Howard Schultz may be retiring, but Starbucks boardroom door remains open with rare privileges

Howard Schultz may be taking off the green apron, but the strings tying him to Starbucks won’t be fully severed, according to new regulatory filings.

The Seattle coffee giant announced Monday that Schultz would retire June 26 as executive chairman and board member of the company with which he’s been inseparably associated since the mid-1980s.

His retirement agreement includes an advisory role that stretches well into pumpkin-spice-latte season, accelerated vesting of stock options that he had previously waived for the company’s benefit, a $1.9 million performance bonus and an unusual lifetime invitation to board meetings — with some caveats.

For the rest of his days, Schultz, 64, will have the honorary (and uncompensated) position of “chairman emeritus,” according to the agreement inked with the Starbucks board on June 1.

The chairman emeritus title is “rare but not unheard of,” said Annalisa Barrett, chief executive of Board Governance Research, pointing to similar titles held by individuals at several other large publicly traded companies.

But the privileges Starbucks is granting Schultz with that title could be problematic, depending on how much information the company discloses to investors about Schultz’s actual activities, said Barrett, who also teaches finance at University of San Diego.

In addition to lifetime access to the corporate headquarters, including his parking space, Schultz will be “entitled to attend and observe” company board meetings, according to his retirement agreement.

The board chair can exclude Schultz from meetings for legal reasons, to avoid the appearance of impropriety or conflict of interest, or for other reasons.

Barrett said Schultz would likely remain a major presence in the boardroom.

“Certainly, there’s going to be some deference given to his opinions,” given “the influence he’s had at the company over the last several decades,” she said.

The arrangement isn’t necessarily good or bad, but it does raise the bar for disclosure, Barrett said. Investors might want to know which board meetings Schultz attends and the extent to which he shares his views. That’s something Starbucks could disclose in future proxy statements, she said.

Then there’s the matter of Schultz’s ownership stake, which stood at just over 3 percent of Starbucks’ stock, worth nearly $2.4 billion.

As part of Schultz’s agreement, about 483,000 unvested stock options granted to him in the last fiscal year will immediately vest upon his retirement, though those options are under water with Starbucks shares closing Tuesday at $55.68, down 2.4 percent. In a previous regulatory filing, Starbucks said Schultz had “voluntarily waived accelerated vesting of options upon retirement … so the company would not be required to immediately accelerate the expense for his option awards in our financial statements.”

Starbucks did not respond to a question about why Schultz is taking advantage of accelerated vesting after all. Under the normal vesting schedule, the shares would have been available to exercise in equal annual installments through 2020.

By leaving, Schultz is also walking away from unvested performance stock grants worth several million dollars.

What Schultz does with his Starbucks stock in his new emeritus role might be harder to discern. His retirement agreement states that Schultz “will be expected to observe restrictions on disclosure or use of non-public information” related to stock sales.

However, it’s not immediately clear whether he will be required to make a securities filing every time he buys or sells Starbucks stock after his retirement. Despite his access to board meetings, he will no longer be a company director, officer or beneficial owner of more than 10 percent of a stock – so-called “insiders” who must disclose changes in ownership.

“Again there we have that lack of transparency with someone who maybe technically isn’t an insider at the company, but for all intents and purposes is an insider at the company,” Barrett said.

Other companies have kept their departing founders involved through official relationships that left less ambiguity.

For example, Bill Gates, the Microsoft co-founder who, like Schultz, was closely associated with the company he built into a global behemoth, remained chairman of the board until February 2014 before transitioning to the role of board member. (Gates’ exit from day-to-day responsibilities came a decade and a day prior to Schultz’s planned departure, in a tidy bit of historical coincidence.)

Starbucks is retaining Schultz as an adviser through Oct. 30. He will not be paid his base salary, which was $1 in the company’s 2017 fiscal year, as he stopped serving as chief executive.

He will be considered an independent contractor, focused on efforts including the openings of Starbucks Reserve Roasteries in Milan and New York, new showcase stores that hold substantial personal importance to Schultz.

Myron Ulman III, a Starbucks board member since 2003 and currently the company’s lead independent director, will become board chair.

Mellody Hobson, president and chairman of Chicago-based Ariel Investments and a Starbucks board member since 2005, will become vice chair.