Incoming Starbucks CFO Cathy Smith will receive a cash signing bonus of $5 million as part of a compensation package crafted to “induce her to join Starbucks,” according to a securities filing on her appointment.

The bonus, 50% of which is to be paid out following Smith’s one-month anniversary as finance chief, comes “in consideration of her forfeited cash incentive opportunity and equity awards,” as the retail industry veteran will leave behind approximately $15 million in such compensation when she departs from her current employer, retailer Nordstrom. The retailer, which announced Smith’s upcoming departure as part of its Q4 2024 earnings report Tuesday, has begun searching for her successor, according to its earnings release.

The new CFO is arriving at the coffee giant as both Starbucks and Nordstrom are moving to execute on new turnaround plans — with Nordstrom in the midst of transitioning form a public to a private entity as part of a $6.2 billion deal late last year with Mexican retail group, El Puerto de Liverpool, according to a December CBS News report.

Both potential compensation and operational changes related to Nordstrom’s privatization could have been possible factors informing Smith’s decision to depart the retailer for Starbucks, though it’s difficult to speculate, David Swartz, senior equity analyst, consumer equity research for Morningstar said.  

“It's not surprising that, when a company is going through a major change like this there's going to be executive turnover,” Swartz said in an interview.

Heading a turnaround  

The compensation package puts Smith in good company, following several multi-million bonuses given out to finance chiefs last year. Google parent Alphabet, for instance, granted its new CFO — Eli Lilly alum Anat Ashkenazi, who succeeded long-time finance chief Ruth Porat —  a $9.9 million such bonus, also aimed at compensating for forfeited compensation, CFO Dive previously reported. Product distribution company QXO, meanwhile, granted its new finance chief a $3 million signing bonus, CFO Dive reported.

An experienced financial executive in the retail industry, Smith has served as CFO for the fellow Seattle, Washington-based Nordstrom since 2023. Her previous roles include serving as chief administrative officer and CFO for Bright Health, and in CFO roles for Target, Express Scripts, Walmart, Gamestop, and Raytheon, according to her LinkedIn profile.

Smith will succeed Rachel Ruggeri, a long-time employee of the coffee chain who has served as CFO since 2021. Ruggeri’s departure “meets the conditions of the ‘without cause’ provision” of the company’s executive severance and change of control plan, Starbucks said. Both Ruggeri’s departure and Smith’s move to the role will occur on an effective date to be determined, according to Starbucks’ filing with the Securities and Exchange Commission.

“I know Rachel has helped the company navigate through some of the most challenging times and played a key role in some of our biggest successes,” CEO Brian Niccol said of the CFO move in a letter published Tuesday, noting Ruggeri will remain to assist with the transition. “When people share stories about Rachel tackling a significant challenge or leaning into a new opportunity, they highlight the same qualities. Rachel was always a steady hand, a clear thinker and often the voice that reminded us of the clarity we get from our mission, and our values. She understands the numbers intimately and values the people deeply.” 

The CFO swap comes as the coffee chain has experienced a persistent decline in sales, causing the Seattle-based chain to overhaul its menu and layoff staff in an effort to bolster its finances under Niccol’s leadership  — Starbucks’ second CEO in two years, CNN reported in February. The chain will look to cut 1,100 corporate jobs and eliminate “several hundred” unfilled and open positions as part of its turnaround plan, CNN reported.

A ‘grande’ challenge

While Starbucks itself is going through some changes, the decision to move to Starbucks represents an upgrade for Smith, as the coffee chain is a larger, blue-chip company with a global footprint, Swatz said.

“It's a greater challenge at Starbucks, but it's also a greater opportunity than you'd find in Nordstrom, which realistically is never going to be anything big,” Swartz, who covers Nordstrom for Morningstar but does not cover Starbucks, said. Though Nordstrom has seen some improvement in its sales growth and margins over the past few years, it is still very much in turnaround mode, Swartz said.

The decision by Smith to leave could also represent something of a challenge for Nordstrom as it moves to execute that shift to a private entity; for the retailer, “it's probably not a great time to have to look for a new CFO,” Swartz said.

“It's also maybe a bit complicated by the fact that it is going private, because that does maybe limit the offer that can be made to somebody,” Swartz said of the retailers’ bid to find a successor for finance chief. For example, a private entity cannot offer a potential CFO candidate grants of stock as part of their compensation, he said.

As well as the cash bonus, Smith will also receive a fiscal year 2025 annual equity award with a target value of $4.5 million in association with her appointment as Starbucks’ CFO, and a “replacement equity grant” with a target value of $6.4 million, also aimed at recouping the millions she will leave behind at Nordstrom. She will also receive an annual base salary of $925,000 and be eligible for a target cash incentive opportunity of 125% of her base salary.

For the full year 2023, Smith received total compensation of $8.5 million as CFO of Nordstrom, comprised of a $605,769 base salary, a $550,000 bonus, and approximately $6.5 million in stock awards, according to the retailer’s latest proxy statement.

Ruggeri, meanwhile, received total compensation for Starbucks’ full year 2024 of $6.6 million, comprised of a $913,335 base salary and approximately $5.3 million in stock awards, according to the company’s latest proxy. Though also eligible for a 125% target cash incentive opportunity, Ruggeri did not receive an annual bonus for the years of 2024, 2023, or 2022 as finance chief, according to the proxy.  

Starbucks and Nordstrom declined to comment beyond the details included in their press releases.