• "It increasingly appears to us that there are substantial conflicts of interests, extensive governance issues and perhaps plans to take Coca-Cola private."
    David Winters, 6/17/2014, letter to Coca-Cola Board of Directors
  • “Good corporate governance also helps to remind the company’s directors that they work for the company’s shareholders, not for themselves, and certainly not for management.”

    Luis A. Aguilar, SEC Commissioner, 4/21/14, Emory University School of Law
  • "Instituting good corporate governance is difficult, if not impossible, at a company that ignores its shareholders."

    David Winters, 5/7/2014, letter to Coca-Cola Board of Directors
  • "As investment adviser with a fiduciary duty to our longtime shareholders, we are deeply concerned that Coca-Cola is becoming known not for great products but for excessive management compensation, the trampling of shareholders’ interests and a willful disregard for the valid concerns of its largest shareholder."
    David Winters, 5/1/2014, letter to Coca-Cola Board of Directors
  • “Although Coca-Cola claims that its corporate governance is ‘Best in Class,’ there has been no progress to withdraw the 2014 Equity Plan which in our opinion reflects a failure of corporate governance and which could massively dilute shareholders while rewarding the top 5% of management for mediocre performance.”

    David Winters, 7/22/14, comments following Coca-Cola's second quarter earnings
  • "Coca-Cola and Berkshire shareholders, and in reality all of America, are counting on you to demand that shareholders be treated as partners instead of piggy banks."
    David Winters, 4/16/2014, letter to Warren Buffett
  • “Some major institutional investors that supported the plan might have reconsidered had they known other pension funds opposed it and known Warren Buffet thought the plan was 'quite excessive.'”

    Pensions & Investments , 5/12/14, “Winning Over Proxy Voters”
  • “We didn't agree with the plan. We thought it was excessive. And—I love Coke. I love the management, I love the directors. But— so I didn't want to vote no. It's kind of un-American to vote no at a Coke meeting .”

    Warren Buffett, CEO of Berkshire Hathaway, 4/23/14, CNBC
  • “I told him (Muhtar Kent) ahead‐of‐time what we were going to do, sure. He knew if I abstained that I obviously wasn't for the plan.”

    Warren Buffett, CEO of Berkshire Hathaway, 4/23/14, Bloomberg TV
  • "Events over the past few months, leading up to and after the annual meeting of Coca-Cola shareholders, have given rise to grave concerns at Wintergreen Advisers regarding potential conflicts of interests at Coca-Cola."
    David Winters, 6/17/2014, letter to Coca-Cola Board of Directors
  • “If there is significant opposition to the proposed equity plan, we believe the Coca-Cola board should consider whether it has a sufficient mandate from shareholders to fully implement the plan."
    David Winters, 4/22/2014, letter to Coca-Cola Shareholders
  • “This plan actually is very much in line with the plans that we have put forward to shareowners in the past, and that have had shareowner approval.”

    Gloria Bowden, Associate General Counsel and Secretary of The Coca-Cola Company, 4/4/14, CNBC
  • “The plan—compared to past plans was a significant change.”

    Warren Buffett, CEO of Berkshire Hathaway, 4/23/14, CNBC

Wintergreen Advisers Cites Changes in Coca-Cola Proxy, But Big Issues Remain


Scoring Coca-Cola's 2015 Proxy:
The "Big Grab" was halted, but urgent issues remain to be addressed

April 13, 2015

New York, NY – (Business Wire) - Wintergreen Advisers today issued a report on The Coca-Cola Company's (NYSE:KO) 2015 Proxy Statement.

David J. Winters, CEO of Wintergreen Advisers, said: "While there has been progress in some areas at Coca-Cola, the board continues to give Muhtar Kent and his team excessive rewards, and we question whether many Coca-Cola directors are able to vigorously act for all shareholders given their overlapping business interests."

"Meanwhile, Coca-Cola lags behind while other consumer brands like Heinz and Kraft pursue bold restructurings. Coca-Cola's board and management lack a sense of urgency to address Coca-Cola's problems and increase shareholder value. There are three big questions around Coca-Cola," Winters said:

  • "What is keeping Coca-Cola from carrying out transformative strategies like those implemented at Heinz and planned for Kraft?"
  • "Why does this management continue to receive excessive compensation while missing the performance targets set by the board?"
  • "When will the board act to correct this situation?"

Liz Cohernour, Chief Operating Officer of Wintergreen, said: "Wintergreen plans to vote against Coca-Cola's directors because we believe they have not exhibited the leadership and independence needed to restore shareholder confidence and return the company to profitable growth. We urge Coca-Cola shareholders to carefully consider these issues."

The report notes that a year ago Wintergreen brought attention to what it saw as serious pay and governance problems at The Coca-Cola Company, beginning with a proposed equity compensation plan it called "Coke's Big Grab" for its potential for whopping payouts to management. Coca-Cola later said it would curtail the plan.

This year, the Wintergreen report notes, Coca-Cola's proxy statement contains better disclosure than a year ago regarding the value of equity incentive compensation and required performance hurdles for management. Importantly, it shows Coca-Cola did not issue secret bonus shares - the much-criticized stock awards granted without criteria. However, the proxy statement shows Coca-Cola is falling short in other important areas.

Wintergreen believes the Coca-Cola 2015 Proxy Statement:

  • Contains a misleading characterization of CEO Muhtar Kent's pay. Coca-Cola's proxy statement says Muhtar Kent "respectfully declined" his annual incentive award, suggesting he took a meaningful pay cut. In fact, the board increased his stock and option awards, making his total pay about even with 2014.
  • Shows missed performance targets that were apparently overlooked when awarding pay for top managers. Coca-Cola managers failed to meet two out of three of their annual performance targets, and met only the very bottom end of the third.
  • Lowers performance hurdles for management in 2015 versus 2014. Coca-Cola's management not only failed to meet its performance targets in 2014, but the 2015 proxy shows the Coca-Cola board has lowered the 2015 performance bar for the coming year, making it easier for management to earn their annual bonuses.
  • Understates the dilutive effect of Coca-Cola's equity compensation awards. Coca-Cola touts a figure of "$4.2 billion in gross share repurchases" on two different locations in their 2015 proxy statement, when in fact, net of dilution from equity compensation, buybacks were only $2.6 billion in 2014. Similarly, the company says it repurchased 98 million shares in 2014, but its shares outstanding only declined by 36 million because of the dilutive effects of equity compensation.
  • Raises questions about the directors' ability to be forceful advocates for all shareholders. Many board members have overlapping business interests, and several have business ties with investment bank Allen & Co. - whose CEO is Coca-Cola director Herbert Allen. Wintergreen believes these business ties can make the board an insular club rather than a vigilant protector of shareholders' interests.

Scoring Coca-Cola's 2015 Proxy:
The "Big Grab" was halted, but urgent issues remain to be addressed

About Wintergreen Advisers

Established in 2005, Wintergreen is an independent global money manager that employs a research-driven value style in managing global securities. As of March 31, 2015, Wintergreen Advisers had approximately $1.5 billion under management on behalf of individuals and institutions through its mutual fund and other clients, and is based in Mountain Lakes, New Jersey.

For further information on Wintergreen Advisers, please call 973-263-4500 or visit www.wintergreenadvisers.com.  Additional information regarding what we view as the issues at The Coca-Cola Company may be found at www.FixBigSoda.com.  For information, forms and documents regarding our U.S. mutual fund, please visit www.wintergreenfund.com.