Starbucks Will Pay Executives Based on Diversity Targets

October 16, 2020
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Starbucks Corp. (NASDAQ: SBUX) is pushing to become a more diverse and inclusive company. An announcement this week has revealed that executive pay will now be linked to diversity targets, with company leadership missing out if goals aren’t achieved.

It’s a bold move for the company and it could set a precedent in the corporate world. Here’s the latest news for investors in the world’s largest coffee shop company.

Starbucks Wants More People of Color in its Organization

Today, 18.5 percent of Starbucks employees are people of color, or what the company calls BIPOC (Black, Indigenous, and People of Color).

The company now wants 30 percent of its corporate employees to fall within this group, along with 40 percent of its retail and manufacturing employees. It hopes to achieve this goal by 2025, giving the company less than five years to make the transition.

Starbucks executives will have their pay linked directly to achieving this goal, although the company hasn’t specifically stated how they will be penalized if it isn’t met. Analysts expect that the diversity goal will be part of a bonus incentive program.

Major changes are underway from the ground up. The company has launched a mentorship program that will connect people of color with the company. It is also incorporating anti-bias materials into its hiring and employee assessment processes.

While the company’s latest announcement will be seen by some as a response to recent racial tensions in the U.S., the company has actually been pushing for a more diverse image since at least 2018, when two black men were arrested in a Philadelphia branch while waiting for a friend.

Starbucks apologized for the incident and then closed thousands of stores temporarily in 2019 to train staff in anti-bias concepts.

Starbucks Stock in 2020

A more positive public image may be beneficial to the bottom line and even the stock at Starbucks. Shares are currently outperforming the target price, which could be revised if recent momentum continues.

Investors seeking a reliable growth pick in the restaurant industry can consider Starbucks stock this month. It has strong upside potential as global Coronavirus restrictions are likely to be eased in the coming months. As the world’s most powerful coffee shop brand with a global network of stores, revenue is likely to soar once the worst of the pandemic is behind us.

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