Coca-Cola announced Wednesday it was scaling back its executive compensation plan amid concerns from Warren Buffett and other shareholders that the equity awards were overly generous.
Shareholders voted in favor of the plan at the company’s annual meeting in April. But Buffett spoke out publicly against it after the vote and another investor, Wintergreen Advisers, called it a “raw deal” for shareholders that diluted the stock by issuing 340 million new shares and options over four years.
Under the revised 2014 equity plan, Coca-Cola will issue fewer shares to management overall and replace equity awards for lower-level executives with cash bonuses, the Wall Street Journal reports. It will also replace stock options with performance-share units as the predominant form of long-term equity compensation.
“Shareowner input on this important topic has directly led to the development of these new guidelines, which are in line with the long-term interests of shareowners,” Maria Elena Lagomasino, chair of Coke’s compensation committee, said in a statement.
The outcry over the original compensation plan reflected broader shareholder discontent after Coke failed to meet its revenue growth targets last year.
In April, Buffett, who has frequently criticized pay plans that rely heavily on stock options, said his loyalty to Coca-Cola prevented him from voting against the 2014 program, even though he didn’t approve of it.
Wintergreen CEO David Winters argued that the plan could dilute shareholders by up to 16.6% and was more generous than the expiring plan approved in 2008.
Coke said Wednesday that the majority of employees will begin receiving long-term incentives as performance cash awards in 2015. “Performance metrics applied to long-term awards will provide a balanced approach to incentives, increase alignment with local operations and pay for results that employees can more directly influence,” it explained.
For executives who remain eligible for equity awards, two thirds will be performance-share units — a form of stock in which individuals earn shares based on a certain performance measure — and one third will be stock options by 2016. April’s plan had called for 60% in options and 40% in performance-share units.
Source: Wall Street Journal Coke Scales Back Executive Equity Compensation
Photo: Flickr user Lee Coursey, CC BY 2.0.