
the Participant participated in the Plan during the Plan Year.
Credit is given for a full month if the Participant is eligible
for 15 or more calendar days during that month. |
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If a Participant changes positions within Starbucks during the
Plan Year, the Compensation Committee in its discretion may
prorate the Participants Bonus Payout by the number of
months in each position. |
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Administration |
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Compensation Committee Responsibilities: Approve the Plan
design, Objective Performance Goals, and Individual Goals (if
applicable) for each Participant. Determine and certify the
achievement of the Objective Performance Goals and Individual
Goals. Approve the Bonus Payout calculation and Bonus Payout for
each Participant. |
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In the event of a dispute regarding the Plan, the Participant
may seek resolution through the executive vice president,
Partner Resources and the Compensation Committee. All
determinations by the Compensation Committee shall be final and
conclusive. |
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Bonus Payout Administration |
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The Bonus Payout will be made as soon as administratively
feasible and is expected to be within approximately 75 days
after the end of the Plan Year. No amount is due and owing to
any Participant before the Compensation Committee has determined
the Bonus Payout. |
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The Company will withhold amounts applicable to federal, state
and local taxes, domestic or foreign, required by law or
regulation. |
A-3
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Contributions for Future Roast 401(k) and Management Deferred
Compensation Plan (MDCP) are deducted from cash Bonus Payouts,
based on the Participants elections then in effect. |
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Termination of Employment |
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The Plan is not a contract of employment for any period of time.
Any Participant may resign or be terminated at any time for any
or no reason. Employment and termination of employment are
governed by Starbucks policy and any applicable employment
agreement and not by the Plan. |
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Revisions to the Plan |
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The Plan will be reviewed by the executive vice president,
Partner Resources and the Compensation Committee on a periodic
basis for revisions. Starbucks reserves the right at its
discretion with or without notice, to review, change, amend or
cancel the Plan, at any time. |
A-4
Annual Meeting of Shareholders
at
Marion Oliver McCaw Hall
Mercer Street, between Third and Fourth Avenues, Seattle,
Washington
at
10 a.m. (Pacific Time)
on
Wednesday, March 21, 2007
Reminder: Each Proxy Statement contains two
admission tickets for the Annual Meeting of Shareholders. Each
attendee must present an admission ticket enclosed within this
Proxy Statement. Doors will open at 8 a.m.
As always, we anticipate a large number of attendees at our
Annual Meeting. We have taken several steps to accommodate as
many people as possible, including providing additional seating
in the main hall and overflow seating in the Exhibition Hall
next door to view a live video feed.
Driving directions to the Mercer Street Garage (directly
across the street from McCaw Hall):
Driving North or South on Interstate 5
(I-5): Take Exit 167, the Mercer Street/Seattle
Center exit. Following the signs to Seattle Center, turn right
onto Fairview Avenue; turn left onto Valley, stay in the center
or left lanes; Valley becomes Broad Street; turn right on Fifth
Avenue North; turn left on Roy Street; turn left on Third Avenue
North and left into parking garage.
Parking Information: There is plentiful
parking in the area surrounding McCaw Hall, which is directly
across the street from the Mercer Street Garage. Please see the
map below for a variety of parking options:
For additional transportation information, please
visit www.seattlecenter.com/transportation or King
County Metro Online at http://transit.metrokc.gov
PROXY
FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
STARBUCKS CORPORATION
This Proxy Is Solicited On Behalf Of The Board Of Directors
The undersigned hereby appoints James L. Donald and Paula E. Boggs (collectively, the
Proxies), and each of them, with full power of substitution, as proxies to vote the shares that
the undersigned is entitled to vote at the Annual Meeting of Shareholders of Starbucks
Corporation (the Company) to be held at Marion Oliver McCaw Hall on Wednesday, March 21, 2007
at 10:00 a.m. (Pacific Time) and at any adjournments thereof. Such shares shall be voted as
indicated with respect to the proposals listed on the reverse side hereof and in the Proxies
discretion on such other matters as may properly come before the meeting or any adjournment
thereof.
(Continued and to be marked, dated and signed on reverse side)
Address
Change/Comments (Mark the corresponding box on the
reverse side)
5 FOLD AND DETACH HERE 5
You can now access Starbucks Corporation accounts online.
Access to Starbucks Corporation shareholder/stockholder accounts is available online via
Investor ServiceDirect® (ISD).
Mellon Investor Services LLC, Transfer Agent for Starbucks Corporation, now makes it easy and
convenient to get current information on shareholder accounts.
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View account status
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View payment history for dividends |
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View certificate history
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Make address changes |
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View book-entry information
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Obtain a duplicate 1099 tax form |
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Establish/change your PIN |
Visit us on the web at http://www.melloninvestor.com
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect® is a registered trademark of Mellon Investor Services LLC
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Mark Here
for Address
Change or
Comments
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PLEASE SEE REVERSE SIDE |
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FOR |
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WITHHOLD |
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all nominees listed |
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AUTHORITY |
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(except as withheld) |
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to vote for nominees listed |
1. ELECTION OF DIRECTORS:
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Nominees: |
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01 Howard Schultz
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07 Olden Lee |
02 Barbara Bass
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08 James G. Shennan, Jr. |
03 Howard P. Behar
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09 Javier G. Teruel |
04 William W. Bradley
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10 Myron E. Ullman, III |
05 James L. Donald
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11 Craig E. Weatherup |
06 Mellody Hobson |
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WITHHOLD AUTHORITY to vote for the following Directors:
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FOR |
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AGAINST |
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ABSTAIN |
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2.
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Company proposal to approve the material
terms
of the Companys Executive Management
Bonus Plan.
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This proxy, when properly signed, will be
voted in the
manner directed herein by the undersigned
shareholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR
PROPOSALS 1, 2 AND 3. |
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3.
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Company proposal to ratify the selection of
Deloitte & Touche LLP as the Companys
independent registered public accounting firm
for the fiscal year ending September 30, 2007.
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YES |
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NO |
I plan to attend the meeting.
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IMPORTANT PLEASE SIGN AND
RETURN PROMPTLY.
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Signature(s) x
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Dated:
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, 2007 |
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When shares are held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such. If a corporation, please sign
in full corporate name by President or other authorized officer. If a partnership, please sign in
partnership name by an authorized person.
5 FOLD AND DETACH HERE 5
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING,
BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
Internet and telephone voting are available through 11:59 PM Eastern Time
the day prior to the annual meeting date.
Internet or telephone vote authorizes the named proxies to vote in the same manner
as if marked, signed and returned on the proxy card.
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INTERNET |
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TELEPHONE |
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http://www.proxyvoting.com/sbux |
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1-866-540-5760 |
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Use the Internet to vote the proxy. |
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OR |
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Use any touch-tone telephone to |
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Have the proxy card in hand when |
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vote the proxy. Have the proxy |
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accessing the web site. |
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card in hand when calling. |
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If voting by Internet or by telephone, you do NOT need to mail back the proxy card.
To vote by mail, mark, sign and date the proxy card and return it in the enclosed postage-paid envelope.
Choose MLinkSM for fast, easy and
secure 24/7 online access to future proxy
materials, investment plan statements, tax documents and more. Simply log on to Investor
SeviceDirect ® at
www.melloninvestor.com/isd where step-by-step instructions will
prompt you through enrollment.
You can view the Annual Report and Proxy Statement on the
internet at: http://investor.starbucks.com