Coca-Cola Shareholders Push Back Against Excessive Executive Compensation Plan (KO)

Coca-Cola has decided to revamp its executive compensation plan after some prominent shareholders criticized the proposed plan as excessive. Coca-Cola released its 2019 equity plan at its annual meeting in April. Despite being approved by 83 percent of shareholders voting on it, dissent was strong against many of the details in the plan.

In the announcement about the changes, the board acknowledged that the concerns of the shareholders were taken into account when revamping the plan. One of those prominent shareholders was Warren E. Buffett of Berkshire Hathaway. Mr. Buffett chose to abstain from the vote and said in his opinion; he considered the plan “excessive.”

One of the biggest criticisms of the original executive compensation plan was that the plan created too many new shares to be distributed to executives. The issuance of the new shares is against the long-term interests of the current shareholders as it could dilute the value of their existing shares in the company. Another criticism of the plan was that the plan did not include enough of the employees of the company.

Proposed changes to the plan include reducing the amount of stock-based compensation issued to employees, paying cash to most employees in the plan. Under the previous plan, all 6,500 employees could possibly receive stock awards. Now, that number has been slashed to around 1,000 employees.

Another proposed change is lengthening the amount of time it would spend issuing those stock awards to eligible employees. While some shareholders may embrace the change to cash payments, others believe that including stock in executive compensation plans make the executive’s incentives more in line with the interests of the shareholders. It remains to be seen whether the proposed changes will satisfy the shareholders.

In a recent marketing success, Coca-Cola put specific first names on Coke cans and bottles, increasing interest within its target audience, which was reflected in rising sales. However, consumers moving away from sugary drinks ultimately hurt the company’s bottom line.

Receive News & Ratings Via Email - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings with our FREE daily email newsletter.