Starbucks Just Had a Corporate Governance Meltdown. Your Board Should Take Note

It pains me to say this — because I love my daily fix of Starbucks caffeine — but the company has just disappointed shareholders. The Starbucks board has failed to deliver upon its most important corporate governance responsibility, CEO succession planning.

On Monday, Howard Schultz, Starbucks chairman (and former U.S. presidential candidate) told The Wall Street Journal that the company wasn’t considering any internal candidates for its next CEO appointment. Think about that for a second. Of the many thousands of managers and executives in the company — and the tens of millions of dollars the company proudly spends on leadership development — the Starbucks board has determined and publicly announced that not one single person in the company is capable of being promoted internally to fill the CEO spot. Leadership development is the opposite side of the same succession planning coin. Starbucks has failed on both sides.

That’s a major, board-level meltdown. Heads should roll. 

Schultz tried to deflect this criticism and told the Journal that the company needs a “different kind of leader” and no CEO could have anticipated the radical changes facing the business. I call this BS. 

It’s not as if Starbucks is creating the next rocket to Mars or artificial intelligence algorithms for Google. It sells coffee, tea, and other delicious beverages, for heaven’s sake. Sure, consumer tastes are changing, and the global pandemic has changed business fundamentals. But this stark reality is true for everyone — companies of all shapes and sizes. And many boards have already updated their approach to succession planning, recognized that new leadership skills are needed, and are now helping their internal, high-potential talent master these competencies well ahead of an actual CEO transition.

Schultz likely knows this better than anyone.  He’s both a student and a teacher of leadership. He literally taught a MasterClass on the topic of leadership development. In the same class, he emphasized the importance of corporate culture. I couldn’t agree more.

Schultz, and the all-star Starbucks board, must appreciate the incredible risks of relying solely on external CEO candidates, who have not been stress-tested in the company and whose personality and leadership style may be rejected outright by the organization’s unique culture — much like an organ transplant can be rejected if the blood type isn’t exactly the same. 

Hopefully, the Starbucks CEO succession meltdown is a siren song to other boards of directors. Disruption is happening in industry after industry, and your succession planning process likely needs some fine-tuning, if not a complete overhaul. Start thinking more carefully about the kinds of leadership skills future CEOs will need to not only handle disruption, but also to be the ones doing the actual disruption. To steal a phrase from one of my new favorite books on leadership, boards need to create a pipeline of intentionally disruptive leaders. Otherwise, they’re destined to rely on external, corporate saviors who are few and far between. And that’s the riskiest strategy of all.  This isn’t rocket science. Start developing internal stars right now, before it’s too late. 

The opinions expressed here by columnists are their own, not those of

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