David Winters, the chief executive officer of Wintergreen, outlined
his concerns with the compensation plan late last month in letters
to Coca-Cola's directors and investors, including Warren Buffett,
CEO of Berkshire Hathaway Inc <BRKa.N>, which is Coca-Cola's largest
In those letters, Winters characterized the plan as "an
unnecessarily large transfer of wealth from Coca-Cola's shareholders
to members of the company's management team."
He is urging the company's board to yank the plan and replace it
with a different one.
On Thursday, Winters took his argument to CNBC, saying that the
company's stock-buyback program aimed at improving investor returns
"has been hijacked by the company."
Coca-Cola said on Thursday that the proposed equity compensation
plan is not just for senior management. About 6,400 employees
participate in the plan globally.
Winters "continues to overstate the dilutive impact of the plan,"
Coca-Cola said in an emailed statement.
The skirmish comes after Coca-Cola reported 2013 volume and revenue
that fell short of internal expectations. U.S. soda sales fell for
the ninth straight year in 2013.
PERFORMANCE PAY VS PROFITS
At the heart of the dispute is a compensation plan that would
include 500 million shares, including stock options and performance
Stock options would account for 300 million of those shares and 40
million would be so-called performance share units, or PSUs, which
are only awarded if certain profit and other financial goals are
met. Each PSU would count as five shares under the plan.
Winters said that the new plan, when combined with equity awards
from existing plans, could result in dilution of 14.2 percent or
On Thursday, he told CNBC that Coca-Cola also moved its performance
[to top of second column]
Winters has dubbed the plan "grossly outsized for a company with
earnings growth in the single digits" and "a bad precedent for
In its proxy filed in early March, Coca-Cola disclosed that the
plan's potential dilution could be 14.2 percent if performance
targets were met and all awards were earned.
In that filing, Coca-Cola also said that the decrease in its targets
for the 2012 through 2014 PSU award and the 2013 through 2015 PSU
award was due to the projected negative impact of currency exchange
and the expectation of a more challenging macroeconomic environment
over the three-year performance periods.
"If the company does not perform, no compensation is realized,"
Coca-Cola said in its statement.
All PSUs for the 2011 through 2013 period were forfeited because the
company did not meet its targets and PSUs for 2012 through 2014 are
not on track to be paid out, Coca-Cola said.
"Actual dilution related to existing equity plans over the last
three years has been less than 1 percent per year and is expected to
be in this range going forward," the company said.
(Edited by Ronald Grover and Jan Paschal)
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.