The Coca-Cola Company (NYSE:KO) has decided to recede its budget for its executives, after senior shareholders, including the billionaire Warren Buffet deemed it excessive and overboard. The world’s largest beverage maker has decided to pitch their shares to a smaller group of executives while the rest will be awarded with cash bonuses.
The Coca-Cola Company (NYSE:KO) is devising a plan to make their authorized shares last longer. They also want that the long term equity awards should be based on share performance rather than stock options. Investors have been unhappy with The Coca-Cola Company (NYSE:KO)’s pay plan calling it crude. Their scrutiny was based upon The Coca-Cola Company (NYSE:KO)’s slowing growth rate. Their current equity plan is to transfer 13 billion dollars to management over the next four years.
Warren Buffet has been a long term critic of The Coca-Cola Company (NYSE:KO)’s excessive payment to the executives, saying that it’s not worth it and it brings a notorious image to the company. Moreover the investors get to suffer. Hence the equity valuation has been transferred from shares to money and the deserving will get cash bonuses instead of shares.
The pressure of the shareowners, which are known to manipulate the company policies according to the power given to them through the shares they own is immense. The Coca-Cola Company (NYSE:KO) management thanked these share owners to invest their thought on such an important topic and bring the company to a decision. After their revised compensation, The Coca-Cola Company (NYSE:KO)’s shares weren’t really affected, just a slight dip of around 0.2 percent.
Warren Buffet’s reservations were based on the fact that executives were given as much as 18 million while the investors and shareholders work day and night to sustain The Coca-Cola Company (NYSE:KO) on a reasonable point at the stock market and get a small amount. He further said that they are the profit makers and the policy makers, while The Coca-Cola Company (NYSE:KO) is paying off executives, making their lavish lives more luxurious.
The Coca-Cola Company (NYSE:KO) also faces enormous threat from PepsiCo Inc (NYSE:PEP) that has consolidated power in the East and has a vast local distribution range. Coke (NYSE:KO) mostly entertains the international market but is short on local distribution. Recently a shareholder of a company, EBay Inc (NASDAQ:EBAY) pitched in the suggestion that EBay Inc (NASDAQ:EBAY) should part ways with Pay Pal in order to focus on sole expansion and image building. Even though eBay Inc (NASDAQ:EBAY) earned quite good through Pay Pal but the shareholder pressure is just too much to handle these days.
The same case has happened with The Coca-Cola Company (NYSE:KO) but this time it is more reasonable and warranted as paying executives mountains of cash is simply unreasonable unless and until you are raking in profits by the second. But Coke is going through a rough patch, and it needs to focus on the company’s financial building rather than feeding the executives.