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I disagree with Buffett abstaining from voting against Coke's compensation plan


LongHaul
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Buffett is a great investor and a great person - so I am nitpicking here, but I still think it is important.

 

I disagree with Buffett abstaining from voting against Coke's compensation plan. 

 

Buffett clearly didn't agree with the plan and thought it was excessive.

 

I think it is a weak argument that because he didn't want express disapproval of mgmt he didn't vote against a potentially highly dilutive/excessive plan.  It is a bad precedent and lacks courage. 

 

Three key virtues are wisdom, justice and courage.  If you lack courage, then wisdom and justice will not be implemented .

 

Thoughts?

 

 

 

Here are his key comments from the CNBC transcript.

 

"BECKY: That was 83 percent for the votes that were cast. Why— why did you abstain?

 

BUFFETT: Well, we abstained because— we didn't agree with the plan. We thought it was excessive. And— I love Coke. I love the management, I love the directors. But— so I didn't want to vote no. It's kind of un-American to vote no at a Coke meeting. So (LAUGH) that's— but we— I didn't want to express any disapproval of management. But we did disapprove of— of the plan.

 

The plan— compared to past plans was a significant change. And— there's already a 9 percent or so overhang in terms of options outstanding relative to the amount of sh— shares outstanding, 8 percent— 8 percent— 8 percent to 9 percent. And— this authorization of another 500 million shares. Not all of which would've gone on options. But that's another 11 percent of the company. And— and— I thought it was too much. And— I talked to my partner Charlie Munger, and he thought it was too much. So we abstained."

 

 

 

 

 

 

 

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It is a bit puzzling, but I do appreciate the fact that Becky questioned him about it and he expressed his disapproval on television for Coke management & BOD to hear.

 

Ultimately the votes are not binding when it comes to compensation. Coke does know that he's not happy. Even if he voted against it, would that have changed the vote…The approval level would be a bit lower.

 

I think Buffett hints in the interview that he doesn't want to alienate the board and I'm sure to him he cares more about keeping Muhtar focused on growing Coke than having him kicked out over compensation. Buffett's been around the block and he took the Dale Carnegie courses. Buffett doesn't want to sell any coke ever, so he cares more about the business being managed well versus causing a big stink on compensation.

 

I would have preferred him voicing his opinion before the vote, but I think he didn't want to alienate management. He wants them to continue talking to him and not do something stupid with the business like the folks at Kraft. He was vocal about Kraft and he voted with his feet.

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Guest wellmont

look at it this way. he sends the same message as voting no. plus he gets to also say how great the company and management is. he gets the best of both worlds doing it this way. message has been sent!

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"Ultimately the votes are not binding when it comes to compensation. Coke does know that he's not happy. Even if he voted against it, would that have changed the vote…The approval level would be a bit lower."

 

Actually,  the vote to approve Executive Comp is just advisory (non-binding), but the votes for the equity plan (to issue more options and shares) must have shareholder approval to get issued.   

 

And I think if Buffett took a public stand before the vote, there is a decent chance he could have affected the outcome.

 

From Coke's recent 8-K just filed.

Item 2. Advisory Vote to Approve Executive Compensation. Votes regarding the advisory vote to approve executive compensation were as follows:

 

Item 3. Approval of The Coca-Cola Company 2014 Equity Plan. Votes to approve The Coca-Cola Company 2014 Equity Plan were as follows:

 

 

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"Ultimately the votes are not binding when it comes to compensation. Coke does know that he's not happy. Even if he voted against it, would that have changed the vote…The approval level would be a bit lower."

 

Actually,  the vote to approve Executive Comp is just advisory (non-binding), but the votes for the equity plan (to issue more options and shares) must have shareholder approval to get issued.   

 

And I think if Buffett took a public stand before the vote, there is a decent chance he could have affected the outcome.

 

From Coke's recent 8-K just filed.

Item 2. Advisory Vote to Approve Executive Compensation. Votes regarding the advisory vote to approve executive compensation were as follows:

 

Item 3. Approval of The Coca-Cola Company 2014 Equity Plan. Votes to approve The Coca-Cola Company 2014 Equity Plan were as follows:

 

You are right regarding the equity plan. You need votes for it to pass. I should have remembered that based on the interview with Buffett and Becky.

 

update:

just looked at the 8K results

http://www.sec.gov/Archives/edgar/data/21344/000130817914000200/lcocacola_8k.htm

 

Buffett approved executive comp but abstained on the equity plan. Yeah, it does change my opinion against Buffett given that he could have voted against the equity plan and been vocal that he want's fewer shares authorized and released over a longer time period. If he did this openly, Coke could have fixed the plan. Instead we have what I'm sure are compensation consultants driving important decisions regarding the company.

 

He can also be quite clear that he's ok with executive compensation just not the equity plan as structured.

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Guest deepValue

I'll say what no one else wants to.  It's amazingly self serving and hypocritical and if wasn't Buffett, but just a "well respected business leader" who did this the wrath of value investmentdom would reign down.

 

Self-serving? Hypocritical? It's not like Buffett's getting paid -- he's a shareholder!

 

It's weak, but Buffett avoids direct confrontation at all costs. Not surprising in the least.

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there is a good chance Coke alters the plan voluntarily, quietly on a friday afternoon with an 8k. :)

 

+1

 

I hope you're right. I'm glad the media isn't letting this one go. Should add pressure on KO.

 

I don't know if they have to revote if they want to reduce the numbers and lengthen out the time.

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I'll say what no one else wants to.  It's amazingly self serving and hypocritical and if wasn't Buffett, but just a "well respected business leader" who did this the wrath of value investmentdom would reign down.

 

Agreed.  At least he admitted that he abstained and sort of called them out on TV.  He will probably get them to where he wants to go just through the media pressure he commands, but uncle Carl would have used a 2x4 and we would all have been better for that.  I mean, he could have just let Charlie be the bad guy.

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Guest longinvestor

The subject of excessive compensation in the form of excessive CEO pay, options largesse, etc.  as well as questionable accounting treatment of options goes on in what, 498 of the 500 S&P companies, all at the expense of shareholders. All of that is treated as the norm and cost of doing business, while we obsess over how WEB expresses his disagreement with the KO move. Hmm. Seems to me that the world is looking for inconsistencies in WEB's words, while we need to call out the consistency of the pervasively wrong behavior in the rest of the world

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Guest deepValue

I don't understand why people are justifying WEB's abstention, or calling it clever.

 

 

Why didn't he just vote "no", and call them out publicly on it? I think it's fairly straightforward...

 

He's friends with the CEO and various board members. It's easy for us to say he should've rebuked them...

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