Wintergreen Advisers today released the following letter, which was sent to
the directors of The Coca-Cola Company KO and Berkshire Hathaway
BRK BRK.B). In the letter, Wintergreen states its belief that the
Boards' recent actions are utterly inconsistent with the well-defined
fiduciary duties that they owe to their respective shareholders.
______________________________________________________________________________
Board of Directors
Berkshire Hathaway Inc.
3555 Farnam St.
Omaha, NE 68131
Board of Directors
The Coca-Cola Company
One Coca-Cola Plaza
Atlanta, GA 30313
May 7, 2014
Dear Board Members,
Over the past six weeks, Wintergreen Advisers has raised a number of serious
issues regarding the excessive nature of Coca-Cola's 2014 Equity Plan. As we
have stated in numerous communications, we believe the plan materially dilutes
shareholders and allows senior management to reap outsized rewards just for
showing up. All of this is well-known. Perhaps less well-known, and
potentially more troubling, however, are the corporate governance issues that
emerged during the course of Coca-Cola's proxy solicitation period and shortly
thereafter.
Recently, we learned that (i) not a single Coca-Cola Director voted against
the plan that ultimately garnered support from less than half of Coca-Cola's
total outstanding shares, (ii) Coca-Cola pushed through the plan over the
objections of its largest shareholder, and (iii) Warren Buffett disapproved of
the plan, but did not want to speak out for fear of embarrassing Coca-Cola. We
find all of this very troubling and indicative of major corporate governance
issues, both at Coca-Cola and at Berkshire Hathaway.
Corporate governance has been very much in the news this proxy season. SEC
Commissioner Luis Aguilar put it very well in an April 2014 speech in which he
stated that for investors, corporate governance "means that the owners of the
company are those who have paid to own the company's stock, and that
management are merely their employees[.] . . . But even the most capable
management, left unchecked can make bad decisions [and that] is why
shareholders elect a board of directors to represent their interests. . . .
Good corporate governance helps shareholders and their representatives to hire
the right managers, and helps make sure that the managers remember they
ultimately answer to shareholders. Additionally, good corporate governance
also helps to remind the company's directors that they work for the company's
shareholders, not for themselves, and certainly not for management." (emphasis
added) As Commissioner Aguilar noted in his speech, these concepts are not
new, and the duties of loyalty and due care owed by corporate directors have
been well-developed over time in Delaware and other state courts. In the
context of a proxy solicitation, good corporate governance and a board's
adherence to its fiduciary duties means that directors disclose all material
information within their control when they seek shareholder action.
In light of the events surrounding Coca-Cola's annual meeting and the passage
of the excessive 2014 Equity Plan, we believe that the directors of both
Coca-Cola and Berkshire Hathaway would do well to study Commissioner Aguilar's
words. Indeed, we believe their recent actions are utterly inconsistent with
the well-defined fiduciary duties that they owe to their respective
shareholders. The Coca-Cola Directors never should have approved such an
excessive plan. Furthermore, upon learning of the dearth of shareholder
support for the plan, the Directors should have withdrawn the plan or firmly
committed to scaling back its implementation. In Berkshire Hathaway's case, we
believe the Directors had a duty to represent the best interests of their
shareholders, even if doing so would embarrass their cronies.
Overall, we love Coca-Cola as a company. Our clients have owned Coca-Cola
shares for more than five years and we believe that good corporate governance
could unlock a great deal of value for shareholders. However, as recent events
have demonstrated, instituting good corporate governance is difficult, if not
impossible, at a company that ignores its shareholders.
Regards,
David Winters, CEO
Wintergreen Advisers, LLC
973-263-4500
Cc: Muhtar Kent
Herbert A. Allen
Ronald W. Allen
Ana Botin
Howard G. Buffett
Richard M. Daley
Barry Diller
Helene D. Gayle
Evan D. Greenberg
Alexis M. Herman
Robert A. Kotick
Maria Elena Lagomasino
Donald F. McHenry
Sam Nunn
James D. Robinson III
Peter V. Ueberroth
Jacob Wallenberg
Warren E Buffett
Charles M. Munger
Howard G. Buffett
Stephen B. Burke
Susan L. Decker
William H. Gates III
David S. Gottesman
Charlotte Guyman
Donald R. Keough
Thomas S. Murphy
Ronald L. Olson
Walter Scott, Jr.
Meryl B. Witmer
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