Activist investors have become the new normal for business. Carl Icahn has pushed Apple to pay out more money to shareholders through dividends and stock buybacks. Bill Ackman has pushed Botox maker Allergan, Inc. (NYSE:AGN) to merge with another biotech company, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX), and Allergan is fiercely resisting.
The latest target of an activist is one of the most widely held companies in the world and represents a pushback against one of the best investors in the world: Coca-Cola and its biggest shareholder, Warren Buffett.
The push comes from David Winters, founder and CEO of Wintergreen Advisers, which holds 2.5 million The Coca-Cola Company (NYSE:KO) shares. David Winters opposes the hefty pay packages for the top executives at Coca-Cola. He says the plan pays out excessive salaries to top executives by issuing new stock, and that new stock ultimately dilutes existing shareholders, including Winters.
David Winters first broke his silence on my show “Opening Bell” and then through a letter to Buffett, The Coca-Cola Company (NYSE:KO)’s largest shareholder. It turned out Buffet also had a problem with the plan but chose not to say anything because he didn’t want the public to sense a rift between him and Coca-Cola management.
The Coca-Cola Company (NYSE:KO) defends the compensation plan, saying it is fine. But David Winters says the company’s lack of answers is a bigger problem than he first thought — it’s now a problem with the company’s governance — and that he has lost confidence in its CEO, Muhtar Kent. Our interview follows, edited for clarity and length.
Question: You have been an investor in Coca-Cola for five years. What changed?
Answer: We discovered in March of this year, on page 86 of the proxy, that there was this huge amount of dilution of stock of the existing shareholders because of new stock issuance so they could pay huge compensation to the top managers. It was such a huge amount of money, some $24 billion. And we decided it was in our clients’ fiduciary interest that we write a letter to the company objecting.
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