Institutional Shareholders Services (“ISS”), the leading provider of proxy research and voting recommendations, gave Coca-Cola a “red flag” with regard to their pay for performance. On a scale of 1 to 10, with 10 being the highest risk and worst score, Coca-Cola scored an 8 for “Compensation” and a 7 for “Board Structure.” Wintergreen Advisers believes this points to serious governance issues at Coca-Cola.
Coca‐Cola’s certified ballot results, filed with the SEC on 4/23/14, show that fewer than half of Coca‐Cola’s total outstanding shares (2.19 billion out of 4.40 billion) were voted in favor of the 2014 equity plan. Coca-Cola does not publish voting percentages based on total outstanding shares, as they had done in the past.
Document detailing the Coca-Cola 2014 equity plan. “Bonus shares” could allow management to reap outsized rewards for mediocre performance – see page 14, section 13.1 of 2014 Equity Plan.
Coca-Cola may have to divert significant amount of free cash flow to offset the dilutive effects of this plan. In 2013, the company repurchased 121 million shares of its stock, but the share count declined by only 51 million because of equity issued to management. See page 66 of Coca-Cola’s 2013 10k.
- Bloomberg, “Coca-Cola Cuts CEO Kent’s Pay After Revamping Equity Program”
- The Wall Street Journal, “What Is Coke CEO’s Solution for Lost Fizz? More Soda,” By Mike Esterl
- Seeking Alpha, “CEO Pay At Coca-Cola: Up Or Down?” By Paul Hodgson
- David Winters discusses Coca-Cola’s secret “bonus shares” with Maria Bartiromo on Fox Business
- Benefit of Coca-Cola’s Equity Compensation Guidelines Enacted After Public Pressure from Wintergreen Advisers: $6.6 billion to $21 billion
- Wintergreen Advisers Comments on Shareholder Opposition to Coca-Cola’s Executive Pay
- Wintergreen Advisers Cites Changes in Coca-Cola Proxy, But Big Issues Remain
- Wintergreen Advisers Poses Questions for Coca-Cola