RW - Shareholder Initiatives: Coca-Cola

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Status

Annual meeting held April 16, 2003

% voting YES: 8.9%

Shareholder resolutions face a variety of obstacles. For this reason, it is considered significant if a resolution garners at least 5% of the vote. Votes over 10% indicate exceptional shareholder support for an issue.

Filers of "social-issue" resolutions generally don't expect their resolution to receive a majority vote and be adopted by management. Rather, filers use these resolutions to get management's attention, and to raise the issue with other shareholders. They hope to achieve a vote sufficient to allow them to return the next year.

According to SEC rules, a resolution must receive 3% of the vote the first year it is filed, 6% in year two and 10% thereafter in order to be included on the proxy the following year.

Coca-Cola

Executive Compensation Review

WHEREAS,

"Beginning with the strongest companies, CEOs and their boards should simply reach the conclusion that executive pay is excessive and adjust it to more reasonable and justifiable levels.”

– William McDonough, President of the New York Federal Reserve Bank speaking at a 9/11 memorial event. Mr. McDonough went on to say that excessive CEO pay was "terribly bad social policy and perhaps even bad morals."

“The Coca-Cola Company . . . rewrote [its] pay rules once it became clear that they would not meet their goals. In doing so, the compan[y] offered perhaps the starkest example of discarding the principle of pay for performance, consultants said.”

– “Coke Rewrote the Rules, Aiding the Boss,”
New York Times, April 7, 2001

Though Coca-Cola stock lost 22% of its value in 2001 (compared to a 12% loss for the S&P 500), and 6,000 Coca-Cola employees (21% of the company’s workforce) were laid off just a year earlier, Coca-Cola CEO Doug Daft enjoyed a 47% compensation increase in 2001, to more than $74 million. In 2001, Mr. Daft’s salary rose 18% and his bonus grew 17% over the previous year.

As a part of his pay package, Coke’s board voted in late 2000 to grant Mr. Daft a 1,000,000 share stock grant (then valued at almost $60 million) if earnings grew 20% a year over the five years beginning January 1, 2001. Mr. Daft would get none of the award if earnings growth fell beneath 15%, and a partial award if earnings grew between 15% and 20%.

In early 2001, Mr. Daft informed investors that the company would not meet its previously announced earnings target. In May 2001, just a few months into the performance period, Coke’s directors lowered the targets substantially, such that Mr. Daft would get his full reward with just 16% earnings growth, and at least some reward if earnings grew just 11%.

Also included in Mr. Daft’s 2001 compensation was more than $100,000 worth of use of the company aircraft for personal travel. Mr. Daft’s retirement plan also counts stock option gains toward his pension, a generous practice followed by only a small minority of large companies, and one that does not apply to all Coca-Cola workers. (Source: “Fat Cats Pensions Under Heavy Fire: It’s One Big Buddy System,” Houston Chronicle, June 2, 2002)

RESOLVED: that the Board conduct a comprehensive executive compensation review and publish a report of this review, omitting proprietary information and prepared at a reasonable cost. This report shall be available to all shareholders upon request by August 15, 2003. At a minimum, this review should consider the following:

Would shareholder value be enhanced if Coca-Cola altered its executive compensation policies to:

1) Freeze executive pay during periods of large layoffs?

2) Establish a maximum ratio between the highest paid executive officer and the lowest paid employee?

3) Seek shareholder approval for any executive severance payments exceeding two times annual salary?

4) Eliminate stock option gains from the calculation of executive pensions?

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