Per media reports, Wintergreen Advisers, an investment fund, has criticized The Coca-Cola Company’s (KO) proposed 2014 management pay package as unreasonably high at a time when the company is seeing slowing revenues and profits.
David Winters, chief executive and founder of the investment fund, which owns a significant equity stake in the company, sent a letter to the board. The letter noted that the cola giant’s proposed equity plan would transfer an unreasonable amount of wealth to its senior managers, leaving a “raw deal” for investors. The letter was also sent to fellow shareholders and investor, Warren Buffet, CEO of Berkshire Hathaway, Inc. (BRK.B) — the largest shareholder of the Coca-Cola Company.
Buffet has reportedly been urged to vote against the 2014 plan at the company’s annual meeting next month.
Reportedly, the equity plan would transfer roughly $13 billion to members of management over the next four years in the form of stock options and shares, leading to significant dilution of Coca-Cola shares.
Winters believes the dilution would add to shareholders’ woes at a time when the company is seeing slowing growth.
The Coca-Cola Company has seen slowing revenues for the last few quarters due to muted volume trends of its carbonated soft drinks (CSD) like Coke and Fanta, and challenging consumer spending environment. Growing health consciousness, rising obesity concerns, possible new taxes on sugar-sweetened beverages and growing regulatory pressures are affecting CSD volumes of beverage makers like Coca-Cola, PepsiCo, Inc. (PEP) and Dr Pepper Snapple Group, Inc. (DPS). Coca-Cola has increased marketing investments and is driving package and product innovation to boost its CSD business. However, such investments shoot up marketing costs of the company in turn, putting pressure on profits.
Coca-Cola has reportedly shot back saying that Winters is “misinformed” and his statements “do not reflect the facts”.
Currently, Coca-Cola has a Zacks Rank #4 (Sell).
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