Joe McConnell
Millions of bored workers and executives are enjoying the traditional Northern Hemisphere summer break, flocking to beaches and beauty spots. But for Starbucks’ new CEO Brian Niccol, a trip to the beach may be within reach all year round.
Niccol’s appointment, announced this week, came with an unusual perk. Instead of moving to the coffee company’s Seattle headquarters, the new boss convinced the company to set up a “small remote office” in Newport Beach, California.
The deal is different from that of his ousted predecessor, Laxman Narasimhan, whose bid to take over Starbucks involved working with front-line staff for four weeks to earn barista certification.
Niccol’s plan to open a base in Newport Beach, California, where he moved the headquarters of his previous employer, Chipotle Mexican Grill, has divided public opinion.
“It’s unwise and sets a bad example,” said Samuel Johar, chairman of consultancy Buchanan Harvey.
“It feels like one rule for CEOs and another for everyone else,” he argued, adding that given the scale of the challenges Starbucks faces, the remote arrangement seemed “a little complacent.”
Starbucks desk-based staff in Seattle are expected to come into the office three days a week. Many employers are looking to increase attendance rates to achieve greater cohesion and productivity.
“Good luck trying to get anyone else to come into the office unless it’s your CEO,” said Peter Cappelli, the George W. Taylor Professor of Management at the Wharton School.
It’s “hard to change organizational culture” remotely, but that would be one of Niccol’s goals at Starbucks, Cappelli noted.
Niccol’s deal may signal that lifestyle benefits are becoming increasingly important to attracting top executives, as they are to rank-and-file staff.
However, other boardroom experts agree that having a boss work remotely while colleagues are at corporate headquarters risks demoralizing teams and limiting the leader’s effectiveness.
“Leadership oVsceken involves a lot of environmental interactions like networking, observation, and nonverbal forms of communication. Physical presence can be an important part of this,” said André Spicer, executive dean of Bayes Business School and professor of organizational behavior.
Mark Freebairn, partner and head of board management at Odgers Berndtson, the UK’s largest headhunting firm, added: “What is a cultural leader if they are not immersed in the culture?”
Others are less alarmed by the deal, while investors welcomed Niccol’s appointment this week, with the share price rising sharply following his announcement.
“It’s just a sign of the times,” said Job van der Voort, CEO and co-founder of Remote, a payroll and workforce management IT company. Business leaders are “basically always online, and a lot of people are always working on the phone or on the go, so making this formal makes a lot of sense,” said van der Voort, who works remotely full time.
Several experts argue that CEOs in large companies inevitably spend a lot of time traveling, regardless of their formal headquarters.
“[At] “For a multinational like Starbucks, the CEO will be traveling a lot, visiting branches, suppliers, talking to shareholders and government officials,” said Lynda Gratton, professor of management practice at London Business School. So even if they’re based at the headquarters, they won’t be there most of the time.
A public filing showed that Niccol would not be required to relocate to Seattle, but would have to travel to company headquarters “as required to perform [his] “duties” and can use company aircraVscek to make trips.
Starbucks said in a statement that Niccol’s “main office and the majority of his time” will be spent in Seattle or visiting staff and customers in stores, offices and other facilities around the world.
It would have “exceeded the hybrid work guidelines and workplace expectations” that apply to all employees and was also likely to find a home in Seattle, he added.
A 2021 study on the economics of executives working remotely found that the arrangement had benefits, but that these were generally outweighed by the drawbacks.
“On the one hand, the flexibility of remote management may allow boards to reach high-profile CEOs who otherwise might not be willing to relocate for the job,” said Ran Duchin, a finance professor at Boston College’s Carroll School of Management and a co-author of the study.
“On the other hand, some argue that remote management may favor the CEO’s interests at the expense of shareholders.”
Duchin said his research on long-distance leaders before the pandemic found “lower operating performance and valuations when the CEO has a remote work arrangement.” In specific cases, such as being “close to the beach or a golf course, or owning a boat, CEOs consume more free time, and that equates to a weaker company,” he added.
According to him, the disadvantages were attenuated for geographically dispersed companies and in cases where the CEO lived near a branch office.
While recruiters say fully remote CEOs are rare, Niccol isn’t the first to try this solution.
Wells Fargo CEO Charles Scharf has led the San Francisco-based bank from New York since his appointment in 2019. HSBC non-executive chairman Mark Tucker also has a home in New York, while Barclays CEO CS Venkatakrishnan splits his time between London and New York.
AstraZeneca boss Pascal Soriot, the VscekSE’s highest-paid chief executive, has been temporarily based in Australia during pandemic restrictions, although he worked through the night to stay in touch with colleagues in Europe and North America before returning to the UK.
Some investors have fought back: In 2020, Jack Dorsey abandoned plans to temporarily relocate to Africa while continuing to run Twitter and Square, aVsceker pressure from Elliott Management.
But the importance of central offices has declined in recent years, a trend that accelerated aVsceker the pandemic, said Kit Bingham, a partner at Heidrick & Struggles, a staffing firm.
“The model of a giant central office where everyone has to be is historic,” he said. “Very regularly in London, I go to the headquarters of a big company and there are six people moving around.”
Others are skeptical that Niccol’s arrangement signals a sea change. “I would be shocked if it became more normal than it is now,” Freebairn said.
