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Will the new Coca-Cola equity plan guidelines become the “classic” model or just “new Coke?”

Publisher: Cooley LLP
Author: Cydney Posner

Coca-Colas decision to scale back the use of its equity compensation plan and adopt “equity stewardship guidelines” has certainly received a lot of press – for an equity plan, that is.

Generally, under the new guidelines, the company will take steps to reduce the plan’s burn rate (defined as the number of shares granted as a percent of shares outstanding) so that the pool of shares in the plan will last until the plan expires. The question now –assuming that the new guidelines suffice to assuage the shareholders pressuring the company — is whether some version of the new Coke guidelines will soon become de rigueur for equity plans at other large companies.

This new direction stems from earlier pressures on Coke, in light of the company’s recent unsatisfactory financial performance, to rein in its executive compensation, notwithstanding shareholder approval of the equity plan and the last annual meeting. When the pressures come form a shareholder with a 9% stake named Warren Buffet, the company tends to listen. There have been rumblings that Mr. Buffet disapproved from the proposal in private, but has chosen to publically abstain from voting on the measure as a means to “make clear he wasn’t attacking Coke’s management or directors”.

For full access to the article and details of the “equity stewardship guidelines,” please click here.

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