Company Name: Coca-Cola Co.
Public Availability Date: January 3, 2008
Document Sections:
INQUIRY LETTER 1
[INQUIRY LETTER 1]
December 14, 2007
BY HAND DELIVERY
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: The Coca-Cola Company - Shareholder Proposal Submitted by Elton W. Shepherd
Ladies and Gentlemen:
We are writing on behalf of The Coca-Cola Company (the "Company") pursuant to
Rule 14a-8(j) under the Securities Exchange Act of 1934 (the "Act") to notify
the Commission of the Company's intention to exclude from its proxy materials
for its 2008 annual meeting of shareowners a proposal (the "Proposal") received
from Elton W. Shepherd (the "Proponent"). We also request confirmation that the
staff will not recommend to the Commission that enforcement action be taken if
the Company excludes the Proposal from its 2008 proxy materials in reliance on
Rule 14a-8(i)(7) and Rule 14a-8(i)(3) under the Act. In the alternative, in the
event the staff does not agree that the Company may omit the Proposal in
reliance on Rule 14a-8(i)(7) and Rule 14a-8(i)(3), we request that the staff
require the Proponent to revise the supporting statement to remove the
statements discussed below in reliance on Rule 14a-8(i)(3).
A copy of the Proposal and the Proponent's supporting statement, together with
related correspondence received from the Proponent, are attached as Exhibit 1.
In accordance with Rule 14a-8(j), we have enclosed six copies of this letter,
including the exhibits. A copy of this letter also is being provided
simultaneously to the Proponent.
The Company currently intends to file definitive copies of its proxy materials
with, the Commission on or about March 3, 2008.
The Proposal
The Proposal requests that the Company's shareowners approve the following
resolution:
"RESOLVED: That Shareowners Urge Coca-Cola's Board That A Significant Percentage
of Future Awards Of Free Restricted Stock And Performance Share Units...Are
performance based; Are tied to company specific performance metrics, performance
targets and timeframes clearly communicated to shareowners; Can not be
prematurely released or substantially altered without a shareowners vote."
Rule 14a-8(i)(7): Ordinary Business Operations
Rule 14a-8(i)(7) permits the exclusion of a shareholder proposal that "deals
with a matter relating to the company's ordinary business operations." According
to the Commission's release accompanying the 1998 amendments to Rule 14a-8, the
underlying policy of the ordinary business exclusion is "to confine the
resolution of ordinary business problems to management and the board of
directors, since it is impracticable for shareholders to decide how to solve
such problems at an annual meeting." Release No. 34-40018 (May 21, 1998) (the
"1998 Release").
The Commission's 1998 release established two "central considerations"
underlying the ordinary business exclusion. The first is that "certain tasks are
so fundamental to management's ability to run a company on a day-to-day basis
that they could not, as a practical matter, be subject to direct shareholder
oversight." The second is that a proposal should not "seek[;]; to `micro-manage'
the company by probing too deeply into matters of a complex nature upon which
shareholders, as a group, would not be in a position to make an informed
judgment."
The staff has previously stated that certain equity compensation proposals
focusing solely on compensation paid to senior executive officers and directors
are not considered matters within the "ordinary business operations" of a
company and are not excludable under Rule 14a-8(i)(7). See Staff Legal Bulletin
No. 14A (July 12, 2002). The staff further stated in SLB No. 14A, however, that
a company may rely on Rule 14a-8(i)(7) for exclusion of equity compensation
proposals focusing more generally on a company's "general workforce" (including
senior executive officers and directors).
The Proposal requests that a "significant percentage" of the Company's future
restricted stock and performance share units ("PSUs") (i) be performance based,
(ii) be tied to specific performance metrics, performance targets and timeframes
clearly communicated to shareowners, and (iii) not be prematurely released or
altered without shareowner approval. The Proposal does not purport to limit its
application to awards made to senior executive officers and directors (or any
other specific group of employees), but instead would apply to all awards of
restricted stock and PSUs, regardless of the rank or position of the grantee.
For this reason, the staff has previously permitted exclusion of a nearly
identical proposal from the Proponent on grounds that the proposal concerns
"general compensation matters." See AmSouth Bancorporation (January 12, 2006);
AmSouth Bancorporation (January 17, 2005); and AmSouth Bancorporation (February
4, 2004). In each of the cited examples, the Proponent requested that the
company confine future grants of restricted stock to the same limitations
contained in the Proposal.
The only difference between the Proposal and the proposals addressed by the
staff in the letters cited above is that the Proposal would apply to the
Company's PSUs, not just restricted stock. The Proponent's inclusion of PSUs in
the Proposal does not alter the fact that the Proposal applies to the Company's
equity compensation programs generally and is not limited to the Company's
senior executives and directors. Accordingly, the Proposal is excludable under
Rule 14a-8(i)(7) as an ordinary business matter (i.e., general compensation
matters).
Rule 14a-8(i)(3): False and Misleading Statements
Rule 14a-8(i)(3) permits the exclusion of a proposal and an accompanying
supporting statement if either is contrary to the Commission's proxy rules. One
such rule, Rule 14a-9, prohibits false or misleading statements in proxy
materials.
The staff has stated that a company may exclude statements contained in a
proposal, or exclude a proposal in its entirety, under Rule 14a-8(i)(3) where
"statements directly or indirectly...make charges concerning improper...conduct
or association, without factual foundation," or where "the company demonstrates
objectively that a factual statement is materially false and misleading." See
Staff Legal Bulletin No. 14B (September 15, 2004).
While the Company acknowledges the staff's long-standing practice of permitting
shareholders to make revisions that are minor in nature, this practice, as
stated by the staff, was adopted to "deal with proposals that comply generally
with the substantive requirements of Rule 14a-8, but contain some minor defects
that could be corrected easily." See Staff Legal Bulletin No. 14B. Indeed, as
stated by the staff in Staff Legal Bulletin No. 14B, "Our intent to limit this
practice to minor defects was evidenced by our statement in SLB No. 14 that we
may find it appropriate for companies to exclude the entire proposal, supporting
statement or both as materially false or misleading if a proposal or supporting
statement would require detailed and extensive editing in order to bring it into
compliance with the proxy rules." See also Staff Legal Bulletin No. 14 (July 13,
2001).
The Proponent's supporting statement contains so many statements that either are
demonstrably and objectively false, or imply improper conduct on the part of the
Company without factual foundation, that the Proposal would require extensive
editing in order to comply with Rule 14a-8(i)(3) and Rule 14a-9. On this basis,
the Proposal may be omitted from the Company's proxy materials.
Mary E. Minnick Released Share Amounts
The supporting statement includes the statement that "Minnick received the cash
equivalent of 35,000 forfeited, unvested shares" upon her departure from the
Company. As described in the Company's Form 8-K filed with the Commission on
March 6, 2007, Mary E. Minnick, the Company's former Executive Vice President
and President, Marketing, Strategy and Innovation, departed the Company,
effective February 28, 2007. Upon her departure, 19,228 unvested shares of
restricted stock were released to Ms. Minnick. These shares were not "forfeited"
shares, as suggested by the Proponent, but were in fact the shares earned by Ms.
Minnick pursuant to the Company's shareowner-approved plan for the 2004 - 2006
PSU performance period, which ended December 31, 2006. Moreover, Ms. Minnick did
not receive cash in lieu of shares. A copy of Ms. Minnick's Form 4, dated
February 16, 2007, reporting her acquisition of these shares is attached as
Exhibit 2. (Ms. Minnick will also be entitled to receive a pro rata cash payment
for PSUs earned during the 2005 - 2007 PSU performance period if the performance
criteria are met. The results of the 2005 2007 PSU performance period will be
determined in February 2008.)
The Company does not know where the Proponent obtained the "35,000" number
included in his supporting statement; however, as disclosed in the Company's
2007 proxy statement, Ms. Minnick's target award for the 2006 - 2008 PSU
performance period, which was granted at the beginning of 2006, was 35,000 PSUs.
The Proponent seems to have taken this number and turned it into support for his
argument that 35,000 shares of restricted stock were released to Ms. Minnick
upon her departure from the Company, or replaced by a cash payment. This
statement is objectively false.
Establishment of Performance Share Unit Program
The supporting statement includes the statement that "In 2001, Coca-Cola
Established A Performance Share Unit Program." This statement too is objectively
false. The Company established its first PSU program in late 2003, with the
first three-year performance period of 2004 - 2006. While it is true that in
2001 the Company's shareowners approved an amendment to the Company's 1989
Restricted Stock Award Plan of The Coca-Cola Company ("1989 Plan") to allow for
the grant of performance-based awards, this amendment did not establish the
Company's "Performance Share Unit Program." The 1989 Plan, as amended in 2001,
was used by the Company to grant only performance-based restricted stock awards
until the establishment of the first PSU performance period in 2004. Copies of
the relevant portions of the Company's proxy statements for the 2004 and 2001
annual meetings of shareowners are attached as Exhibits 3(a) and (b),
respectively. Accordingly, the Proponent's statement that the Company instituted
a PSU program in 2001 is objectively false and misleading in that it implies the
Company has been issuing PSUs for three years longer than is the case.
PSU Growth Targets
In the supporting statement, the Proponent states that "In 2006, Coca-Cola met
its PSU growth target by excluding certain accounting charges. Actual EPS grew
+5.9%, not +8.0%." This statement is objectively false and misleading in a
number of respects, described below.
Background
The Company's Compensation Committee established compound annual growth in
earnings per share ("EPS") as the performance measure for its PSU awards (prior
to the Company's most recent PSU grants for the 2007 - 2009 performance period).
The target EPS growth level is set at the beginning of the three-year
performance period and is measured over that period. As described in the
Company's annual report on Form 10-K for the year ended December 31, 2006,
compound annual growth in EPS is adjusted for certain items impacting
comparability from year-to-year in order to ensure consistency over the period.
In addition, as clearly disclosed in the 2007 proxy statement, in the event that
compound annual growth in EPS, as adjusted, at the end of the three-year
performance period exceeds the "target" level established by the Compensation
Committee, a number of shares of the Company's common stock greater than the
"target" level will be issued to the executive. In the event that the compound
annual growth in EPS, as adjusted, at the end of the three-year performance
period does not meet the "target" level established by the Compensation
Committee (but is greater than the "threshold" level established by the
Committee), a number of shares of the Company's common stock less than the
"target" level will be issued to the executive.
The Company met its PSU growth target "in 2006"
Because the performance period for PSUs covers three years, the Proponent's
statement that the Company met its PSU growth target "in 2006" does not clearly
inform the Company's shareowners (or the Company) which performance period the
Proponent is referring to in support of the Proposal. It is unclear whether the
Proponent is referring to the performance period that ended in 2006 (covering
the period 2004 - 2006), or the performance period that began in 2006 (covering
the period 2006 - 2008). In either case, the statement is objectively false, as
explained below.
The Company "met" its PSU growth target for the 2004 - 2006 performance period
If the Proponent is referring to the performance period that began in 2004 and
ended in 2006, the statement that the Company "met" its PSU growth target in
2006 is not correct. The Company's compound annual growth in EPS for purposes of
the 2004 - 2006 PSU performance period, with all applicable adjustments as
certified by the Audit Committee and approved by the Compensation Committee, was
below the target level established for that period. Thus, all plan participants,
including many of the Company's executives, received a number of restricted
shares below target. For example, as disclosed in the 2004 proxy statement (see
Exhibit 3(a)), Gary P. Fayard, the Company's Executive Vice President and Chief
Financial Officer, received a target award of 42,246 PSUs for the 2004 - 2006
performance period. As reported on Mr. Fayard's Form 4, dated February 16, 2007
(attached as Exhibit 4(a)), after the performance for the 2004 - 2006 period was
certified, only 27,882 shares, or approximately 66% of the target, were issued.
The remaining PSUs were forfeited. Thus, the Proponent's statement that the
Company met its target EPS growth level is objectively false, assuming the
Proponent is referring to the 2004 - 2006 performance cycle.
The Company "met" its PSU growth target for the 2006 - 2008 performance period
If the Proponent is referring to the performance period that began in 2006 and
will end in 2008, whether compound annual growth in EPS for that period will be
below, at or exceed the target level established by the Committee will not be
determinable until the end of the performance period. As disclosed in the 2007
proxy statement, attached as Exhibit 4(b), the Company set the target level of
EPS growth for the three-year performance period at 8%. The Company will not
know whether it has "met" the 8% target level until early 2009.
Actual EPS Growth for the Performance Period was not 5.9%
Finally, the Proponent states that the Company's earnings per share increased
5.9%, not 8.0%, in 2006. The Company has informed us that, while this is
technically a true statement, it is true with respect to the Company's EPS
growth rate from fiscal 2005 as compared to fiscal 2006a period of one year. As
discussed above, for purposes of its PSU program, the Company measures compound
annual growth in EPS over a three-year period; growth in EPS over a one-year
period does not determine whether the cumulative three-year target will be met
under the PSU program, and did not determine whether the 2004 - 2006 PSUs were
issued at "target" level.
For all the reasons discussed above, the Proponent's statement that "In 2006,
Coca-Cola met its PSU growth target by excluding certain accounting charges.
Actual EPS grew +5.9%, not +8.0%" is objectively false in numerous respects. In
addition, by stating that the Company "met" its PSU growth target by "excluding
certain accounting charges," and that EPS growth was "actually" 5.9%, the
Proponent implies that the Company has improperly manipulated its three-year
compound annual growth target in order to issue PSUs at the target level, which
is materially false and misleading.
PSU Forfeitures and Issuances
In his supporting statement, the Proponent states that "From 2003 to 2007, three
new PSU's were issued for every PSU forfeited." Putting aside the fact that the
performance period ending on December 31, 2007 has not yet concluded, and thus
it is not yet known whether the performance target for the 2005 - 2007
performance period will be achieved, the statement is objectively and
demonstrably false. As described in the 2007 proxy statement, PSUs are forfeited
when the pre-established performance targets are not met. As noted above, Mr.
Fayard earned approximately 66% of his PSUs for the 2004 - 2006 performance
period, and forfeited the remaining 34%. While this is only one example, it
demonstrates that the blanket statement by the Proponent is objectively false
and misleading. In addition, the statement implies that the Company treats
forfeiture as a sham and replaces shares that have been forfeited, which is
patently untrue.
Shareowner Table
The Proposal contains a table which purports to set forth a list of the
Company's shareowners who "always vote no." Presumably, the Proponent is
asserting that these shareowners always vote no on his proposals (and perhaps
other shareowner proposals) as support for his contention that his proposal
actually received 51% of the vote at the Company's 2007 annual meeting of
shareowners. Unless the Proponent has individually asked each of these
shareowners how they voted on the Proponent's proposal last year, there is no
way the Proponent could know this information, as the individual voting results
from the Company's 2007 annual meeting of shareowners are confidential. In
addition, the Company believes this statement is objectively and demonstrably
false, as at least one shareowner included in the Proponent's table has informed
the Company that it, in fact, supported the Proponent's proposal last year.
Thus, the Proponent's statement that 51% of shareowners voted in favor of his
proposal if "certain shareowners who always vote no" are excluded is misleading,
and suggests to the Company's shareowners that the proposal is supported by a
majority of "objective" shareowners.
Conclusion
For the reasons set forth above, it is our view that the Company may exclude the
Proposal from its proxy materials under Rule 14a-8(i)(7) and Rule 14a-8(i)(3).
We further request confirmation that the staff will not recommend any
enforcement action to the Commission if the Company so excludes the Proposal. In
the alternative, we request confirmation that the Company may exclude the
statements referenced above pursuant to Rule 14a-8(i)(3).
When a written response to this letter becomes available, please fax the letter
to me at (202) 637-5910. Should the staff have any questions in the meantime,
please feel free to call me at (202) 637-5737.
Sincerely,
/s/
Alan L. Dye
cc: Elton Shepherd
Carol C. Hayes
Mark E. Preisinger
A. Jane Kamenz
Enclosures
[INQUIRY LETTER 2]
December 21, 2007
U. S. Securities & Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N. E.
Washington, D. C. 20549
Reference: Coca-Cola Shareowner Proposal Submitted By Elton W. Shepherd
Ladies and Gentlemen:
I have received a letter from Hogan & Hartson, counsel to Coca-Cola, regarding
my 2008 shareowner proposal.
Background
In October 2001, I submitted a proposal for inclusion in Coca-Cola's 2002 proxy,
urging the Board to terminate its Restricted Stock Program. After consultation
with Mark Preisinger, Coca-Cola's Assistant VP for Shareowner Affairs, I was
promised that my concerns regarding the premature release of unvested,
restricted shares would be addressed. I withdrew the proposal.
As my concerns were not addressed, in 2002, I resubmitted my proposal. Although
Coca-Cola urged the SEC to exclude my proposal, I presented it at the 2003
annual meeting and received about 6% of the vote.
In 2004, I modified my proposal urging the Board to tie future restricted stock
grants to performance targets and urging that any premature release of unvested,
restricted stock be approved by shareowners. I received about 27% of the vote.
As Performance Share Units (PSU'e) are another form of restricted stock, in
2005, I urged the Board to tie future restricted stock and PSU grants to
performance targets and urged that any premature release of unvested, restricted
stock or PSU's, be approved by shareowners. I received about 32% of the vote.
In 2006, and again in 2007, I resubmitted the same proposal as 2005, each time
receiving about 32% of the vote.
Relationship With Mark Preisinger
Mr. Preisinger has been very helpful. Since 2001, I have met with him at
Coca-Cola headquarters, had lunch with him on numerous occasions, corresponded
with him frequently and spoken with him by phone many times. On occasion Mr.
Preisinger has asked me to modify my supporting statement or pointed out an
inaccuracy on my part. Based on Mr. Preisinger's Input, I have modified and/or
deleted elements of my supporting statement from time to time. It is regretful
that Mr. Preisinger did not contact me regarding my 2008 proposal.
Ordinary Business Operations
Counsel states that "equity compensation proposals focusing solely on
compensation paid to senior executive officers and directors are not considered
matters within the 'ordinary business operations' of a company and are not
excludable under Rule 14a-8(i)(7)." I agree. Moreover, Mr. Preisinger has
informed me thar 36 - million restricted shares, with a current market value of
$2.2 - billion dollars, have been awarded since 1983, hardly ordinary
compensation, but rather, pretty extraordinary.
Counsel states that my proposal "does not purport to limit its application to
awards made to senior executive officers and directors (or any other specific
group of employees), but instead would apply to all awards of restricted stock
and PSU's, regardless of the rank or position of the grantee." My understanding
is that only senior officers and directors are eligible for restricted stock and
PSU awards. However, to add clarity for shareowners, I propose to modify the
first sentence of my proposal to state "Resolved, That Shareowners Urge
Coca-Cola's Board That A Significant Percentage of Future Awards Of Free
Restricted Stock And Performance Share Units To Senior Executive Officers And
Directors" followed by the rest of my proposal left unchanged.
False & Misleading - Mary Minnick
I was informed by Mr. Preisinger that Ms. Minnick was terminated in February
2007. In an April 2004 letter, Mr. Preisinger provided a copy of Coca-Cola's PSU
Program. On page 5, attached as exhibit #1, it states that in the event of
voluntary resignation or termination for cause the recipient must "forfeit the
entire award."
Furthermore, prior to the 2007 annual meeting, Mr. Preisinger put me in touch
with a Coca-Cola executive compensation expert, a woman whose name I do not
recall. The woman informed me by phone that Ms. Minnick's target for the 2004 -
2006 program was 46,000 PSU's. However, only 19,228 of these PSU's met the
performance criteria. The woman informed me further that Ms. Minnick would
receive a check in 2007 for $923,000, the cash equivalent of these 19,228
forfeited PSU's. If in fact these 19,228 unvested PSU's were instead released, I
was misinformed by Coca-Cola. Either way, Ms. Minnick received $923,000.
The compensation expert informed me further that for the 2005 - 2007 program,
Coca-Cola anticipated that Ms. Minnick would receive $773,000 in cash in early
2008. Thus, I was told that Ms. Minnick would receive cash payments of $923,000
in early 2007, plus $773,000 in early 2008, for a grand total of approximately
$1.7 - million dollars, as stated in my supporting statement.
Counsel acknowledges, as I stated above, that Ms. Minnick "will also be entitled
to receive a pro rata cash payment for PSU's earned during the 2005 - 2007 PSU
performance period, if the performance criteria are met." Finally, counsel
claims "the Company does not know where the Proponent obtained the '35,000
number' included in his supporting statement." Again, as noted above, I obtained
my information from the Coca-Cola compensation employee. However, to resolve
counsel's objection, I propose to delete the phrase"... Minnick received the
cash equivalent of 35,000 forfeited, unvested shares" that appears next to her
name in the table in my supporting statement.
False & Misleading - Establishment of Performance Share Unit Program
I thought the PSU program began in 2001. As my error is unintended, I propose to
delete "2001" and substitute "2003".
False & Misleading - PSU Growth Targets
Regarding earnings per share (EPS), Coca-Cola reported on page 6 of its 2006
annual report that diluted EPS were $2.16 in 2006 versus $2.04 in 2005. $2.16
divided by $2.04 equals an increase of +5.9%, as stated in my supporting
statement. Counsel acknowledges this fact.
Further, on page 2 of its PSU Program description, attached as exhibit #2,
Coca-Cola states that the "calculation compound annual growth in EPS shall be
adjusted for significant structural changes, accounting changes, and other
operating and non - operating charges and gains disclosed separately in the year
- end earnings release or other Company public communications for the base year
and each year of the Performance Period." In other words, as noted in my
supporting statement, Coca-Cola can achieve its PSU growth target by excluding
certain accounting charges.
Finally, as Mr. Preisinger informed me that Coca-Cola did not meet its PSU
performance targets during 2002 - 2004 or during 2003 - 2005, it could not have
mathematically met its 2004 - 2006 EPS growth target of +8.0% because, as noted
above, 2006 EPS increased just +5.9%. The PSU program is complicated. To add
clarity, I propose to delete the statement "In 2006, Coca-Cola met its PSU
growth target by excluding certain accounting charges. Actual EPS grew +5.9%,
not +8.0%" and substitute the statement "Coca-Cola reserves the right to exclude
certain accounting charges when calculating PSU growth targets."
False & Misleading - PSU Forfeitures and Issuances
In April 2007, shortly after the annual meeting, I contacted Karen Danielson, a
Coca-Cola employee and former member of Mr. Preisinger's staff. On three
occasions I asked Ms. Danielson for information regarding PSU forfeitures and
new issuances. As Ms. Danielson did not respond and as this information is not
in Coca-Cola's 2007 proxy, I assumed the ratio was 3 new PSU's for every 1 PSU
forfeiture, the same ratio I used in my 2007 shareowner proposal. As it is very
important for shareowners to know that even if PSU's are forfeited, new ones are
often issued, I propose that Coca-Cola provide me with the correct ratio for the
2003 - 2007 timeframe and I will include it in my 2008 proposal.
False & Misleading - Shareowner Table
In 2007 I contacted each shareowner in the table via letter seeking their
support. Some responded informing me they had voted no. Others did not respond.
For example, I wrote to Emory and Georgia Tech a second time and informed them
that unless I heard otherwise, I would assume going forward that they had
consistently voted no. They did not respond. I am pleased that one shareowner
did vote yes, but this shareowner did not inform me. I propose that the
shareowner who voted yes should be deleted form the table and the % yes vote,
excluding these no votes, be recalculated. I can not do this unless I am
informed who voted yes.
Summary
Since my first proposal in 2003, the central thrust of my effort has been to
highlight Coca-Cola's restricted stock program. particularly the repeated
premature release of unvested restricted shares. Note that Coca-Cola does not
deny the premature release of unvested, restricted shares. While counsel does
object to my failure to include the words "to senior executive officers and
directors" as described above, I have suggested that these six words be added to
my 2008 proposal.
Most of counsel's objections center on the PSU program. The PSU program is very
complex, has changed over time and is difficult to describe in 500 words are
less. Any errors that counsel alleges are unintentional and have always been
handled by modification or deletion by me prior to printing the proxy statement.
We can do so again.
There are four tables in my supporting statement, containing a grand total of 23
named executives or shareowners. Yet. counsel can point to just one shareowner
who voted yes instead of no and to Ms. Minnick, where counsel does not deny that
she received $1.7 - million dollars in cash or unvested shares. With all due
respect to counsel's objections, I have worked closely with Coca-Cola since 2003
to ensure accuracy.
I continue to resubmit my proposal for a very simple reason ... I believe
shareowner support for my proposal was the key reason that a $75 - million
dollar unvested, restricted share grant to former CEO Daft was rescinded in 2004
when he departed. This is important to me because during my employment at
Coca-Cola I received annual, modest grants of stock options. I paid for all of
my options. When I retired, some unvested options were forfeited under the terms
of the Stock Option Plan. Thus, I believe it is only fair that senior departing
executives, with unvested restricted share grants, be held to the forfeiture
requirements of the Restricted Stock Plan.
I hope you agree. If so, please direct Coca-Cola to include my proposal, with
the changes I have suggested, in its 2008 proxy
In accordance with Rule 14a-8(j) I have enclosed six copies of this letter
including exhibits #1 and #2. I have also copied Mr. Preisinger. My
understanding form counsel's letter is that the SEC will provide my response to
Hogan & Hartson.
Also, please know that I bear no animus toward CEO Isdell whom I have never met.
Best wishes in all endeavors and have a happy holiday season.
Yours for the SEC,
/s/
Elton Shepherd
720 Buff Drive N. E.
Atlanta, Georgia 30342
404 - 219 - 1048 (Cell)
cc Mark Preisinger
P. S. As my son attends college in California, I will be there until January
5th. If necessary, I can be contacted by phone.
[INQUIRY LETTER 3]
October 15, 2007
Mark Preisinger - Assistant Vice-President, Shareowner Affairs
Coca-Cola Company
NAT 810
1 Coca-Cola Plaza
Atlanta, Georgia 30313
Reference: Shareowner Proposal of Elton W. Shepherd to the Coca-Cola Company
dated October 15, 2007
Dear Mark:
Attached please find a shareowner proposal that I wish to include in Coca-Cola's
2008 proxy.
Also attached is correspondence from Edward Jones Company, confirming their
status as record holder of my 26,294 shares of Coca-Cola common stock. This
confirms that I am eligible to submit a shareowner proposal because I have
continuously beneficially held from October 15, 2006 to October 15, 2007 at
least $2,000 in market value of the Coca-Cola Company commo stock entitled to be
voted on my shareowner proposal at the annual meeting. Further, I confirm that I
intend to hold my Coca-Col stock through the date of the annual shareowners
meeting.
Many thanks to you and your staff who have been consistently helpful and cordial
in addressing my concerns and in guiding me through the SEC shareowner proposal
process. I wish all of you the best in all endeavors.
/s/
Elton W. Shepherd
720 Buff Drive N. E.
Atlanta, Georgia 30342
2008 Coca-Cola Shareowner Proposal - Submitted October 15, 2007
In 1983, Coca-Cola Established A Restricted Stock Program.
Restricted Stock Is Antithetical To Corporate Governance "Best Practices."
It is free.
Has no performance requirements.
Includes dividends and voting rights.
Dilutes the ownership of common shareowners.
And, guarantees recipients a profit, even if Coca-Cola's stock price decreases.
Since 1983, Nearly Half Of All Free Restricted Shares Were Awarded To Two
Executives. |[NCCDEF] |[UCB2] |[TDC4,M'Goizueta .',QL] |[TCC6,MP1,QR] |[XT]
|[ST]|[BK]|[LC15]|[RS2]Executive |[TA]Current Value of Free Shares
|[ST]|[LC3]|[RS4]Goizueta |[TA]$640,000,000 |[ST]Keough
|[TA]|[CUH204]$151,000,000|[XU] |[ST]|[RS6]|[CFZ]Total |[TA]$791,000,000 |[ET]
Although Free Restricted Shares Vest At Age 62, After A 5 Year Restriction
Period, Coca-Cola Has Repeatedly Released Unvested Shares To Departing
Executives. |[NCCDEF] |[UCA1] |[TDC4,M'EXECUTIVE',QL,VU] |[TCC4,MP1,QL,S5,VU]
|[XT] |[ST]|[LC15]|[RS2]Executive |[TA]Value of Unvested Free Shares
|[ST]|[LC3]|[RS4]Ivester |[TA]$98,000,000 . . . Under Ivester our stock dropped
from $58 to $52. |[ST]Stahl |[TA]$19,100,000 |[ST]Daft |[TA]$8,320,000 . . .
Under Daft our stock fell from $52 to $51. |[ST]Chestnut |[TA]$5,190,000
|[ST]Frenette |[TA]$3,600,000 |[ST]Isdell |[TA]$3,050,000 . . . Isdell left in
1998, returned as CEO in 2004. |[ST]Dunn |[TA]$2,500,000 |[ST]Minnick
|[TA]|[TI'$0.000.000. . . ']$1,700,000. . . Minnick received the cash equivalent
of 35,000 forfeited, unvested shares. |[ST]Ware |[TA]|[CUH204]$1,600,000???|[XU]
|[ST]|[RS6]|[CFZ]Total |[TA]$143,060,000 |[ET]
Other Departing Executives Received Free Shares Under Employment Contracts.
|[NCCDEF] |[UCA1] |[TDC4,M'EXECUTIVE',QL,VU] |[TCC4,MP1,QL,S5,G.24] |[XT]
|[ST]|[LC15]|[RS2]Executive |[TA]Value of Free Shares |[ST]|[LC3]|[RS4]Patrick
|[TA]$3,490,000 . . . Patrick also received a $2,000,000 consulting contract
with "no obligation to work any hours during any period of time." |[ST]Heyer
|[TA]$2,080,000 . . . Heyer also received an $8,000,000 cash severance. |[ET]
In 2001, Coca-Cola Established A Performance Share Unit Program.
PSU's, Another Form Of Free Stock, Are Forfeited Unless Compound Earnings Per
Share Grow +8.0% Over 3 Years. But, EPS Can Be Manipulated And Forfeiture Is Not
Guaranteed.
In 2005, the Securities & Exchange Commission determined that Coca-Cola inflated
EPS by "channel stuffing" concentrate from 1997-1999 in Japan.
In 2006, Coca-Cola met its PSU growth target by excluding certain accounting
charges. Actual EPS grew +5.9%, not +8.0%.
From 2003-2007, three new PSU's were issued for every PSU forfeited.
CEO Isdell Has Received Over $41,000,000 In Free Stock. |[NCCDEF] |[UCA1]
|[TDC4,MP1,QL] |[TCC6,M'$00.000.000',QR] |[XT] |[ST]|[LC15]|[RS4]Restricted
shares upon departure in 1998 |[TA]$22,490,000 |[ST]|[VE3]Restricted shares upon
return in 2004 |[TA]$6,900,000 |[ST]Performance Share Units, 2004 - 2006
|[TA]$12,130,000 |[ST]|[TA]|[TU204] |[ST1]|[RS6]|[CFZ]Total |[TA]$41,520,000
|[ET]
Since 2002, PepsiCo Has Outperformed Coca-Cola By + 24%. |[NCCDEF] |[UCA1]
|[TDC4,MP1,QL] |[TCC4,M'0-0-0000',QC,GP1] |[TCC4,M'00-00-0000',QC,GP1]
|[TCC4,M'Returnd',QC,GP1] |[XT] |[ST]|[LC15]|[TN2,3]|[RS5]$100 Investment -
Stock Price Appreciation Plus Dividends|[QL] |[ST]|[LC5] |[TA]1-1-2002
|[TA]12-31-2006 |[TA]Return |[ST]|[LC5]|[RS4]Coca-Cola* |[TA]$100 |[TA]$115
|[TA]|math|0 15% |[ST]|[LC5]PepsiCo |[TA]$100 |[TA]$139 |[TA]|math|0 39%
|[ST3]|[LC3]|[TN1,4]|[QL]* Coca-Cola's stock price peaked at $89 in 1998. |[ET]
In 2007 My Proposal Received 532,000,000 Votes Or 32%. Excluding Certain
Shareowners Who Always Vote No, The Yes Vote Was 51%. |[NCCDEF] |[UCA1]
|[TDC4,M'WOODRUFF FOUNDATIONS',QL,VU] |[TCC4,MP1,QL] |[XT]
|[ST]|[LC15]|[RS2]Shareowner |[TA]Shares Always Voted No |[ST]|[LC3]|[RS4]Warren
Buffett |[TA]200,000,000 . . . Buffett, a critic of excessive pay, supports free
restricted stock. |[ST]|[VE3]Suntrust |[TA]90,000,000 . . . Suntrust and
Coca-Cola share a Board member. |[ST]Woodruff Foundation |[TA]87,000,000 . . .
Robert Woodruff never received free stock. |[ST]Barclays |[TA]65,000,000
|[ST]Vanguard |[TA]58,000,000 |[ST]Fidelity |[TA]45,000,000 |[ST]Coca-Cola
Directors |[TA]38,000,000 |[ST]Northern Trust |[TA]26,000,000 . . . Northern
Trust administers Coca-Cola's Pension Plan. |[ST]Emory University |[TA]4,000,000
|[ST]Georgia Tech |[TA]|[CUH204]250,000???|[XU] |[ST2]|[RS6]|[CFZ]Total
|[TA]613,250,000 |[ET]
Brokers Routinely Vote Against Shareowner Proposals. Please Instruct Your Broker
To Vote Yes.
Resolved That Shareowners Urge Coca-Cola's Board That A Significant Percentage
Of Future Awards Of Free Restricted Stock And Performance Share Units ...
Are performance based;
Are tied to company specific performance metrics, performance targets and
timeframes clearly communicated to shareowners;
Can not be prematurely released or substantially altered without a shareowners
vote.
[STAFF REPLY LETTER]
January 3, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: The Coca-Cola Company
Incoming letter dated December 14, 2007
The proposal requests that a significant percentage of future awards of
restricted stock and performance share units be tied to specific performance
metrics and, further, that performance targets and timeframes be clearly
communicated to shareholders. In addition, the proposal requests that future
awards of restricted stock and performance share units not be prematurely
released or substantially altered without a shareholder vote.
There appears to be some basis for your view that Coca-Cola may exclude the
proposal under rule 14a-8(i)(7), as relating to Coca-Cola's ordinary business
operations (i.e., general compensation matters). Accordingly, we will not
recommend enforcement action to the Commission if Coca-Cola omits the proposal
from its proxy materials in reliance on rule 14a-8(i)(7). In reaching this
position, we have not found it necessary to address the alternative basis for
omission upon which Coca-Cola relies.
Sincerely,
/s/
Craig Slivka
Attorney-Adviser |
