Coca-Cola Needs to Make a Real Change: Shareholders aren’t Satisfied with “We Won’t do it Again” pledges

CEO James Quincey’s total compensation for 2022 was $22,822,519, essentially unchanged from the prior year. At the 2022 annual meeting 49 percent of shareholders voted against pay. ISS recommended shareholders vote against this year as well.

On April 10, the company filed an open letter to shareholders in response to ISS’s negative recommendation. The company says the advisory service vote recommendation was “primarily driven by what they perceive as ‘limited responsiveness’ by our Talent and Compensation Committee (the ‘Committee’) to the shareowner feedback we received during our outreach efforts.”

In other words, perhaps, shareholder opposition must be addressed by more than meetings.

According to Coca-Cola “the reason cited by those who voted against the say-on-pay proposal in 2022 was the use of a consulting agreement entered into with the Company’s former General Counsel, both in terms of quantum and transparency around the rationale for the agreement.” In the proxy statement the company notes that the Compensation Committee intends, “going forward to continue to monitor and limit the use of consulting agreements with senior executive officers and exercise prudence with all aspects of such agreements, including quantum.”

This is all to the good, but only answers part of what concerned some shareholders. In the rationales for voting against that I read on Insightia, the consulting agreement was mentioned in reasons for opposition, but after the word “moreover.” Other performance related concerns shareholders pointed out include the fact that Coca-Cola’s CEO pay exceeded the 75th percentile of peers while performance did not reach that same percentile and that CEO pay is extremely excessive relative to the median household income in the United States.

Coca-Cola is number 13 on our most recent list of the 100 Most Overpaid CEOs.

A regression analysis by HIP Investor done last year suggested that based on performance the CEO’s compensation for 2021 should have been only $14,551,808, as opposed to the summary compensation table reported figure of $24,883,878 and that 71% of his pay package was excess pay.

Still, Coca-Cola objects, noting that ISS found, “CEO pay and company performance are reasonably aligned for the year in review.”

As far as reasonable alignment goes, I’d suggest that means ISS essentially did not think pay grew disproportionately to performance. But what if pay was too high to begin with, as I believe it was? There’s nothing in ISS’s vocabulary to address this, though shareholders are speaking out more on the topic. CEO pay will not decrease without downward pressure on the excessive packages, even those that theoretically aligned with performance.

Finally, I want to note that Committee member Maria Elena Lagomasino is the chair of Disney’s Compensation Committee as well. Disney has historically faced a great deal of concern from shareholders about its over-paying habits. It is remarkable that one director would serve on two such compensation committees.