Δείτε εδώ την ειδική έκδοση

Buffett says Coke employee equity plan is 'excessive'

Warren Buffett, whose Berkshire Hathaway is Coca-Cola's largest shareholder, said he believed the US drinks company's plan to award shares to employees was "excessive" but abstained from voting on the measure on Wednesday.

The equity pay plan won shareholder approval at Coke's annual meeting in Atlanta, despite a campaign by investor David Winters, who argued the plan was overly dilutive to existing shareholders and would transfer too much money to executives.

"I respect the Coke organisation, I just don't like the plan," Mr Buffett, whose Berkshire owns more than 400m shares - or 9.1 per cent - of Coke, told CNBC. "We abstained because we didn't agree with the plan. We thought it was excessive."

The billionaire told Bloomberg Television that it was the first time that he could remember abstaining on a Coca-Cola vote. "I could never vote against Coca-Cola," he said.

But he did not want to vote against it, he said, because he did not want to express disapproval of Coca-Cola's management. He had no plans to sell any of his holding, he added.

Mr Winters, whose Wintergreen Advisers owns 2.5m Coke shares, had urged fellow shareholders to vote against the plan in a series of letters and media appearances since March. He said it would transfer about $13bn to management over four years and, combined with previous equity plans, could dilute shareholders by up to 16.6 per cent.

While he gained the support of investors including Calvert Investments and the Ontario Teachers' Pension Plan, the measure was passed on Wednesday with 83 per cent of votes in support, according to Coca-Cola.

Following the vote, Coca-Cola said: "The company's compensation programs are performance-based and the equity plan is fair, competitive and consistent with shareowners' interests and our pay for performance philosophy."

The company said dilution from its equity plans has been less than 1 per cent a year over the past three years and that its stock repurchases have helped offset issuance of new shares. It also said that because the awards are performance-related, the company may issue fewer shares than the plan allows for.

Mr Winters, who is also a shareholder in Berkshire, had lobbied Mr Buffett directly as he tried to garner support, citing the billionaire's previous criticism of executive pay practices.

"We do not believe it would be consistent with Berkshire's long ingrained culture to support such a plan at any of your equity holdings," he wrote in his most recent letter to the investor on April 16.

On Wednesday, Mr Winters said: "We are surprised that Warren Buffett had the opportunity to take a stand against excessive management compensation and failed to seize it." He said he was pleased with the result of the vote, however, saying it showed "a substantial number of shareholders had concerns about the plan."

Mr Buffett's disapproval is particularly stinging because of his very close association with Coca-Cola, which exemplifies his long-term commitment to the companies in which he invests.

The company has a big presence at Berkshire's annual meeting in Omaha, when Mr Buffett dispenses investment advice to his shareholders whilst sipping on a Cherry Coke.

In his letter to Berkshire shareholders for 1988, when he first bought the stock, he wrote: "When we own portions of outstanding businesses with outstanding managements, our favourite holding period is forever."

Berkshire has even increased its shareholding in Coca-Cola over the past year, and Mr Buffett's son, Howard, has been on Coke's board since 2010 - though he does not sit on the compensation committee.

Coca-Cola said its board respected Mr Buffett's "philosophical stance" on equity-based compensation. "As our largest shareowner, Mr Buffett is an avid supporter of the company and its management team, and has been a wonderful counsellor through the years. We greatly respect his views and look forward to continuing our productive relationship with him for many years to come."

Coke shares closed up 0.1 per cent at $40.75.

© The Financial Times Limited 2014. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation

ΣΧΟΛΙΑ ΧΡΗΣΤΩΝ

blog comments powered by Disqus
v