Coca-Cola Amends Equity Plan To Minimize Dilution
Coca-Cola Co, under pressure from an activist investor, said it had adopted new guidelines under its 2014 equity plan that will extend the number of years shares will last under the plan by using fewer shares each year.
The company said its new Equity Stewardship Guidelines would increase transparency about equity awards, formalize its practice of share repurchases to minimize dilution, and renew commitments to continue an open dialogue with shareholders on compensation matters.
Wintergreen Advisers, which owns about 2.5 million shares of Coca-Cola on behalf of clients, has been a vocal critic of the company's existing plan, saying it greatly dilutes the holdings of current shareholders.
In September, proxy filings with the Securities and Exchange Commission showed that funds managed by State Street, Fidelity and Capital Group voted against the plan.
The company's compensation committee will limit the grants under the equity plan to an annual “burn rate” of no more than 0.8 percent in 2015, Coca-Cola said.
A burn rate refers to the number of shares granted as a percentage of outstanding shares.
The guidelines will also facilitate a shift towards performance shares and be less heavily weighted toward stock options for employees who are eligible for equity awards.
As a result of the changes, Coca-Cola said it expects shares authorized under the equity plan to last the full term of 10 years.
Wintergreen CEO David Winters sold his shares in Berkshire Hathaway Inc in August, citing Chairman Warren Buffett's inaction on Coca-Cola's equity plan.
Winters was not immediately available for comment.
Berkshire Hathaway is Coca-Cola's biggest shareholder, with a 9.1 percent stake.
Coca-Cola shares were little changed at $42.68 in morning trading on the New York Stock Exchange.