Warren Buffet Wins A Battle Against Coca-Cola's Plan To Pay Its Bosses $US13 Billion

Warren buffettAP ImagesWarren Buffett

Coca-Cola has shelved plans to give its top executives up to 340 million shares worth around $US13 billion, after investors, including its biggest shareholder Warren Buffet, called the packages “excessive.”

A Wall Street Journal report details he drinks company has now revised the pay plan and said it will now issue “substantially” fewer shares for long-term equity awards to the top 1% of senior management in favour of cash bonuses and it will also “significantly” reduce the amount of staff receiving stock options.

Coca-Cola’s compensation committee chairman Maria Elena Lagomasino said: “Shareholder input on this important topic has directly led to these new guidelines.”

But she added that there was still “no question of changing or reducing eligibility of long-term rewards” and incentive targets for its 6,500 managers, and that compensation is likely to remain similar in dollar terms, subject to the company’s performance.

So it’s not quite clear how big a victory this is, if the Coke executives are now getting in cash what they were previously going to get in stock.

The most vocal critics of the original compensation plan — which was voted through by shareholders at the company’s annual general meeting in April, with 83% of voters in favour — was Wintergreen Advisers, which holds a 1% stake in Coke, on behalf of its clients.

Wintergreen’s chief executive David Winters said the announcement on the updated pay guidelines was “vague” and that a lot of questions that still need answering. He said the old plan was “outrageously excessive.”

But other shareholders were more approving of the move. Ricardo Duran, spokesman for the US’s second largest pension fund the California State Teachers’ Retirement System, said: “Clearly communicating to the market how the company plans to use its equity is always a positive move as CalSTRS sees things.”

Warren Buffet is the largest shareholder in Coke with a 9.1% stake in the business. He had abstained from voting through the original pay guidelines, saying at the time “I could never vote against Coca-Cola, but I couldn’t vote for the plan either.

The updated compensation plan forms part of Coca-Cola’s chairman and chief executive Muhtar Kent’s efforts to placate investors following a disappointing period of financial performance.

Coke’s revenue missed analysts’ estimates and slipped 1 per cent year on year to $US12.6bn, while net income fell 3 per cent to $US2.6bn in the three months to June 27 this year. Those decreases cam despite the company growing the volumes of products in sold in the period as it was impacted by “significant” commodity price increases and stalling soda sales in North America, its biggest market.

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