RESOLVED: That the shareholders of the Coca-Cola Company (“Coke” or the “Company”) urge the Board of Directors to seek shareholder approval for future severance agreements with senior executives that provide benefits in an amount exceeding 2.99 times the sum of the executive’s base salary plus bonus. “Severance pay” means “payment by an employer to an employee beyond his or her base pay and bonus upon termination of his/her employment.” “Future severance agreements” include employment agreements containing severance provisions; retirement agreements; and, agreements renewing, modifying or extending existing such agreements. “Benefits” include lump-sum cash payments (including payments in lieu of medical and other benefits) and the estimated present value of periodic retirement payments, fringe benefits and consulting fees (including reimbursable expenses) to be paid to the executive.
SUPPORTING STATEMENT
As part of his severance agreement, Coke’s former Chairman of the Board and CEO, Mr. Douglas Ivester, received a six-year consulting agreement worth $675,000.00, office space, furniture, supplies, a company car, home security service, and club dues. In total Mr. Ivester’s retirement package was reportedly worth $119 million. Steven Heyer, Coke’s former COO, received a severance package reportedly worth at least $24 million after only three years on the job. Jack Stahl, the Company’s former president and COO, received a severance package reportedly worth over $25 million. Douglas Daft, former Chairman of the Board and CEO, was paid over $36 million when he left the Company’s Board in 2004.
Despite disappointing profits and a federal investigation into Coke’s accounting practices, Coke’s board continues to reward leaders that have failed to meet shareholders’ performance expectations. Our Company’s history of paying exorbitant pay packages to departing executives subverts the idea of pay for performance.
In light of gross corporate abuses at companies like Enron, Tyco, and WorldCom, shareholders are taking a closer look at executive compensation practices and seemingly limitless severance packages for senior executives. Requiring shareholder approval for severance agreements—whether entered into prior to or at the time of termination—will insulate the Board from manipulation and will avoid rewarding bad management or poor performance.
Severance agreements may be appropriate in some circumstances. Nonetheless, we believe that the potential cost of such agreements entitles shareholders to be heard when a company contemplates paying out more than twice the amount of an executive's last salary and bonus. Because it is not always practical to obtain prior shareholder approval, the Company would have the option, if it implemented this proposal, of seeking approval after the material terms of the agreement were agreed upon.
Several other companies, including Sprint, Norfolk-Southern, and Bank of America have adopted similar resolutions. In the spirit of improving financial transparency and accountability to shareholders, Coca-Cola should reform its excessive compensation practices and policies.
For these reasons, we urge shareholders to vote FOR this proposal.
