Fired Starbucks CEO gets $1.25 million in severance

SEATTLE: Starbucks Corp. has given the chief executive officer it fired earlier this month a severance package that includes $1.25 million (euro850,000) the coffee retailer will pay out over the next year.

The agreement, disclosed in a filing with the Securities and Exchange Commission on Monday, also allows Jim Donald to exercise options for 1.6 million shares of stock at prices of either $10.86 or $15.23.

Those options are worth $10.73 million (euro7.3 million), based on Monday's closing stock price of $19.66.

Donald has options to buy another 2.3 million Starbucks shares, but those options are essentially worthless because the strike prices are greater than the current stock price.

The world's largest chain of coffee houses fired Donald on Jan. 7 and handed the reins back to Chairman Howard Schultz as part of a series of moves aimed at revitalizing the company.

Rising dairy, energy and other costs, declining traffic in U.S. stores, and growing competition from cheaper rivals has sent Starbucks' stock plummeting 50 percent since late 2006.

Donald had been CEO since March 2005, when he was promoted from president of the company's North American division to replace Orin Smith, who retired.

Donald received compensation Starbucks valued at $7.4 million (euro5 million) last year.

He earned a $1 million salary, but his package was boosted by stock options worth $6.3 million (euro4.3 million) when they were granted and perquisites worth about $37,000 (euro25,076).