Coke Says Pay Plan Has ‘Flexibility’ After Drawing Criticism

Coca-Cola Co. (KO), facing criticism of its stock-compensation program from investor Warren Buffett, said the plan offers “maximum flexibility” for future adjustments, though no changes are currently in the works.

While Buffett abstained from voting against the pay proposal at Coca-Cola’s shareholder meeting last week, he began criticizing the plan after it passed. Buffett said at the time that his loyalty to the company kept him from voting against the measure. The Wall Street Journal reported yesterday that pressure from Buffett would probably prod Coca-Cola to revise the pay plan before it goes into effect next year.

“No changes are being made to the plan at this time,” Petro Kacur, a spokesman for Atlanta-based Coca-Cola, said in an e-mailed statement. “The plan already offers maximum flexibility, including the ability to extend the life of the equity plan, to ensure that it continues to meet the needs of the business and remains in line with shareowner interests.”

David Winters, a shareholder in both the soft-drink maker and Buffett’s Berkshire Hathaway Inc., had called on Buffett to oppose the pay plan, saying it violates the billionaire’s principles on stock dilution. The measure passed with 83 percent of the votes cast.

“No matter how you slice it or dice it, Buffett reached the same conclusion that we did -- the plan is excessive,” Winters said yesterday in an e-mailed statement. 

Buffett, chairman and chief executive officer of Omaha, Nebraska-based Berkshire, didn’t immediately return a message left with an assistant seeking comment. Berkshire controls the largest stake in Coca-Cola, with 9.1 percent of shares.

Transferring Wealth

Winters has said the latest equity plan, in addition to ones already enacted, could transfer $29.8 billion to the Coca-Cola managers, harming shareholders. Coca-Cola already granted long-term equity compensation to about 6,400 employees in 2013.

Winters renewed his attack yesterday when he sent a letter to the board asking if directors were aware of Buffett’s views on the pay plan before the shareholder meeting.

“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,” Winters, CEO of Wintergreen Advisers LLC, said in the letter.

‘Great Future’

Buffett said last week that it was proper for Winters to go public with his criticism. And while Buffett said he disagrees with some of the figures used by Winters, he shares the thought that the company plans to give out too much stock.

“I think it’s a great company, it’s run by great people, and I think it’s got a great future,” Buffett said last week in an interview with Bloomberg Television’s Betty Liu. “I just think the plan is excessive.”

Buffett, 83, often drinks Coca-Cola beverages at public appearances and told Liu that he’s good friends with Muhtar Kent, the company’s CEO. Howard G. Buffett, the billionaire’s son, sits on Coca-Cola’s board.

Coca-Cola has said that stock repurchases, including $4.8 billion of buybacks in 2013, cushion the dilution tied to employee awards. Dilution related to equity plans has been less than 1 percent annually over the past three years, “and is expected to be in this range going forward,” the company said in a presentation.

Coca-Cola shares have declined 1.3 percent this year, trailing the 1.9 percent gain of the Standard & Poor’s 500 Index. The stock was little changed today in New York, closing at $40.78.

To contact the reporter on this story: Nick Turner in New York at nturner7@bloomberg.net

To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net; Nick Turner at nturner7@bloomberg.net Dan Reichl

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