Employee Retention and Company Success
Starbucks believes that the 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 will assist the company in attracting and retaining key executives, which is critical to long-term success. Thus, compensation for executive officers consists of three components: annual base salary, annual incentive bonus, and long-term incentive compensation. Annual base salaries for executive officers are reviewed annually or at the time of promotion or other change in responsibilities. Initial salary and increases in salary are based on 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 a comparator group companies’ pay levels. The annual incentive bonus for executive officers, except for the Chief Executive Officer and Chairman, is dependent on both company performance and individual performance during the prior fiscal year. Once objective performance measure or measures, bonus target percentages and other terms and conditions of awards are determined by the Committee, target bonus amounts are then expressed as a percentage of base salary and are established according to the overall intended competitive position and competitive survey data for comparable positions in comparator group companies. After the end of the fiscal year, the Committee determines the extent to which the performance goals were achieved, and approved and recommended the amount of the award to be paid to each participant. The total bonus award is determined according to the level of achievement of both the objective performance and individual performance goals. The Chief Executive Officer and Chairman’s incentive is based 100% on company performance. Long-term incentive compensation for executive officers is comprised of stock options awards. The determination of the size of stock option grants to executive officers is based 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. This plan is designed to align executive officers’ interests with those of shareholders by rewarding outstanding performance and providing long-term incentives. Starbucks’ revenue growth plan continues to center on the opening of new retail stores, both Company-operated and licensed, in the pursuit of it’s objective to establish itself as one of the most recognized and respected brands in the world. Starbucks opened 2,199 new stores in fiscal 2006 and plans to open approximately 2,400 in fiscal 2007. With a presence in 37 countries, serving customers more than 40 million times per week, management continues to believe that the Company's long-term goal of approximately 20,000 Starbucks retail locations throughout the United States and at least 20,000 stores in International markets is achievable. For the 13-week period ended December 31, 2006, global comparable store sales for Company-operated markets increased by 6%. Comparable store sales growth for the remainder of fiscal 2007 is expected to be in the target range of 3% to 7%. In addition to opening new retail stores, Starbucks works to increase revenues generated at new and existing Company-operated stores by attracting new customers and increasing the frequency of visits by current customers. The strategy is to increase comparable store sales by continuously improving the level of customer service, introducing innovative...
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