KO Coca Cola Company

By Jennifer Maloney and Joann S. Lublin 

The biggest proxy adviser is challenging the $17.6 million pay package given last year to Coca-Cola Co.'s outgoing chief executive.

Institutional Shareholder Services Inc. said it opposes Chief Executive Muhtar Kent's 2016 package because his total compensation increased from $14.6 million in 2015 despite weaker financial performance and unmet financial goals. Mr. Kent is set to hand the reins on May 1 to Chief Operating Officer James Quincey; Mr. Kent will remain chairman of the board.

The proxy adviser took issue with the board's use of discretionary pay tied to qualitative assessments of Mr. Kent's performance. It urged Coke shareholders to vote "no" on its nonbinding resolution about executive-pay practices. The shareholder meeting is scheduled for April 26.

"Discretionary assessments have led to overall pay increases amid a period of flagging share price and underwhelming financial performance," ISS said. The firm noted that most performance measures declined for Coke in 2016, including shareholder return, revenue and net income.

"The fundamental principle of our compensation programs is that they should pay for performance and compensate leaders for delivering results, " a Coke spokesman said. Under Mr. Kent's leadership, the company "delivered its profit target for the full year," expanded its global market share and diversified its beverage portfolio, the spokesman said.

"We continue to see support for our executive compensation programs through our ongoing direct engagement with shareowners," he added.

Recommendations by ISS are taken into account by some large shareholders. Glass Lewis & Co., the second-biggest proxy advisory firm, recommended earlier this week that shareholders vote "yes" on Coke's pay practices.

In 2014, Coke overhauled its executive-compensation plan, scaling back stock options and shifting to more cash-based performance awards, following criticism from billionaire investor Warren Buffett and other shareholders who called the equity plan excessive.

Mr. Kent in 2016 received $1.41 million for "individual performance" -- close to the maximum potential payout for this component. Coke said he received this pay for accomplishments such as diversifying the company's beverage portfolio, overseeing an orderly CEO transition and leading an effort to divest its bottling operations.

In a proxy statement filed March 9, Coke's board compensation committee wrote that while the majority of incentive pay should be based on financial metrics, "progress toward non-financial goals that are critical to our business, including our sustainability focus areas, also adds value for our shareowners."

Write to Jennifer Maloney at jennifer.maloney@wsj.com and Joann S. Lublin at joann.lublin@wsj.com

(END) Dow Jones Newswires

April 06, 2017 20:32 ET (00:32 GMT)

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