Corporate Governance

Starbucks Selling A Plane

By J. Robert Brown

We've been talking about Treasury's efforts in the area of executive compensation.  The use of private aircraft illustrate the problems in this area.  Starbucks and Citigroup both opted to do without a corporate aircraft.  Needless to say, the interesting thing is not the decision itself but the lateness in the day for opting to do something seemingly obvious.

Starbucks is closing more stores (300) and reducing the number employees (6700).  Buried in the WSJ article was a mention that the company was also planning to sell its private aircraft.

• Starbucks also said it put its Gulfstream 550 aircraft up for sale last week, just after the plane was delivered last month. The company had been criticized for buying the plane, in light of all the store closings and worker layoffs.

Buying the plane in the first instance is worse than John Thain spending $1.2 million on his office suite.  At least Thain did so back in January 2008, before the bottom fell out.  Starbucks can't say the same thing.  As it struggles with downsizing and lower earnings, it chose this time to buy a private aircraft.  It's not far from the auto companies flying to Washington in their private jets to ask for bailout money. 

As usual, the unanswered question is the oversight of the board.  And this is not the only company where the question needs to be asked.  Citigroup has announced that it won't take delivery of a $42 million jet.  The question is why, in this climate, it thought to buy the plane in the first place. 

Surely the board of Starbucks (and Citigroup) ought to be more involved in the trials and tribulations of the company and ought to be sending a message that this is not the time for profligate spending.  Apparently not. 

Full post as published by The Race to the Bottom on February 05, 2009 (boomark / email).