It's been a good week for billionaire investors: on Tuesday, Carl Icahn got his way when eBay announced that it and PayPal will go their separate ways. And on Wednesday, Coca-Cola announced that it will revise the executive pay structure that Warren Buffett recently called "excessive."
Coke announced Wednesday morning that going forward, it will provide more transparency into how its equity compensation plan works, and that the plan will use fewer shares each year. According to the new guidelines, equity shares given through the plan will consist of no more than 0.8% of all outstanding stock in 2015 and 0.4% for the remaining life of the plan. Coke also said that while it will continue to provide long-term incentive awards to a broad group of employees, those awards will shift from stock to cash; employees who are still eligible for equity awards will see a heavier weighting of performance shares and fewer stock options. By 2016, Coke says the mix will be two-thirds performance shares and one-third stock options.
"Further to the approval of the 2014 Equity Plan in April of this year, we have developed guidelines that further align compensation to the long-term interests of shareowners," Coca-Cola chairman and CEO Muhtar Kent said in a statement Wednesday morning, referencing the push-back he received from Buffett and other shareholders earlier in the year. In March, Wintergreen Advisers fund manager David Winters lambasted Coke's executive pay model, saying in a letter to Coke shareholders, "We can find no reasonable basis for gifting management 14.2% of the share capital of Coca-Cola, worth $24 billion at today’s share price." By April, Buffett called Coke's compensation plan "excessive" and was open about the fact that he thought it awarded too many shares of stock. At the time, he chose to abstain from a vote on the compensation plan in an attempt to "make a statement" but not go to war with the company.
Evidently, these statements got through to Coke.
“Shareowner engagement has produced positive results for our company on a variety of fronts, including on compensation matters,” Maria Elena Lagomasino, the chair of Coke's compensation committee, said in a statement Wednesday. “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.”
Following the news of Coke's revised compensation plan, shares of the beverage giant were relatively unmoved, down just 0.2% in early Wednesday trading. Year-to-date, the stock is up 4.9%.
