Coke Chairman’s Pay Is Called Hard to Swallow
Few corporate stars earn more than America’s top sports and entertainment figures, but Coca-Cola Co. Chairman Roberto C. Goizueta makes Chicago Cubs’ $7-million infielder Ryne Sandberg look underpaid.
Coke’s 1991 proxy statement discloses that Goizueta received 1 million shares of company stock last year worth about $81 million at today’s prices. In addition, he earned base salary, bonuses and incentive deals worth about $3.14 million. The stock award takes the form of restricted stock, which carries limitations on his freedom to sell and must be forfeited if the 60-year-old Goizueta leaves the company before April, 1996.
According to UC Berkeley professor and compensation expert Graef Crystal, Goizueta’s $84-million package is the second-largest ever granted, next to that of Time Warner Inc. Chairman Steven J. Ross, who in 1990 earned $78.1 million. Crystal’s methodology values Goizueta’s package at $63.5 million, based on an average price for Coca-Cola stock during 1991 of $59.90 per share, rather than Thursday’s closing price of $80.625 per share.
He points out, however, that ultimately Goizueta’s grant may top Ross’, because Ross was awarded options on 1.8 million shares that will only be valuable if the company’s stock closes at or above $150 per share.
Time Warner stock closed Thursday at $104.75 per share. “I’m sure Ross would gladly change places with Goizueta,” Crystal said.
Coke’s award comes at a time of mounting criticism by shareholders and legislators of executive pay, which rose sharply during the 1980s. Principal targets are executives whose pay ballooned while shareholders’ returns sagged.
Goizueta, however, has presided over one of the decade’s winners. Coke’s stock price has increased nearly 14-fold in the 10 years since he took over as chairman, from nearly $6 per share at the end of 1981 to $80.25 at the end of 1991.
Crystal, a prominent critic of high pay in the boardroom, said he is “uneasy about attacking Goizueta. Who among his shareholders will pick up a paving stone and march with me to the boardroom? His shareholders are bursting their buttons with fine food and drink.”
Nonetheless, Crystal, like many shareholder-rights activists, dislikes restricted shares because they are granted regardless of what happens to the company stock price in the future. He objects further on the grounds that Goizueta has already been handsomely rewarded for past achievements, most notably with a previous award of 500,000 restricted shares--worth $15 million--for the three years ended Dec. 31, 1990.
“This looks like another case of special deals for special people,” said Ralph Whitworth, president of United Shareholders Assn., which represents institutional shareholders. “It smells tremendously.”
“Shareholders are interested, not in how much, but in how executives are paid. This deal loses on both counts, because it appears to be tremendously outsized and also doesn’t provide incentives,” Whitworth said. “Even if the stock price falls, Goizueta still wins. Shareholders appreciate his performance immensely, but this is a case of overreaching. It is taking the idea of management ownership to the absurd.”
Linda Peek, director of corporate communications at Coca-Cola’s Atlanta headquarters, defended Goizueta’s pay. “The success record of the Coca-Cola Co. speaks for itself,” she said. “More than $50 billion has been added to the wealth of Coca-Cola shareholders over the past 10 years and $22 billion of that in just the past year.”
Coca-Cola Salaries
Here are the 1991 base salaries for the top executives of the Coca-Cola Co., according to the company’s proxy statement. The officials also received bonuses and incentive packages that increased their pay.
* Roberto C. Goizueta, chairman and chief executive, $1.06 million.
* Donald R. Keough, president and chief operating officer, $925,000.
* Ira C. Herbert, executive vice president (retired this year), $650,000.
* John W. Georgas, executive vice president (retired this year), $516,667.
* M. Douglas Ivester, senior vice president, $445,000.
* All executive officers as a group (17 people, including those five), $6.3 million.
Source: Associated Press
