Latest / Boardroom Conversations with Fexingo: CEOs, Strategy, and Corporate Leadership Explained / How the Starbucks Board Handles the Succession Problem
Transcript
- Lucas: Four CEOs in four years. That's Starbucks since 2022. And for a company that had exactly two CEOs in its first forty years — Howard Schultz and then Orin Smith — that's a staggering pace of churn. Luna: Four in four — so we're talking Schultz returning, then Laxman Narasimhan, then another Schultz interim, and now Brian Niccol as of 2024? Lucas: Exactly. And Brian Niccol — the Chipotle guy — is still in the seat as of June 2026. But the question the board has to answer is: why did it take them so long to find a permanent CEO, and why did they keep going back to Schultz? Luna: It's almost like the board couldn't quit the founder. And that's a governance red flag, right? Lucas: Huge one. Let me lay out the timeline. In 2022, Kevin Johnson — who'd been CEO since 2017 — announced his retirement. The board promoted Howard Schultz as interim CEO while they conducted a search. Schultz had been chairman emeritus, but he'd also been the founder ceo who built Starbucks from 11 stores to over 30,000. He knew the culture cold. But he also had a habit of being the one person in the room who could override the board. Luna: Right — Schultz essentially had a veto by charisma. You can't govern against a founder who's still in the building. Lucas: Exactly. So the board ran a 'thorough' search and in September 2022 they named Laxman Narasimhan — former Reckitt Benckiser CEO, PepsiCo veteran. Outsider. He started in March 2023. But by August 2023, Schultz was publicly criticizing the strategy on LinkedIn. By November, Narasimhan was out — after barely eight months as permanent CEO. Luna: Eight months? That's not a CEO tenure, that's a long interview. Lucas: Right. And here's where the board's decision-making gets really interesting. Instead of sticking with the search and finding a replacement, they brought Schultz back as interim — again — and then in August 2024, they hired Brian Niccol away from Chipotle. Niccol is still CEO today, and by most accounts he's doing well. But the process to get there was a mess. Luna: So what was the board thinking? I mean, they had a sitting CEO in Narasimhan, and they let Schultz undermine him publicly — and then they pulled the trigger on a firing after just one quarter of disappointing sales. That's not steady governance. Lucas: Let's look at the board composition at the time. In 2023, the Starbucks board had 11 members. Three were former Starbucks executives — including Schultz as chairman emeritus. Two more were long-time directors who'd served with Schultz for over a decade. So you had a board where the founder — the guy who built the brand — had deep personal relationships with half the directors. That's a recipe for groupthink. Luna: Yeah, and independence is supposed to be the backbone of board oversight. If half the board owes their seat — or their emotional loyalty — to the founder, they're not going to push back when he says Narasimhan isn't working. Lucas: And they didn't push back. When Schultz went public with his criticism in August 2023, the board didn't issue a statement of support for Narasimhan. They didn't say 'the board stands behind the CEO.' They went silent — and then four months later, they fired him. The signal was clear: the founder's opinion mattered more than the board's process. Luna: Which is exactly the problem with founder-controlled boards. Even if the founder doesn't have a majority of shares — Schultz owns about 1.8 percent, I think — they have moral authority that's hard to counter. Lucas: Right. And it's not just about Schultz. The board's compensation practices also contributed. When Narasimhan was hired, he got a signing package worth over $20 million — plus a guaranteed bonus for fiscal 2023. That means he was paid to stay, not to perform. And when he was fired, his severance was over $14 million. The board essentially paid twice — once to get him, once to get rid of him — without any real accountability. Luna: And then they had to pay even more to get Niccol. I remember the headlines — Niccol's package was reportedly worth over $100 million, including a massive equity grant and a signing bonus to cover what he forfeited at Chipotle. That's a lot of shareholder money to fix a problem the board helped create. Lucas: Exactly. And the question is: could the board have avoided this entirely? Let me give you a counterexample. Consider how the board at a company like Apple handled succession after Steve Jobs. Jobs was a founder ceo with enormous charisma. But the Apple board — led by Art Levinson — insisted on a rigorous succession plan years before Jobs stepped down. They identified Tim Cook as COO, they gave him operational responsibility, they let him run the company for months at a time during Jobs's medical leaves. By the time Jobs passed in 2011, Cook had effectively been ceo in waiting for years. Luna: And the board didn't let Jobs undermine Cook publicly the way Schultz undermined Narasimhan. That's the key difference — the Apple board maintained independence. Lucas: Right. Now, to be fair, Starbucks's board has taken steps since the Niccol hire. In 2025, they added three new independent directors — all with retail or governance experience. They also created a formal succession planning committee, separate from the compensation committee. And they reduced Schultz's role to 'founder emeritus' with no board seat. So they're learning. Luna: But the lesson for other boards is clear: if you have a founder who's still influential, you need to institutionalize the succession process before a crisis hits. You can't wait until the CEO quits or gets fired, because then the founder steps back in and you're stuck in a loop. Lucas: Right. And the hard part is that many boards don't want to have that conversation with a sitting founder ceo. It's awkward. It's like saying 'we need to plan for a world without you.' But the Starbucks board learned the hard way that avoiding that conversation costs more — in dollars, in brand equity, and in management morale. Luna: Before we wrap up, I want to ask about one more thing. You mentioned Brian Niccol is still CEO and doing well. What's he doing differently that Narasimhan didn't? Lucas: Good question. Niccol has done three things that seem obvious in hindsight but were controversial at the time. First, he simplified the menu — cut about 30 percent of the drink and food options. That improved kitchen speed and inventory costs. Second, he invested in barista labor — raised wages and added more hours during peak shifts. Third, he leaned into mobile ordering and pickup-only stores, which is what Chipotle did so well. Same-store sales have stabilized and actually grown modestly — about 2 percent year-over-year in the most recent quarter. Luna: So the board finally found a CEO who could execute — but only after burning through three CEOs and hundreds of millions in severance and recruitment costs. That's a governance failure that will be studied in business schools for years. Lucas: Absolutely. And if this conversation has given you a useful lens for thinking about board dynamics — whether you're on a board yourself or just trying to understand why your own company's leadership changes so much — the way we keep these episodes ad-free and independent is through listener support. You can find us at buy me a coffee dot com slash fexingo. It's a small gesture that lets us keep drilling into topics like this without outside pressure. Luna: Yeah, it's really what keeps these conversations going. And we appreciate everyone who's chipped in. Lucas: So to bring it back: the Starbucks board's journey from founder dependence to a more professional governance structure is still a work in progress. Brian Niccol has brought stability, but the real test will come when he inevitably decides to leave — and whether the board can find a successor without another crisis. Luna: And whether they can resist the temptation to call Howard Schultz one more time. Lucas: Right. That's the ultimate governance challenge for any founder-led company: building a board that can say no to the founder. And that's harder than it sounds. Luna: Well, next time we'll look at a board that handled succession really well — or really poorly. We've got plenty of examples. Lucas: We do. Thanks for listening, and we'll talk to you next time.