Coca-Cola Co.
Summary:
Coca-Cola is one of the premier company's in the world and has made some excellent decisions related to growth and environmental sustainability over the last few years. This has been in large part to the leadership and decision-making of CEO E. Neville Isdell and the other NEOs. Coca-Cola has also built a strong compensation program that is tied to the performance of its execs, however some of the incentives soared to new heights in 2007. Are we Americans really that lazy that we need a $25 million motivator to push us to achieve? What ever happened to a good old-fashioned pat on the back?
Analysis:
Coca-Cola has grown to be the largest beverage company in the world, operating in over 100 countries. It is truly an international company with over 75% of operating profits coming outside of North America. Although the beverage industry in the U.S. as a whole has been hurt by the weak economy, the large companies like Coca-Cola continue to grow and profit. Coca-Cola is further strengthening its position through recent investments in environmental initiatives and cost-cutting efforts. So what's an executive for the largest beverage company in the world make in a strong year? As expected, it's A LOT, but is it justified?
So… What Are They Paid?
CEO E. Neville Isdell, for instance, took home a total compensation package in 2007 worth an estimated $32 million. The CEO's compensation was high in several keys areas, but most of it was tied to the performance of the company. Although all incentive programs have some degree of discretion, Coca-Cola's methods appear to be very sound. Executives can make a lot of money if they succeed, but their bonus can disappear if results are poor, a rarity in incentive plans.
Both the CEO and the company's four NEOs received relatively high stock and bonus awards. In addition, the executives have accumulated a large amount of stock and option awards. By our count, the CEO alone has over 750,000 stock awards and nearly 3 million option awards outstanding. The good part is that less than one-third of the options are currently exercisable, meaning most of the options are contingent upon future performance. In 2007, the CEO was targeted to receive 115,000 stock awards and nearly 900,000 option awards. Estimated value of 2007 awards for Mr. Isdell totaled $12.5 million.
Some of the worst news comes from the perquisites section Coca-Cola decided the CEO, should be able to fly himself and his family wherever they want to go, on the company's dime. Incremental costs of aircraft usage for the Isdell family ran up to $340,000 in 2007. And since economic times are tough, why not throw in a car and driver worth $80,000, security provisions for $115,000, and matching contributions of $200,000 plus!
Some of the best news from the Coca-Cola compensation plan comes from the termination and change-in-control section. Unlike many other companies, large cash severance payments are not entitled to the CEO and NEOs at Coca-Cola. There is some accelerated vesting of stock awards, which is a concern, but the total amount doesn't appear too high.
Compensation Details:
| CEO | NEO Avg. | |
|---|---|---|
| Base Salary | $1,612,500 | $751,557 |
| Bonus | $0 | $0 |
| Stock | $9,426,234 | $2,946,413 |
| Options | $7,369,657 | $2,789,576 |
| non-Equity Incentives | $6,649,500 | $2,169,150 |
Reference Links:
(1) Annual
Proxy Statement
(2) Annual
Report