Activist investment firm Elliott Management and Starbucks' board of directors are engaged in settlement discussions, according to sources familiar with the matter. The two parties held a meeting last week to deliberate over Elliott's proposed settlement offer. While a decision has yet to be reached, it remains unclear what concerns the board may have regarding the deal.

Should the settlement talks prove successful, one possible outcome is the appointment of Jesse Cohn, the managing partner at Elliott, as a Starbucks director. Cohn has played an instrumental role in Elliott's activism practice, having spearheaded campaigns at companies such as AT&T and Salesforce in the past. The proposed settlement, as previously reported, aims to allow CEO Laxman Narasimhan to retain his position along with a seat on the board. It would also include governance enhancements, in addition to expanding the board's composition.

However, the settlement agreement faces some complexities due to the opposition expressed by Starbucks Chairman Emeritus Howard Schultz, who has voiced his disagreement with resolving the matter through a settlement with Elliott. The Wall Street Journal has also reported that investment firm Starboard Value has acquired a stake in Starbucks. It remains uncertain whether Starboard will ultimately initiate an activist campaign within the coffee chain.

Neither Elliott nor Starbucks chose to comment on the ongoing discussions, while a representative for Starboard did not respond to requests for a statement. It's worth noting that Elliott Management has amassed a substantial stake in Starbucks, valued at up to $2 billion. The hedge fund, which manages around $69.7 billion in assets, is known for its assertive approach in the technology sector, having led campaigns at companies such as AT&T, Crown Castle, Salesforce, and Texas Instruments. In a departure from the tech industry, Elliott is also seeking to replace both the CEO and chairman of Southwest Airlines in its push for change within the struggling carrier.

Starbucks has encountered consecutive quarters of declining sales, reflecting significant setbacks in China and weaknesses within its core U.S. business. This challenging performance has taken a toll on Starbucks' stock price, which has experienced a decline of 19% year-to-date.

Discussion of the settlement offer between Elliott Management and Starbucks' board of directors remains ongoing. The potential outcome of these talks has significant implications for the future direction and leadership of Starbucks, as well as its ability to address the operational challenges it currently faces.