Starbucks removes DE&I requirements from executive pay structure

Starbucks recently said that it will no longer tie executive pay to DE&I goals. It’s a move that one lawyer believes will become more common amid backlash against diversity initiatives.

The latest. At its annual meeting last month, 92% of Starbucks investors approved the new pay structure, according to Bloomberg Law, reversing a 2023 policy that tied 7.5% of an executive’s bonus to the company’s DE&I goals.

Instead, executive bonuses will be based on equality, social, and governance (ESG) goals, which the company first established in 2020. Instead of mentioning DE&I, the incentive program now refers to “talent.” The company still has diversity goals and shares its progress toward them in its annual impact report.

The move came seven months after a judge dismissed a lawsuit that the National Center for Public Policy Research, a conservative think tank, brought against Starbucks over the company’s diversity policies.

Zoom out. More than half of the S&P 500 companies tied diversity and inclusion to executive pay as of last summer, the Financial Times reported. Companies including Booz Allen Hamilton, Salesforce, and Hewlett Packard Enterprise tie DE&I to bonuses and compensation.

“I don’t believe in hard quotas...but I do believe that a percentage of your compensation should be tied to advancing talent. And then in the advancement of the talent to address these issues,” Antonio Neri, CEO of Hewlett Packard Enterprise, told CNBC regarding the company’s continuing commitment to the approach.

Like Starbucks, some companies are modifying their language around DE&I goals. For example, Kontoor Brands, which owns Wrangler and Lee, changed its executive pay incentives after America First Legal, the firm behind the majority of the anti-DE&I lawsuits, sent the company a threatening letter. It now ties executive pay to inclusion metrics that don’t mention gender or race, Reuters reported. Threats of legal action also appear to have forced Yum! Brands and American Airlines to remove diversity language or targets from their executive compensation messaging in 2023.

As threats of legal action and lawsuits over DE&I policies increase, some experts believe fewer companies will use DE&I as a success metric for executives. Debra Steiner Friedman, a labor and employment attorney, told HR Brew in December that “employers may be less likely to tie compensation to meeting certain demographic metrics.”