Wintergreen Advisers – Your Home for Global Value®

Established in 2005, Wintergreen is an independent global money manager based in Mountain Lakes, New Jersey. Wintergreen employs a research-driven value style in managing global securities. The firm was co-founded by David J. Winters (bio), who has 30 years of experience in investment advisory services, including management of registered investment companies. David Winters is the firm’s Chief Executive Officer. Wintergreen Adviser’s co-founder is Liz Cohernour (bio), who has over 30 years’ experience in investment advisory business and is the firm’s Chief Operating Officer. All client assets are managed on a discretionary basis. Wintergreen Fund, Inc. is the primary client of the Adviser.

Archived Wintergreen Advisers News:

David Winters quoted in Bloomberg article about Coca-Cola's revamped equity compensation plan

March 10, 2016

Winters said, "Wintergreen is ecstatic that Coca-Cola finally took action on our analysis of Coke's bloated equity bonus plan," in the Bloomberg article, "Coca-Cola Cuts CEO Kent's Pay After Revamping Equity Program" by Anders Melin and Jennifer Kaplan.


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Wintergreen Advisers pleased that Consolidated-Tomoka has hired Deutsche Bank to pursue the directive of Wintergreen's Proxy Proposal

February 17, 2016

New York, NY - (Business Wire) - Wintergreen Advisers, LLC ("Wintergreen") is pleased that Consolidated-Tomoka Land Co. (NYSE: CTO, "CTO") has hired Deutsche Bank to pursue the directive of Wintergreen's Proxy Proposal: to explore strategic alternatives to enhance shareholder value, including the possible liquidation of assets or the sale of the company. We believe CTO is trading at a massive discount to the value of its underlying assets and that a liquidation or substantial asset sale is in the best interests of the CTO shareholders.

We believe it is time to expedite and finalize any sales process while interest rates remain low and the ongoing real estate market recovery remains strong. We think prior and current CTO management has failed to enhance shareholder value beyond a slight reflection of the recovery of the real estate market and CTO needs strong, experienced outside advisers to point the company in a proper direction for the benefit of all shareholders.

At this point we cannot tell precisely what instructions have been given to Deutsche Bank as investment banker adviser, nor can we know how vigorously it will be permitted by CTO's Board of Directors to explore all meaningful strategic paths for maximizing shareholder value through the sales process. We would welcome CTO's support of Wintergreen's Proposal on CTO's forthcoming proxy statement.

We note that CTO also announced that its review of company activities and disclosures, conducted by CTO's Audit Committee, had not uncovered any violations of securities laws. We question this finding and reiterate that we believe CTO management has violated both the letter and the spirit of multiple laws.


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Wintergreen Advisers Cites What it Sees as Further Disclosure Failings at Consolidated-Tomoka

Urges Board of Directors to expedite sale process to maximize value for shareholders

January 12, 2016

New York, NY - (Business Wire) - Wintergreen Advisers, LLC ("Wintergreen") sent the following letter to the board of Directors of Consolidated-Tomoka Land Co. (NYSE: CTO, "CTO") to draw attention to what Wintergreen believes are continuing failures by CTO to make full disclosures to its shareholders about the financial condition of the company.

The Wintergreen letter notes that CTO's recent announcement of a new share repurchase program fails to mention that the company's share count has increased since John Albright was named CEO in August 2011, depriving shareholders of the benefits typically associated with share repurchases. In fact, we believe CTO's share repurchases are being used to make stock grants to management instead of reducing CTO's share count and increasing each shareholder's equity in the company. Indeed, Mr. Albright has been granted options for 314,000 shares of CTO stock, which represent over 5% of the company's outstanding shares, since he was hired in 2011.

The Wintergreen letter adds: "We call upon the Board to expedite the sales process and maximize value for shareholders. We believe now is the time to act, while interest rates remain low and to realize the benefit of the ongoing and escalating recovery of real estate values in Daytona Beach which we believe has been the primary reason for the recent increases in CTO's share price."

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January 12, 2016

Consolidated-Tomoka Land Co.
c/o William L. Olivari, Audit Committee Chairman
8 Creekview Way
Ormond Beach, FL 32174

Memorandum to: Consolidated-Tomoka Land Co. Independent Directors (the "Board")

On December 22, 2015, Consolidated-Tomoka Land Co. ("CTO" or the "Company") issued a press release that announced that the Company had completed an $8 million share repurchase program and approved a new $10 million share repurchase program. Wintergreen Advisers, LLC ("Wintergreen") believes that this release continues a pattern of misleading disclosure by CTO that fails to properly convey what is actually going on at the Company. Wintergreen believes that truly full disclosure to all shareholders would have also included the following material points:

  1. CTO's outstanding share count has increased since John Albright has been appointed CEO. According to the Company's latest Form 10-Q filing, outstanding shares have increased by over 210,000 or 3.5% since Mr. Albright was hired in August 2011 --- despite the ongoing share repurchases. The typical benefit of a share repurchase program is that the outstanding share count shrinks, increasing each shareholder's equity in the company. However, since CTO's share repurchases aren't nearly enough to offset the shares being issued by the Company since Mr. Albright was hired (between August 2011 and September 30, 2015 CTO has repurchased 100,732 shares), CTO's shareholders only see continued dilution.
  2. CTO's share counts continue to increase due in part to stock grants to management. Since he was hired in August 2011, Mr. Albright alone has been granted options for 314,000 shares of stock which represent over 5% of the Company's outstanding shares. Overall, since Mr. Albright was hired, CTO has authorized stock grants for over 430,000 shares of stock which represents over 7.3% of the Company's outstanding shares. CTO has continued to transfer company assets to what we view as an underperforming management team.
  3. CTO holds repurchased shares in treasury, instead of retiring them. We believe this shows that the Company has no intention of reducing outstanding shares and benefiting shareholders - apparently the Board's goal for buybacks is simply to have more shares available to issue to management in future grants.

Wintergreen believes that management's goal is to extend its tenure as long as possible, including by delaying the sale of the Company and its assets. The longer that management can extend the sales process, the more opportunities it will have to acquire CTO shares via stock grants that dilute every other CTO shareholder. We believe CTO's management, with the Board's approval, repeatedly puts its personal interests ahead of shareholders. We again remind the Board of its true constituency --- the Board works for shareholders and not for management. We call upon the Board to expedite the sales process and maximize value for shareholders. We believe now is the time to act, while interest rates remain low and to realize the benefit of the ongoing and escalating recovery of real estate values in Daytona Beach which we believe has been the primary reason for the recent increases in CTO's share price.

Management's pattern of communicating what we view as half-truths and misrepresentations must be immediately corrected. Shareholders deserve a full and accurate picture of the Company - not the fairy tale that management has published. For example, we believe the Company intentionally misled shareholders in its November 24, 2015 press release announcing the inclusion in the Company's proxy materials of our shareholder proposal to hire an independent adviser to evaluate the sale or liquidation of the Company. We had been in contact with the Board and management during the months preceding the submission of our shareholder proposal and had very clearly voiced our concerns about CTO's management and the change of the Company's strategic direction. Therefore, we believe that to say the Company "appreciated Wintergreen's support" when CTO management and the Board were well aware of our dissatisfaction was an attempt to intentionally mischaracterize our position in an attempt to mislead shareholders.

Wintergreen also calls upon the Board to provide detailed disclosure to all shareholders about what advisors have been hired to oversee the sales process and also the process that was undertaken to determine the independence of these advisors. For what precise reason has the advisory firm been hired? Is the focus on the best interests of shareholders or of management? Are the advisors who have been engaged to evaluate the sale of the Company also recipients of the commissions and other fall-out benefits from the Company's transactions? Further, the Company has announced almost $120 million in transactions related to income properties, loan investments, and "venture interests" for 2015. Wintergreen believes shareholders should be provided a full accounting of all commissions, brokerage fees, and any other transaction related expenses that have been incurred in conjunction with the previously referenced $120 million in transactions, along with details as to who is being paid. We would expect that the Board would have the courtesy and respect for all shareholders to provide this full disclosure ahead of the Board's January 2016 meeting so that shareholders have more complete information to evaluate management and the Board.

Recently, CTO director Jeff Fuqua stated that "the Board has been consistently and appropriately involved in the oversight of the Company's management and the review of financial disclosures". Based on the issues we have raised to the Board's attention over the past few months, including granting Mr. Albright options for over 5% of the Company's outstanding shares, possible securities law violations and what we view as grossly inadequate disclosure regarding the Company's expanded investment and derivative portfolios, we are puzzled by Mr. Fuqua's statement. It seems to us that either the Board is not receiving from management the information it needs to effectively do its job or it is rubber-stamping whatever management puts in front of it for approval. Neither option is palatable and neither sounds to us like appropriate oversight. Mr. Fuqua also indicated that the Board and management have worked together to "create significant shareholder value." Wintergreen believes that shareholders are not seeing any benefit - all we see are increased overhead and expenses, continued dilution as shares are gifted to management, and a flurry of commissions and expenses that benefit the advisors and brokers - all at the expense of shareholders.

Regards,

David J. Winters CEO                  Liz Cohernour, COO


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Wintergreen Advisers Sees Possible Securities Law Violations at Consolidated-Tomoka


December 17, 2015

New York, NY - (Business Wire) - Wintergreen Advisers, LLC ("Wintergreen") today announced that it submitted the following letter to the independent directors of Consolidated-Tomoka Land Company (NYSE:CTO, "CTO"). Wintergreen believes CTO's recent public filings have not met the standards set forth in various federal securities laws. Furthermore, Wintergreen believes that CTO's management, led by John Albright, is actively trying to deceive shareholders with filings, investor presentations, and disclosures that obfuscate, confuse and hide what is really going on at CTO, including the trading of a blind pool with borrowed money. Wintergreen believes that CTO's management violated both the letter and the spirit of multiple laws, and in light of this, expects CTO's Board of Directors to conduct a thorough and independent inquiry.

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December 17, 2015

Consolidated-Tomoka Land Co.
c/o William L. Olivari, Audit Committee Chairman
8 Creekview Way
Ormond Beach, FL 32174

Memorandum to: Consolidated-Tomoka Land Co. Independent Directors

Subject: Possible Violations of Federal Securities Laws

On November 13, 2015, Wintergreen Advisers, LLC sent the independent directors of Consolidated-Tomoka Land Co. ("CTO" or the "Company") a letter identifying what we view as specific examples of failure at the senior management level. We would like to reiterate those concerns and to discuss them in the context of relevant federal securities laws. We believe CTO management violated both the letter and the spirit of multiple laws, and in light of this, do not understand how CTO's board of directors ("Board") can stand by and do nothing. At the very least, we would expect the Board to conduct a thorough and independent inquiry into these matters and to publicly report its findings.

Our overall concerns relate to the requirements of the following significant federal securities laws:
  1. Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley")
  2. Securities Act of 1933 (the "Securities Act")
  3. Securities Exchange Act of 1934 (the "Exchange Act")

In total, these laws and the rules promulgated thereunder require ongoing forthright and complete disclosure of material financial and non-financial information. A company's management is primarily responsible for ensuring compliance with these laws. We believe CTO's recent public filings have not met the standards set forth in these federal securities laws and furthermore, we believe that CTO's management, led by John Albright, is actively trying to deceive shareholders with filings, investor presentations and disclosures that obfuscate, confuse and hide what is really going on at CTO.

For example, in our earlier letter to the Board, we detailed the following issues:

CTO's Use of and Disclosure Regarding Leverage

Overall, CTO's long-term debt has increased 44% in 2015 and over 135% since the beginning of 2014. This rapid increase in the use of leverage is extremely alarming to us and we believe it puts the entire Company at risk. In addition, based on CTO's most recent Form 10-Q, it appears that CTO is making long-term commitments with short-term borrowing, which exposes shareholders to interest rate risk. Furthermore, we believe CTO's disclosure with regard to its use of leverage is extremely misleading to shareholders and creates the impression that CTO's low leverage character has not changed. This obfuscation prevents shareholders from fully appreciating what we view as a substantial and radical change to CTO's business and strategy.

We believe this could create serious potential liability under Rule 10b-5 of the Exchange Act and Item 303 of Regulation S-K under the Securities Act. Rule 10b-5 makes it unlawful for any person to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading. Here, in investor presentations, publicly-filed reports and statements certified by Mr. Albright, we believe CTO both mischaracterizes the degree of its use of leverage and fails to adequately disclose material details regarding this leverage. Further, Item 303 of Regulation S-K requires that a company disclose a description of any known trends or uncertainties that it reasonably expects will have a material impact on its business. Here, we believe it is clear that CTO's increased use of leverage represents a continuing trend and we question how anyone could take the view that a company which increases its leverage to such a degree would not expect that increase to have a material impact on its business. As such, we wonder why there is not significantly more disclosure in this area. It should be noted that the violation of these rules can result in civil or criminal penalties.

CTO's Calculation of Leverage

In a November presentation, CTO management chose to present leverage ratios against "Total Enterprise Value". To us, this appears to purposefully understate CTO's true use of leverage in order to justify increasing leverage. In our opinion, this is extremely dangerous and has the potential to destroy shareholder value because it prevents shareholders from adequately assessing CTO's risk profile. In fact, if measured against CTO's Equity Market Capitalization from the same presentation, CTO's leverage would be an alarming 48%, which could force CTO to sell off its most valuable assets at a steep discount if it is unable to service its debt. Although Mr. Albright recently stated that "[CTO] measures its net asset value on a regular basis and believe[s] that [CTO's] recent share price is not representative of the net asset value of the Company", we do not think this justifies creating a reference metric that, in our opinion, omits clear disclosure of CTO's dramatically increased leverage when measured against CTO's equity market capitalization.

In addition to Rule 10b-5 and Regulation S-K concerns similar to those discussed above, we believe Mark Patten's e-mail disclosure that CTO is using hypothetical metrics to measure net asset value is also material. If CTO were to include these hypothetical metrics to measure net asset value in its financial reports without certain clarifications, we believe it could violate various provisions of Sarbanes-Oxley, including Regulation G which states that a company that presents a non-GAAP financial measure is required to compare such measure with the most comparable financial measure that is calculated in accordance with GAAP. In our view, failing to provide such a comparison prevents shareholders from accurately assessing CTO's leverage. In addition, under Section 302 of Sarbanes-Oxley, the CEO and CFO of a company are required to certify that submitted reports fairly present the financial condition of the company in all material respects and that such reports do not contain any material untrue statements or material omissions and are not misleading. Further, under Section 902 of Sarbanes-Oxley, persons can be held liable for attempting or conspiring to commit violations of Sarbanes-Oxley. We believe CTO's management, including Mr. Albright, intentionally misled shareholders and hid CTO's true level of leverage by measuring CTO's leverage in such a way that, in our opinion, would not have been permissible under Sarbanes-Oxley if included in CTO's financial statements. Violations of Sarbanes-Oxley and the rules promulgated thereunder can result in fines, imprisonment, the claw back of bonuses and private causes of action under Rule 10b-5.

CTO's Securities and Derivatives Portfolios

CTO has recently dramatically expanded an investment portfolio and initiated a derivatives portfolio, with extremely limited disclosure to shareholders. For example, CTO is trading "put options . . . related to common stock investments" and these investments are priced using Level 2 inputs. These activities raise a number of questions for us, and we would have expected a high level of detail in CTO's reports to shareholders. Additionally, we believe that CTO's management is trading this blind pool with borrowed money. Unfortunately we have found CTO's disclosure around these matters woefully inadequate. According to CTO's Form 10-Q, Messrs. Albright and Patten have determined CTO is in compliance with SEC regulations, but we believe these investment activities require a higher level of disclosure. Under Item 305 of Regulation S-K, a company is required to disclose in its Form 10-Q, material qualitative and quantitative information about the market risk inherent in the financial and derivative instruments that it trades, including the primary market risk exposures and how they have changed in the past year and how they are managed. Here, we believe CTO's dearth of disclosure around these activities could give rise to violations of Item 305 of Regulation S-K, whereby CTO management has failed to disclose material information regarding investment and derivatives portfolios that are becoming a larger and larger part of CTO's business plan. In addition, this same conduct could give rise to a Rule 10b-5 violation whereby CTO and its management could be held liable for omitting to state material facts necessary in order to make the Form 10-Q not misleading.

In conclusion, we believe CTO management's pattern of apparent mistruths and misrepresentations must be immediately investigated by the Board. Not only do shareholders deserve an accurate picture of CTO's activities and financial health, the items we have detailed in this letter may represent a massive overhanging liability for CTO and its shareholders and should be addressed without delay. It is the Board's responsibility to look after the interests of its shareholders. It is of paramount importance that the Board takes a more active role in the direction and management of the company. In a recent speech, SEC Commissioner Luis Aguilar remarked "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." i The focus, front and center, belongs on the maximization of shareholder value. We believe the Directors need to immediately review and address the concerns that we raise in this letter. We are disappointed that the Board has not meaningfully responded to our recent letter and expected better, but we are willing to work with CTO's Board to get to the bottom of what we view as CTO management's recent failures.

Regards,

David J. Winters CEO                  Liz Cohernour, COO

i Luis A. Aguilar, SEC Commissioner, 4/21/14, Emory University School of Law.


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Wintergreen Advisers urges Consolidated-Tomoka Land Co. to take steps to maximize shareholder value

Wintergreen Advisers submits shareholder proposal to hire an independent adviser to evaluate sale of the company or liquidation of its assets

November 23, 2015

Wintergreen Advisers, LLC ("Wintergreen"), today announced that it has submitted a shareholder proposal to Consolidated-Tomoka Land Company (NYSE: CTO, "CTO") recommending that the Board of Directors of CTO retain an independent financial adviser to evaluate ways to maximize shareholder value through the sale of the company or the liquidation of its assets.

Wintergreen beneficially owns 1,543,075 shares of common stock, which constitutes 26.0% of CTO's outstanding stock. Wintergreen has beneficially owned more than 10% of CTO common stock since May 2006.

In the proposal, Wintergreen Advisers said:

"We believe CTO management should focus on maximizing shareholder value either by selling CTO or liquidating CTO's assets. Daytona Beach and Volusia County's real estate values have rebounded since the financial crisis, which may present an attractive opportunity for an acquirer of CTO. Alternatively, shareholders may receive better value by receiving a cash distribution from the sale of the remainder of CTO's land and the liquidation of the income property portfolio, before a rising interest rate environment damages these holdings' value and reduces shareholder value. Shareholders have been waiting a long time; now is the time for CTO's Directors to evaluate ways to maximize shareholder value.

"In his October 27, 2015 press release, CTO's President and CEO stated: 'our recent share price is not representative of the net asset value of the company.' We agree.

"Over the past two years, CTO's management aggressively increased leverage, dramatically expanded a securities portfolio of undisclosed holdings and initiated a derivatives portfolio. General and administrative expenses have soared. The alarming increase in risk and expenses has not led to a material increase in book or market value, and clearly is not recognized through stock price appreciation. We believe the simple truth is that CTO's management team has failed, and now is the time to act.

"Therefore, we believe that the greatest value to shareholders will be realized through a thoughtful evaluation of the sale of CTO or the liquidation of CTO's assets. We believe a vote for this shareholder proposal would benefit all shareholders."


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David Winters appeared on Consuelo Mack WealthTrack

July 3, 2015

As investors move in droves to passive, low-cost index funds, Wintergreen Advisers CEO David Winters discusses why he thinks index funds are a dangerous market mania, akin to other market bubbles.


To view the video, please visit http://www.wintergreenfund.com.


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Click here to view the report:
How the Votes of Big Index Funds
Feed CEO Greed and Put Americans'
Retirement Savings in Peril

Index Investing Puts Americans' Retirement Savings in Peril, Wintergreen Advisers Says

Wintergreen cites position concentration and passive stance on executive pay

April 30, 2015

New York, NY – (Business Wire) - The rush of money into index equity funds has ballooned into a market mania that is fueling excessive CEO compensation and putting the savings of ordinary investors at risk, according to a new report by Wintergreen Advisers that was released today.

The report noted that the massive assets of index giants Vanguard, BlackRock (NYSE: BLK) and State Street (NYSE: STT) make them the largest block of shareholders in America's largest publicly traded companies, holding an average of 16% of the shares outstanding of the top 25 companies in the S&P 500.

David Winters, CEO of Wintergreen Advisers, said: "Trillions of ordinary investors' dollars are now committed to a mechanistic strategy that day in and day out simply buys stocks without a thought for their actual underlying value. Students of market history know that index mania - like other market fads before it - will end badly.

"The sad reality is that index funds have turned ordinary investors into the pawns in a game that undermines the integrity of American markets and imposes costs on society that don't show up in index fund expense ratios. We believe that one consequence of this is that billions of dollars of value created by American companies are being diverted to a select few executives while ordinary investors, distracted by 'low fee' hype, are subjected to dangerous risk concentrations in their retirement portfolios."

Wintergreen's analysis of the voting histories of the leading S&P 500 index funds run by Vanguard, BlackRock and State Street over the past five years for the 25 largest companies in the S&P 500 found that these funds cast their votes in favor of equity compensation plans 89% of the time, and opposed executives' pay packages less than 4% of the time. They withheld or cast votes against directors a meager 4% of the time.

Liz Cohernour, COO of Wintergreen Advisers, added: "Index mania has been a boon for executives of companies in the index, whether or not these executives are delivering real shareholder value. Flows into Big Index's fund products that tend to vote with management means a significant block of the shareholders in an S&P 500 company can generally be counted on to support executive compensation packages even when shareholders are receiving meager returns."

The Wintergreen report noted that index hype creates an illusion of safety and diversification. Wintergreen believes this can lead ordinary investors to take on a dangerously high concentration of risk in their investment portfolios.

By Wintergreen's estimate, the top 25 securities by market value in the S&P 500 in 2014 contributed over 33% of the index's total return, while the top 25 securities by performance contributed 55% of the index's total return. Apple, Microsoft, Facebook and Intel alone accounted for over 20% of the total return of the S&P 500 in 2014.

Click here to view the report:
How the Votes of Big Index Funds
Feed CEO Greed and Put Americans'
Retirement Savings in Peril

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Wintergreen Advisers Comments on Shareholder Opposition to Coca-Cola's Executive Pay

April 29, 2015

NEW YORK--(BUSINESS WIRE) -- Earlier today, the Coca-Cola Company (NYSE:KO) announced preliminary results of the shareholder vote at its annual meeting, which showed that nearly 20% of the votes cast were opposed to the resolution to approve executive compensation, compared with 9% a year ago.

David J. Winters, CEO of Wintergreen Advisers, said:

"Last year, Wintergreen challenged Coca-Cola's pay practices and helped stop management's big grab for excessive compensation. It is gratifying to see that a year later even more investors have grown impatient with executive compensation that rewards failure.

"The vote should pressure the Coca-Cola board to not only reform pay practices further but to move faster on fixing Coca-Cola's business. Companies across the consumer sector are dramatically restructuring - when will Coca-Cola take the aggressive steps needed to restore profit growth?"

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Scoring Coca-Cola's 2015 Proxy:
The "Big Grab" was halted, but urgent issues remain to be addressed

Wintergreen Advisers Cites Changes in Coca-Cola Proxy, But Big Issues Remain

Campaign against 'Big Grab' fostered better disclosure, but pay remains excessive; Coca-Cola strategy lacks boldness and urgency of Heinz and Kraft restructurings.

April 13, 2015

New York, NY – (Business Wire) - Wintergreen Advisers today issued a report on The Coca-Cola Company's (NYSE:KO) 2015 Proxy Statement.

David J. Winters, CEO of Wintergreen Advisers, said: "While there has been progress in some areas at Coca-Cola, the board continues to give Muhtar Kent and his team excessive rewards, and we question whether many Coca-Cola directors are able to vigorously act for all shareholders given their overlapping business interests."

"Meanwhile, Coca-Cola lags behind while other consumer brands like Heinz and Kraft pursue bold restructurings. Coca-Cola's board and management lack a sense of urgency to address Coca-Cola's problems and increase shareholder value. There are three big questions around Coca-Cola," Winters said:

  • "What is keeping Coca-Cola from carrying out transformative strategies like those implemented at Heinz and planned for Kraft?"
  • "Why does this management continue to receive excessive compensation while missing the performance targets set by the board?"
  • "When will the board act to correct this situation?"

Liz Cohernour, Chief Operating Officer of Wintergreen, said: "Wintergreen plans to vote against Coca-Cola's directors because we believe they have not exhibited the leadership and independence needed to restore shareholder confidence and return the company to profitable growth. We urge Coca-Cola shareholders to carefully consider these issues."

The report notes that a year ago Wintergreen brought attention to what it saw as serious pay and governance problems at The Coca-Cola Company, beginning with a proposed equity compensation plan it called "Coke's Big Grab" for its potential for whopping payouts to management. Coca-Cola later said it would curtail the plan.

This year, the Wintergreen report notes, Coca-Cola's proxy statement contains better disclosure than a year ago regarding the value of equity incentive compensation and required performance hurdles for management. Importantly, it shows Coca-Cola did not issue secret bonus shares - the much-criticized stock awards granted without criteria. However, the proxy statement shows Coca-Cola is falling short in other important areas.

Wintergreen believes the Coca-Cola 2015 Proxy Statement:

  • Contains a misleading characterization of CEO Muhtar Kent's pay. Coca-Cola's proxy statement says Muhtar Kent "respectfully declined" his annual incentive award, suggesting he took a meaningful pay cut. In fact, the board increased his stock and option awards, making his total pay about even with 2014.
  • Shows missed performance targets that were apparently overlooked when awarding pay for top managers. Coca-Cola managers failed to meet two out of three of their annual performance targets, and met only the very bottom end of the third.
  • Lowers performance hurdles for management in 2015 versus 2014. Coca-Cola's management not only failed to meet its performance targets in 2014, but the 2015 proxy shows the Coca-Cola board has lowered the 2015 performance bar for the coming year, making it easier for management to earn their annual bonuses.
  • Understates the dilutive effect of Coca-Cola's equity compensation awards. Coca-Cola touts a figure of "$4.2 billion in gross share repurchases" on two different locations in their 2015 proxy statement, when in fact, net of dilution from equity compensation, buybacks were only $2.6 billion in 2014. Similarly, the company says it repurchased 98 million shares in 2014, but its shares outstanding only declined by 36 million because of the dilutive effects of equity compensation.
  • Raises questions about the directors' ability to be forceful advocates for all shareholders. Many board members have overlapping business interests, and several have business ties with investment bank Allen & Co. - whose CEO is Coca-Cola director Herbert Allen. Wintergreen believes these business ties can make the board an insular club rather than a vigilant protector of shareholders' interests.

Scoring Coca-Cola's 2015 Proxy:
The "Big Grab" was halted, but urgent issues remain to be addressed

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Wintergreen Advisers Poses Questions for Coca-Cola

February 9, 2015 3:00 PM Eastern Standard Time

  1. On the December 15, 2014 modeling call with analysts, Coca-Cola CFO Kathy Waller acknowledged that Coca-Cola’s 2010 $13 billion acquisition of the North American bottling assets of Coca-Cola Enterprises will apparently result in a zero percent return, at best, over nearly a decade. We think this is a shockingly bad investment. Who is being held accountable?
  2. During the fourth quarter of 2014, there were reports in the media that a large buyout firm, 3G Capital, potentially had its sights on Coca-Cola. Coke shares traded sharply higher following the report. Has Coca-Cola been approached by 3G or any other parties regarding a strategic transaction?
  3. In early January 2015, Coca-Cola announced the company would lay off 1,800 employees. How many senior management positions are being eliminated as part of these firings? What is the company’s projected cash and pension expense for severance and other restructuring costs this year?
  4. How many secret bonus shares have been granted under Article 13 of the 2014 Equity Compensation Plan without regard to meeting performance hurdles?
  5. In recent years, Coca-Cola’s spending on share repurchases, capital expenditures, and dividends have outpaced its cash flow, and Coca-Cola has borrowed to bridge the gap. How much longer can Coca-Cola continue to spin the financial plates like this? What is the risk of a downgraded credit rating?
  6. Has Coca-Cola examined its real estate portfolio to see what assets are excess and should be sold? For example, the seemingly incredibly valuable 711 5th Ave in New York City seems to be an unproductive use of assets and long overdue for rationalization.
  7. ith the upcoming nationwide introduction of Fairlife milk product, what gives Coca-Cola confidence that moving into a new market and spending significant amounts of money on branding is a productive use of company cash?
  8. What is the company’s plan for succession following the exit of Muhtar Kent, who we believe has made material misstatements to shareholders and overseen an extended period of poor corporate performance? Will Coca-Cola look outside of its broken system for best-in-class succession candidates?

David Winters discusses Coca-Cola's secret “bonus shares” with Maria Bartiromo on Fox Business

February 6, 2015

David Winters talks to Maria Bartiromo about the letter that Wintergreen Advisers sent to The Coca-Cola Company on February 3, 2015, regarding Coca-Cola’s secret “bonus shares.” Winters said, “Only in a document, which wasn't mailed to shareholders, is there a mention of shares that they can issue with no criteria, in an unlimited amount.”


Wintergreen Faults Coca-Cola for Failure to Adequately Disclose Secret Bonus Shares

February 3, 2015 4:30 PM Eastern Standard Time

NEW YORK--(BUSINESS WIRE)--Wintergreen Advisers LLC said today that the Board of Directors of the Coca-Cola Company (NYSE: KO) failed to protect shareholders’ interests by introducing secret “bonus shares” for top management as part of Coca-Cola’s 2014 Equity Compensation Plan.

In a letter to the Coca-Cola Board released today, Wintergreen said it believes Coca-Cola’s 2014 Proxy Statement did not adequately identify and explain the concept of secret bonus shares, and as a result, it believes the disclosure in the 2014 Proxy Statement regarding the secret bonus shares fell far short of both the spirit and the letter of the federal securities laws governing proxy disclosure.

Wintergreen called on Coca-Cola to immediately claw back any secret bonus shares that have been granted and to pledge that none will be issued in the future. Wintergreen also requested the resignation of all board members, management and consultants or advisers who assisted in the 2014 Equity Plan debacle.


Board of Directors
The Coca-Cola Company
One Coca-Cola Plaza
Atlanta, GA 30313

January 29, 2015

RE: Secret Bonus Shares

To the Board of Directors of The Coca-Cola Company:
Wintergreen Advisers takes seriously its responsibility to safeguard the interests of its clients. That is why we have spoken out about the issues at The Coca-Cola Company, where investment funds we advise have been committed, long-term shareholders. We have been sharply critical of Coca-Cola’s poor performance, excessive pay practices and weak governance because they harm all Coca-Cola shareholders. Yet Coca-Cola’s management and Board of Directors have failed to address these problems. As a result, we feel we have no choice but to continue to bring important facts to light in the hope that real change will come to Coca-Cola.

One area in which we believe the Board failed utterly to protect shareholders’ interests is the introduction of secret “bonus shares.” Although Coca-Cola’s 2014 Proxy Statement contained only one ambiguous reference to these secret bonus shares, under the 2014 Equity Compensation Plan, Coca-Cola’s Compensation Committee may award secret unrestricted bonus shares that are not tied to any performance goals. We believe:

  • The ability to award secret bonus shares absent any specific criteria is a dramatic and material departure from Coca-Cola’s past practices of paying for performance and is also at odds with descriptions of the 2014 Equity Plan by Coca-Cola’s officers and directors.
  • More seriously, the lack of any detail regarding these secret bonus shares in Coca-Cola’s 2014 Proxy Statement fell far short of what is required under federal securities laws because shareholders could have read the 2014 Proxy Statement and still not have known that the Compensation Committee could award secret bonus shares.
The Ability to Award Secret Bonus Shares is a Material Departure From Past Pay Practices

Prior to the effectiveness of the 2014 Equity Plan, Coca-Cola’s most recent stock award plan was adopted in 2008. In Coca-Cola’s 2008 Proxy Statement, there are numerous references to a pay-for-performance approach. Indeed, the very first two sentences of the Section discussing compensation are “We pay for performance. By this, we mean that rewards are not paid when results are not delivered.” In contrast, the 2014 Equity Plan allows Coca-Cola’s Compensation Committee to grant stock awards on any basis it deems appropriate. We believe this overreaching discretion permitting the issuance of secret bonus shares is a material departure from Coca-Cola’s past pay practices.

Coca-Cola’s 2014 Proxy Statement Did Not Adequately Disclose the Concept of Secret Bonus Shares

We believe Coca-Cola’s 2014 Proxy Statement did not adequately identify and explain the concept of secret bonus shares and failed to communicate that these unrestricted awards were not part of the 2008 Plan. In fact, the only reference to secret bonus shares in the 2014 Proxy Statement appears on page 87, when discussing the types of awards that may be granted under the plan: “…other stock-based awards, in the discretion of the Compensation Committee, including unrestricted stock grants.” [Emphasis ours]. It is far from clear to us what the term “unrestricted” means in this context. We think a shareholder could closely read the 2014 Proxy Statement and still not realize that the Compensation Committee could award secret bonus shares. In fact, shareholders would have to venture all the way to page 14 of the 2014 Equity Plan Agreement itself to fully appreciate the vast discretion afforded to the Board under the 2014 Equity Plan. Unlike the Proxy Statement, which was mailed to all shareholders, the 2014 Equity Plan Agreement was only sent upon request. We think disclosure regarding such an important and novel aspect of Coca-Cola’s compensation practices should have been presented to shareholders front and center, not buried in a supplemental document that most shareholders would not read. As a result, we believe the disclosure in the 2014 Proxy Statement regarding the secret bonus shares fell far short of both the spirit and the letter of the federal securities laws governing proxy disclosure. The blame for this falls solely on Coca-Cola’s Board of Directors, who designed the Plan, unanimously supported the Plan, and signed off on the disclosure regarding the Plan in the 2014 Proxy Statement.

Coca-Cola Officers and Directors Have Made and Continue to Make Potentially Misleading Statements Regarding the 2014 Equity Plan

We believe Coca-Cola officers and directors made public statements during the proxy solicitation period regarding the 2014 Equity Plan that were inaccurate at best, and potentially materially misleading. Specifically,

  • Mel Lagomasino, the Chair of Coca-Cola’s Compensation Committee, stated in April 2014 that the 2014 Equity Plan “does not result in changes to our pay practices – the 2014 Equity Plan is closely in line with past plans approved by the Board and the shareowners. The second point is that we firmly believe that equity compensation is performance-based. If the Company does not perform, compensation is not realized.” [Emphasis ours]
  • Coca-Cola Chairman and CEO Muhtar Kent stated in April 2014 that “Our new equity program that we have proposed to our shareholders in this coming month in April is completely in line with previous equity programs.” [Emphasis ours]

We believe these statements are simply not true. The new plan has a highly significant element that was not part of the prior plan, namely, secret bonus shares. Further, if Coca-Cola intends to use equity compensation solely to award performance, why did the Board find it necessary to include the secret bonus shares feature?

Equally troubling to us is that Coca-Cola has doubled down on what we believe to be its mischaracterizations of the 2014 Equity Plan. On January 15, 2015, longtime Coca-Cola Director Barry Diller stated in an interview that Coca-Cola intended to issue award shares under the 2014 Equity Plan over a period of ten to twenty years. We believe Mr. Diller is demonstrably wrong as the 2014 Proxy Statement is extremely clear on this point: “Based on historical granting practices and the recent trading price of the Common Stock, the 2014 Equity Plan is expected to cover awards for approximately four years.” No other time frame is discussed in the 2014 Proxy Statement and there is no additional language suggesting a time frame for the plan greater than four years. In addition, the plan itself has a maximum term of ten years, so it is illogical to contend that Coca-Cola intended to grant awards for twenty years.

Mr. Diller also stated that Coca-Cola should have better explained the 2014 Equity Plan, and this is one point we can all agree on. When a shareholder could closely read a company’s proxy statement and not know about a key and new feature of the company’s equity compensation plan, that is a communication issue at best and a deliberate obfuscation of the plan at worst. We wonder which applies to Coca-Cola.

Our Recommendations

We believe investors should have been told in plain terms in the 2014 Proxy Statement as well as in the company’s officers’ and directors’ public statements that the 2014 Equity Plan departed in material respects from previous plans. This would have allowed investors to determine whether the introduction of unrestricted secret bonus shares was consistent with Coca-Cola’s professed policy of linking awards to performance goals that are aligned with the interests of the company and shareholders. As Securities and Exchange Commissioner Luis A. Aguilar told the students and faculty of the Emory School of Law on April 21, 2014: “The underlying corporate governance issue regarding executive compensation is not simply about the amount of the compensation—but whether the decision-making process enables accountability through transparency and through shareholder engagement. To that end, it is important to have corporate governance practices that foster these principles, and that fully and fairly explain the compensation process to shareholders.” In our view, Coca-Cola has failed the tests for transparency and accountability in its communications regarding the 2014 Equity Plan.

To remedy the situation, we urge the Board to:

  1. Withdraw the 2014 Equity Plan, on the basis that a material feature was not adequately disclosed to shareholders in the 2014 Proxy Statement.
  2. Disclose if, when, to whom and how many secret bonus shares have been granted and the rationale for the award. Any such secret bonus shares should be clawed back, to the extent possible, and Coca-Cola should pledge that it will not issue any secret bonus shares in the future.
  3. Represent that future compensation plans will not allow for compensation that is not tied to performance.
  4. Review the 2014 Proxy Statement in light of Coca-Cola’s disclosure policies and present a report of its findings to shareholders.
  5. Request the resignation of all board members, management and consultants or advisers who assisted in the 2014 Equity Plan debacle.

Over the past nine months, we have raised a number of issues at Coca-Cola that go beyond just the 2014 Equity Plan, including what we view as stagnant performance and ineffective governance. However, we feel it is important to address this issue of secret bonus shares again as it epitomizes all of the problems we see at Coca-Cola: overreach and greed at a time of flat performance and a lack of accountability by the Board when it comes to standing up for shareholders. Let there be no doubt – we think the Coca-Cola Board of Directors bears full responsibility for what we view as the serious problems with the 2014 Equity Plan and the far-from-adequate disclosure regarding the 2014 Equity Plan. However, the problems at Coca-Cola go beyond the issues we have outlined in this letter. We believe there is a worrisome pattern of subterfuge, backtracking and changes of direction. The willingness to confer excessive rewards on an underperforming and undeserving management team is a symptom of deeper problems in the leadership of Coca-Cola, a great American institution. Ultimately, if the Directors will not protect Coca-Cola shareholders, then Coca-Cola shareholders will need to protect themselves.

Sincerely,

Wintergreen Advisers, LLC

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Barry Diller Said What?

January 16, 2015

Yesterday, Coca-Cola director Barry Diller attempted to offer an explanation for the controversy over Coke’s equity compensation plan. He says shareholders didn’t read the fine print. The trouble is that his explanation does not square with the facts.

Here’s what Mr. Diller said when asked about the Coke equity plan on CNBC’s “Squawk Box” yesterday:

  • “It’s weird. What happened is that Coca-Cola had a compensation plan that had been in place for a very long time. They had to renew the plan. The rules said that they had to say that X number of shares would be given over a four-year period, right? Coca-Cola had no intention of giving them over a four-year period. They were going to give them over at least ten and maybe a twenty year period. But if you took the four-year period and didn’t read underneath it and understand it, that it wasn’t an obligation, you would have said Coke was giving away all this stuff to employees and looting shareholders when in fact Coke’s dilution is under 1% which is standard for companies, etc. It was all blown to hell. It was not, it should have been better explained, and Coke learned a lesson. It should have explained it in more detail at the outset.”

Here’s what Coke’s 2014 Proxy Statement actually says:

  • “Based on historical granting practices and the recent trading price of the Common Stock, the 2014 Plan is expected to cover awards for approximately four years.” (pg. 85)
  • “Approving the 2014 Plan would [allow] the Company to continue to grant long-term equity compensation for approximately four years.” (pg. 84)

It’s troubling that Mr. Diller – who has been on the Coke board for 13 years and is a member of its Corporate Governance committee - apparently doesn’t understand what the 2014 Proxy Statement actually said.

We would agree with him about one thing, though: Coke should have explained its equity compensation plan better. Of course, had Coke done so, even more shareholders might have agreed with us (and with Warren Buffett, on behalf of Coke’s largest shareholder) that the equity compensation plan was excessive.

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Atlanta Business Chronicle: Viewpoint – Firing workers won’t restore growth at Coca-Cola

January 8, 2015

On January 8, 2015, David Winters contributed the following op-ed to the Atlanta Business Chronicle regarding the recently announced firings at The Coca-Cola Company.

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Coca-Cola’s Fizzy Math:
How Bad Performance, Excessive Pay and Weak Governance are Harming Shareholders

Wintergreen Advisers Issues Analysis of Coca-Cola

Report says shares deeply discounted because of poor management and governance

December 15, 2014

New York, NY – (Business Wire) - Wintergreen Advisers today issued a report on the Coca-Cola Company (NYSE:KO) and called for forceful action to revitalize the company.

David J. Winters, CEO of Wintergreen Advisers, said: “Coca-Cola has serious problems but we believe they can be fixed. With the right management and a commitment to serving shareholders, we think Coca-Cola can thrive again.”

The report includes the following conclusions by Wintergreen:

  • Pay for Coke’s top management has been excessive in light of the company’s performance. Annual equity grants to top management have risen steadily over the past four years while Coke’s profit growth has stalled.
  • Rather than putting a brake on pay, Coca-Cola’s equity stewardship guidelines could continue to reward Coke’s top managers unjustly, and the guidelines’ emphasis on cash bonuses could cost shareholders as much as $10.20 of per-share value.
  • Coke has been routinely outspending its cash flow in recent years and funding the gap with debt. Additional spending on executive bonuses and severance charges threatens to make this problem even worse. We believe excessive pay practices combined with slowing profit growth could threaten Coke’s 50-year record of dividend increases. Even today, Coke has a dividend-coverage ratio of just 1.4x, compared to an average of 5.0x for its peers in the S&P 500.
  • The strategic investments made by CEO Muhtar Kent have destroyed shareholder value. His blunders on failed acquisitions alone have cost shareholders $16.3 billion. He is incapable of leading Coke’s turnaround and should be replaced.
  • The recent election of two new directors to the Coca-Cola Board is a welcome sign of progress, yet we believe more needs to be done. Indeed, Coca-Cola’s Board has Directors who, in our view, have served for too long. Three members of the board have served for a combined 102 years. We believe such long tenures can make the board an insular club rather than a vigilant protector of shareholders’ interests.

Wintergreen estimates that the discount placed on Coke’s shares because of these issues is between $30 and $38 per share. Removing these discounts would put Coke’s share price at $74 to $82 per share, in line with the $90 per share Nomura Securities analyst Ian Shackleton believes Coke shares could be worth in an LBO scenario.

Wintergreen believes resolving Coke’s issues is relatively easy and straightforward – get rid of bad compensation plans, bring in new and more capable management, get expenses and overhead under control, and replace the board with a shareholder-focused board.


Coca-Cola’s Fizzy Math:
How Bad Performance, Excessive Pay and Weak Governance are Harming Shareholders

About Wintergreen Advisers

Established in 2005, Wintergreen is an independent global money manager that employs a research-driven value style in managing global securities. As of September 30, 2014, Wintergreen Advisers had approximately $2.0 billion under management on behalf of individuals and institutions through its mutual fund and other clients, and is based in Mountain Lakes, New Jersey. Wintergreen’s clients own over 2.5 million shares of The Coca-Cola Company, and have owned Coca-Cola shares for over five years.

For further information on Wintergreen Advisers, please call 973-263-4500 or visit www.wintergreenadvisers.com. Additional information regarding what we view as the issues at The Coca-Cola Company may be found at www.FixBigSoda.com. For information, forms and documents regarding our U.S. mutual fund, please visit www.wintergreenfund.com.


  1. Source: Nomura Securities, October 29, 2014 report

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Cash Matters: Why Coke’s Equity Plan Is
Still Bad For Shareholders

November 11, 2014

When the Coca-Cola Company (NYSE: KO) on October 1, 2014 announced the adoption of Equity Stewardship Guidelines for the company’s existing 2014 Equity Compensation Plan, we were cautiously optimistic that Coca-Cola’s Board of Directors had made changes to the Plan to address the concerns expressed by Wintergreen Advisers and certain Coca-Cola shareholders. 

But after looking closely at the Guidelines and studying Coca-Cola’s public statements, we’ve concluded that there has been no significant change. In fact, we believe the Guidelines could actually make the Plan worse for Coca-Cola shareholders. Under the Guidelines, certain top Coca-Cola managers will be paid in cash instead of stock which could potentially put the company’s dividend at risk.

Still a Wildly Excessive Plan

When Coca-Cola announced the adoption of the Guidelines, the head of Coca-Cola’s Compensation Committee said that “we are not changing or reducing eligibility for long-term awards.”  The Guidelines simply call for top management to receive fewer stock options and much more cash and full-value equity awards than they might otherwise have received under the Plan as originally conceived. Coca-Cola’s Guidelines do not reduce by one cent the amount that will be paid out of shareholders’ pockets to the top 5% of management who are eligible for the Plan.

When it was up for shareholder approval, the Plan was criticized for being excessive and oversized, and the Guidelines have done nothing to rein in its excessiveness or reduce its size.   Management remains eligible for “bonus shares” that can be awarded without criteria. There still is no cap on total stock awards to any individual.  We believe the Plan remains wildly excessive.

Coca-Cola’s Board of Directors seems to be attempting to distract shareholders by issuing Guidelines that appear to address the problems with the Plan, but which in reality do nothing at all. Coca-Cola is simply reshuffling the deck and shareholders are still getting a bad deal.

Creating New Problems for Shareholders

In our view, the Guidelines not only fail to address the original problems with the Plan, but they raise problems of their own.  To meet the Guidelines, Coca-Cola will massively increase the amount of cash compensation handed out to top management over the next 10 years in addition to shares and options issued under the Plan.  The result for Coca-Cola shareholders will be both dilution (from the shares and options issued) and reduced earnings (from the increased cash compensation expense).  We believe the excessive Plan and the appalling Guidelines are a lose-lose situation for all Coca-Cola shareholders.

By our estimate, it appears that the cash compensation required to meet the Guidelines will cost shareholders between $1 billion and $3 billion per year in excessive management compensation.  That is cash that comes directly out of shareholders’ pockets and reduces Coca-Cola’s earnings by a proportionate amount.  After taxes, that $1 billion to $3 billion per year is worth between $0.17 and $0.51 in annual per share net income, assuming a 25% corporate tax rateAt Coca-Cola’s current valuation of 20x earnings, that excessive cash compensation costs shareholders between $3.40 and $10.20 of per share value.

Putting the Dividend at Risk

Coca-Cola recently lowered its earnings outlook and Chairman and CEO Muhtar Kent acknowledged that it “will take time to implement and deliver improvement in our results.”  But any improvement in Coca-Cola’s performance will be impeded by the negative effect of what we view as the excessive dilution and massive cash payouts that will be made to management, both of which impact Coca-Cola’s ability to grow earnings per share.  If Coca-Cola is unable to grow earnings per share, the dividend growth that shareholders have come to expect after 50 consecutive years of increases will be put at risk. 

Coca-Cola’s dividend coverage ratio currently stands at only 1.6x, before considering the negative impact of increased cash compensation to the top 5% of management.  We believe it is incredibly imprudent behavior by the Board of Directors to put shareholders’ dividends at risk in order to increase compensation to what we view as an already overpaid management team. 

It is the fiduciary responsibility of all Board members to put the shareholders’ interests ahead of those of management. It is becoming apparent to us that the current Board is not meeting that responsibility.  If this Board cannot take steps to restore trust and revitalize the company, it should be replaced.

Sincerely,

David J. Winters, CFA
CEO
Wintergreen Advisers, LLC

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Wintergreen Advisers Poses Twelve Urgent Questions for Coca-Cola


Wintergreen calls for answers on company’s operations, costs and governance

October 20, 2014 12:00 PM Eastern Daylight Time

New York, NY – (Business Wire) - As The Coca-Cola Company (NYSE: KO) prepares to announce its third-quarter 2014 financial results on October 21, Wintergreen Advisers today released a list of twelve questions for the company to address during its conference call with investors.

Wintergreen urges Coca-Cola to provide detailed information in three critical areas – restructuring its bottling operations, streamlining expenses, and improving accountability.

David J. Winters, CEO of Wintergreen Advisers, said: “Coca-Cola is not making sufficient progress on cutting costs, a major initiative – restructuring its vast bottling network – is cloaked in secrecy, and those responsible for the company’s 2014 equity compensation plan are still at their posts. This situation cannot continue. It is time for Coca-Cola to get serious about revitalizing its business, and it can start by providing information about these issues.”


Wintergreen’s questions are:

    Restructuring Coca-Cola’s Bottling Operations

  1. Why is there not more robust financial disclosure regarding Coca-Cola Refreshments (CCR), its North American bottling and distribution segment? Coke needs to provide more detailed disclosure regarding CCR so that all investors may determine whether or not the $12+ billion purchase of Coca-Cola Enterprises North American business, the predecessor to CCR, has been a productive use of shareholder cash.
  2. Fixing up CCR and refranchising bottling operations was touted as a four-year process when the business was created in 2010. We are approaching five years - where do we stand on refranchising?
  3. Why haven’t investors seen specific plans for refranchising company owned bottlers outside the U.S. in countries such as China, Germany and India, among others?

Streamlining Expenses

  • Coke has recently announced a $1 billion cost savings and productivity initiative. For a company with a nearly $200 billion market capitalization, $1 billion of cost cutting initiatives appears to be an uninspiring goal. Many analysts have suggested $3 billion to $5 billion in potential annual savings is realistic – why is Coke not aiming for these higher targets?
  • Why does the Coke system need nearly 100 manufacturing plants in the U.S. when Anheuser-Busch InBev, a company of comparable size and scale, requires only a dozen?
  • At a time of what we view as sluggish growth and lackluster results, why is Coke spending $100+ million on a major renovation of its Atlanta headquarters? We believe Coke should be downsizing and cutting expenses, not further bloating the corporate structure.
  • Coke’s selling, general, and administrative expenses as a percentage of sales is far higher than almost all consumer packaged goods peers, even after adjusting for advertising spending. Why? What specific steps are being taken to make the company more efficient? When will Coke’s antiquated supply chain be restructured and modernized?
  • Coke’s revenue per employee is far below many of its consumer packaged goods peers. Why? What specific steps is Coke taking to streamline the company?
  • Strengthening Accountability

  • When can Coke’s shareholders expect to see some board members held accountable for the 2014 Equity Compensation Plan debacle?
  • What are the criteria for invoking a clawback on bonuses and options related to past poor deals such as Glaceau and potentially CCE North America?
  • What role did Muhtar Kent have in structuring the 2014 Equity Compensation Plan in both its original and revised format? Why is the CEO, who likely stands to benefit more than anyone from this compensation plan, involved at all in structuring it?
  • The Coca-Coca Company, which mixes and distributes a simple product based on a largely unchanged, 19th-century formula, would appear to be able to be capably managed by a newly graduated MBA student. So why then is the Coca-Cola board so generously rewarding a management team that we believe has failed to be good stewards of the business, refuses to be accountable for past mistakes and, in soliciting shareholders’ votes, has presented misleading information?
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    David Winters discusses Coca-Cola's compensation plan changes with Maria Bartiromo on Fox Business

    October 2, 2014

    David Winters discusses why he is not satisfied with the changes announced by Coca-Cola for their 2014 equity compensation plan. Winters said, "We're thrilled that Coca-Cola has acknowledged and conceded that what they did was wrong. And now, there is an opportunity for further progress at Coca-Cola."

     

     

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    David Winters appeared on CNBC to discuss why more changes are needed at Coca-Cola

    October 1, 2014

    David Winters discusses ongoing issues at Coca-Cola with CNBC's Scott Wapner, Kayla Tausche, and Josh Brown. Regarding Coca-Cola's decision to revise their equity compensation plan, Winters said, "It is a move in the right direction. It is Coca-Cola's public admission that the plan was a bad plan, and what they have told shareholders over the last many months was incorrect."

     

     

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    Wintergreen Advisers responds to Coca-Cola’s statement regarding new Equity Stewardship Guidelines

    October 1, 2014 12:25 PM Eastern Daylight Time

    New York, NY – (Business Wire) - Wintergreen Advisers today released the following statement by David Winters:

    “Coca-Cola (NYSE: KO) has finally conceded that the equity compensation plan it put to a vote of shareholders in April was outrageously excessive and inconsistent with past plans. This has been Wintergreen Advisers’ publicly expressed view since we first read Coca-Cola’s proxy statement in March of this year. No amount of backtracking by the Coca-Cola board of directors can hide the fact that we believe it tried to sneak one by shareholders in Coca-Cola’s proxy materials and statements at the April shareholder meeting. Today's statement by Coca-Cola only calls into question the competence and leadership of the board of directors and management. Much more work has to be done to revitalize Coca-Cola and restore trust in the company.”

     

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    Wintergreen Advisers Renews Call for Withdrawal
    of Coca-Cola Equity Plan


    Move comes as several leading fund managers disclose votes against the plan

    September 15, 2014 12:00 PM Eastern Daylight Time

    New York, NY – (Business Wire) - Wintergreen Advisers today renewed its call for The Coca-Cola Company (NYSE: KO) to withdraw its 2014 Equity Plan in light of new disclosures about significant shareholder opposition to the plan.

    As recently reported in the media, several of Coca-Cola’s largest shareholders did not support the plan, according to proxy-voting records filed with the SEC. Those filings show that funds managed by State Street, Fidelity and Capital Group voted against the Plan.

    Opposition by these funds is in addition to public pension funds that also voted against the plan, including the Florida State Board of Administration, State of Wisconsin Investment Board, Ontario Municipal Employees’ Retirement System, Ontario Teachers’ Pension Plan, and Canada Pension Plan Investment Board.

    David Winters, CEO of Wintergreen Advisers, said: “When large shareholders reject your plan, a responsible company should take pause. And while the public is only now learning of these votes, the Coca-Cola board has known about the level of opposition to the plan for months. These new proxy voting disclosures – taken with the decision by Coca-Cola’s largest shareholder, Berkshire Hathaway (NYSE: BRK.A, BRK.B), to abstain from voting – suggest the Chairwoman of Coca-Cola’s compensation committee should never have said the plan had ‘broad-based investor support.’

    “In our view, Coca-Cola’s plan does not have sufficient investor support to justify its implementation, and the board should do the right thing and set it aside without further delay. This is a test of whether the Coca-Cola board truly is prepared to act in the interests of shareholders. If it is not, the board should be replaced.”

    While the Coca-Cola 2014 Equity Plan was approved by a majority of the votes cast, fewer than half of Coca-Cola’s total outstanding shares (2.19 billion out of 4.41 billion) were voted in favor of the plan. By contrast, 66% of the total outstanding shares were voted in favor of Coca-Cola's previous equity plan in 2008

     

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    David Winters discusses issues at Coca-Cola on CNBC

    September 18, 2014

    David Winters discusses issues at Coca-Cola and Berkshire Hathaway with Kelly Evans on CNBC’s Closing Bell.They also discuss Canadian Natural Resources, Union Pacific, Genting and Swatch.

     

     

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    Wintergreen Advisers Renews Call for Withdrawal
    of Coca-Cola Equity Plan


    Move comes as several leading fund managers disclose votes against the plan

    September 15, 2014 12:00 PM Eastern Daylight Time

    New York, NY – (Business Wire) - Wintergreen Advisers today renewed its call for The Coca-Cola Company (NYSE: KO) to withdraw its 2014 Equity Plan in light of new disclosures about significant shareholder opposition to the plan.

    As recently reported in the media, several of Coca-Cola’s largest shareholders did not support the plan, according to proxy-voting records filed with the SEC. Those filings show that funds managed by State Street, Fidelity and Capital Group voted against the Plan.

    Opposition by these funds is in addition to public pension funds that also voted against the plan, including the Florida State Board of Administration, State of Wisconsin Investment Board, Ontario Municipal Employees’ Retirement System, Ontario Teachers’ Pension Plan, and Canada Pension Plan Investment Board.

    David Winters, CEO of Wintergreen Advisers, said: “When large shareholders reject your plan, a responsible company should take pause. And while the public is only now learning of these votes, the Coca-Cola board has known about the level of opposition to the plan for months. These new proxy voting disclosures – taken with the decision by Coca-Cola’s largest shareholder, Berkshire Hathaway (NYSE: BRK.A, BRK.B), to abstain from voting – suggest the Chairwoman of Coca-Cola’s compensation committee should never have said the plan had ‘broad-based investor support.’

    “In our view, Coca-Cola’s plan does not have sufficient investor support to justify its implementation, and the board should do the right thing and set it aside without further delay. This is a test of whether the Coca-Cola board truly is prepared to act in the interests of shareholders. If it is not, the board should be replaced.”

    While the Coca-Cola 2014 Equity Plan was approved by a majority of the votes cast, fewer than half of Coca-Cola’s total outstanding shares (2.19 billion out of 4.41 billion) were voted in favor of the plan. By contrast, 66% of the total outstanding shares were voted in favor of Coca-Cola's previous equity plan in 2008

     

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    David Winters discusses issues at Coca-Cola with
    the New York Times

    September 9, 2014

    David Winters discusses the lack of shareholder support for The Coca-Cola Company’s 2014 equity plan with Andrew Ross Sorkin for the New York Times article, “Support in Coca-Cola Vote Depends on How the Math Is Done.”

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    Wintergreen Advisers Announces www.FixBigSoda.com and Outlines Steps to Revitalize Coca-Cola

    July 23, 2014 03:46 PM Eastern Daylight Time

    NEW YORK — July 23, 2014 (Business Wire) — Citing persistent weakness in revenue and net income at The Coca-Cola Company (NYSE: KO), Wintergreen Advisers today presented an eleven-point plan to revitalize the company.

    The Wintergreen plan was shared in early July with Coca-Cola’s largest shareholders and is available today to the public on a new website, www.FixBigSoda.com, devoted to sharing information on improving Coke’s governance and business performance.

    Wintergreen recommends that Coca-Cola cut costs, improve margins and step up the pace of bottler refranchising to significantly improve operating results. Wintergreen’s plan also calls for Coca-Cola to strengthen its corporate governance, improve disclosure, separate the roles of chairman and CEO and create a strong and independent Board of Directors.

    David Winters, CEO of Wintergreen Advisers, said: “Coca-Cola’s lackluster second quarter earnings report underscores the need for urgent action. If the current board of directors and management team are unwilling or unable to get Coca-Cola back on the path of profitable and organic growth that accrues to all shareholders, they should be replaced. Coca-Cola and its shareholders deserve nothing less.”


    July 8, 2014

    Dear fellow Coca-Cola shareholders,

    Over the past few years, Coca-Cola has simply not lived up to its potential. Revenue has been flat and net income before extraordinary items was lower in 2013 than in 2011, despite massive spending on marketing and several cost cutting initiatives.¹ At the same time, Coca-Cola’s debt has increased by $8.5 billion.² Furthermore, the pace at which Coca-Cola has fixed-up and refranchised its bottlers has been frustratingly slow, and disclosure on the performance of the bottling assets has been less than clear. All of these factors lead us to believe that Coca-Cola could be better managed.

    We believe Coca-Cola’s shareholders deserve better, so we asked ourselves – “What would Coca-Cola look like if it were a well-run company with a focus on shareholder returns?” Here’s our answer:

    Operations and integrity:

    • Best in class profit margins. Coca-Cola’s profit margin has been stuck at 26% for the past three years.³ By contrast AB InBev and SABMiller, both beverage companies with global footprints and sizes comparable to Coca-Cola’s, have profit margins of 40% and 34% respectively.⁴ In our opinion, there is no reason why Coca-Cola shouldn’t have profit margins comparable to these companies. If Coca-Cola achieved a profit margin of 37% (the average of AB InBev and SABMiller), its profits would be 41% higher. Assuming Coca-Cola continued to trade at its current valuation, the shares would be worth substantially more than their recent price of $42 per share.
    • A laser-like focus on costs. In just ten years, Coca-Cola's workforce has grown from 49,000 employees to 131,000 employees, while profit per employee has declined by 32% over that same period.⁵ We believe that Coca-Cola could be more efficient and that certain significant cost-cutting measures could be taken to boost profits per employee without harming the company.
    • An increased pace of bottler refranchising. It has been nearly four years since Coca-Cola purchased Coca-Cola Enterprises’ North American operations and since that time, little progress has been made in refranchising those bottling assets. Capital should be freed up from these operations and redeployed into the more profitable and less capital-intensive concentrate business, or returned to shareholders.
    • Improved disclosure. Investors should be able to see exactly how the bottling business is performing as a standalone business unit. Coca-Cola’s current disclosure is insufficient for this purpose.
    • Prioritizing pricing and profit over volume growth. Coca-Cola management has seemingly emphasized growing volumes in mature markets such as the United States rather than focusing on prices and profits. At the end of the day, it is profits that matter to shareholders, not volume.
    • No more attempts to buy growth. Paying large valuations for stakes in non-core businesses such as Keurig Green Mountain Inc. does not address the fundamental growth problems Coca-Cola has encountered in its primary business of selling cold beverages. Management’s focus should be improving its time-tested and highly profitable business lines rather than trying to buy growth.
    • No more cheapening Coca-Cola’s brands. Mixing apple and grape juice with 0.3% pomegranate juice and labeling it as pomegranate juice reflects poorly on the entire company and management. We believe that the United States Supreme Court's recent unanimous decision related to a lawsuit against Coca-Cola for its allegedly misleading labeling of pomegranate juice is indicative of larger problems with management’s focus, integrity and judgment.

    Corporate Governance

    • Separate the roles of Chairman and CEO. Currently, Mr. Muhtar Kent serves as both the Chairman and CEO of Coca-Cola. Having an independent Chairman is a widely accepted best-practice for large, blue chip companies because it reduces certain conflicts of interests and helps to prevent management overreach. Coca-Cola should be a leader in corporate governance practices, and we believe the first step is having an independent Chairman.
    • Withdraw and replace the 2014 Equity Compensation Plan. We believe the Plan is overly-dilutive and harmful to shareholders and to Coca-Cola. It should be withdrawn and replaced with a more modest plan which includes clear and meaningful performance hurdles which must be cleared before any bonuses are paid and include an emphasis on cash awards. All details of any compensation plan should be contained within the proxy statement itself, not in supplemental filings, and should be presented in a clear and concise manner. Coca-Cola’s shareowners should be able to understand exactly what they are being asked to vote for without referencing several documents spread over several dozen of pages. For a complete picture regarding the 2014 Equity Plan, investors need to reference the proxy statement, a supplemental filing, and Coca-Cola’s 10-k.
    • Develop and implement a plan to reduce the dilutive effects of the existing 388 million equity awards.⁶ Whether through repurchasing options from employees or another mechanism, the 8.8% potential dilution from these awards needs to be addressed. The dilution overhang should be significantly reduced so that the future upside of Coca-Cola’s shares accrues to all shareholders.
    • A strong and independent Board of Directors. We question how a truly independent board could develop and unanimously approve a plan that ultimately garnered approval from less than half of Coca-Cola's total outstanding shares. An independent board's role is to stand up to management overreach and to represent the interests of the shareholders, who are the true owners of the company. At Coca-Cola, one-third of the board members have been there for more than 15 years, and many have overlapping business interests with each other and the company.⁷ Furthermore, many of the directors have little, if any, experience in the global beverage business. We believe it is time for some fresh, informed and independent perspectives in the boardroom.

    Coca-Cola is a company with incredible potential around the world and some of the most valuable consumer brands ever created. Its shareholders deserve leadership that respects and honors the iconic nature of the company and is willing to do what it takes to restore Coca-Cola to the great company that we know it to be. We have outlined a few modest steps that we believe are essential to returning value to Coca-Cola. If the current board of directors and management team are unwilling or unable to get Coca-Cola back on the path of profitable and organic growth that accrues to all shareholders, they should be replaced. Coca-Cola and its shareholders deserve nothing less.

    Sincerely,

    David J. Winters, CEO
    Wintergreen Advisers, LLC.
    973-263-4500


    Footnotes:

    1. Coca-Cola 2013 10-K, page 74; Coca-Cola 2011 10-K, page 78; this sentence has been corrected and updated as of July 10, 2014.
    2. Coca-Cola 2011 10-K, page 75; Coca-Cola 2013 10-K, page 76.
    3. As measured by EBITDA margin – earnings before interest, taxes, depreciation and amortization divided by net revenue.
    4. Bloomberg.
    5. Coca-Cola 2004 Annual Report page 12; 2013 Annual Report page 11; Bloomberg.
    6. Coca-Cola 2014 proxy statement, page 85.
    7. Coca-Cola 2014 proxy statement, pages 39 to 41.

     

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    David Winters Q&A with Barron’s

    July 7, 2014

    David Winters discusses issues at Coca-Cola, why he isn’t selling Coke’s stock, and why he’s bullish on the Asian consumer, in the Barron’s article, “How a Hands-On Investor Went Flat on Coke” by Sarah Max.

     

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    David Winters appeared on Bloomberg TV

    June 18, 2014

    David Winters was interviewed by Tom Keene and Scarlet Fu on Bloomberg Surveillance. They discussed value investing, speculation about Berkshire Hathaway and 3G taking Coca-Cola private, executive compensation, dividends and buybacks.

     

     

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    David Winters discusses issues at Coca-Cola
    with Yahoo Finance

    June 18, 2014

    David Winters was interviewed by The Daily Ticker’s Aaron Task about the potential for Coca-Cola to be taken private and possible conflicts of interest.

     

     

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    David Winters discusses Coca-Cola buyout
    speculation on Fox Business

    June 17, 2014

    David Winters appeared on Fox Business with Maria Bartiromo to discuss the possibility of Berkshire Hathaway and 3G taking Coca-Cola private. They also discuss conflicts of interest and corporate governance issues at Coca-Cola.

     

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    Wintergreen Urges Coca-Cola to Address Conflicts
    Amid Buyout Speculation

    June 17, 2014 10:00 AM Eastern Daylight Time

    NEW YORK -- (BUSINESS WIRE) -- Citing its concern about possible conflicts of interest at The Coca-Cola Company (NYSE: KO) amid media speculation that 3G Capital and Berkshire Hathaway may be planning a transaction to take Coca-Cola private, Wintergreen Advisers today released the following letter. It is addressed to the independent directors who chair Coca-Cola’s Audit, Compensation, and Governance Committees and urges them to address these conflicts and take steps to exercise their fiduciary duty with regard for all shareholders.


    Committee Chairs of the Board of Directors
    The Coca-Cola Company
    One Coca-Cola Plaza
    Atlanta, GA 30313

    June 16, 2014

    Dear Ms. Lagomasino and Messrs. Greenberg and Nunn:

    Events over the past few months, leading up to and after the annual meeting of Coca-Cola shareholders, have given rise to grave concerns at Wintergreen Advisers regarding potential conflicts of interests at Coca-Cola. I am writing to you, in your roles as chairs of the Compensation, Audit, and Governance Committees, respectively, to urge you and your fellow Board members to address the current and potential conflicts that we identify below.

    Wintergreen’s specific and most recent concern stems from speculation in the U.S. and Brazilian media that Berkshire Hathaway, your largest shareholder, and 3G Capital, a private equity firm, may be planning a transaction to take Coca-Cola private.¹ Media reports express the view that Berkshire's and 3G's recent joint acquisition of Heinz may serve as the blueprint for such a transaction. Additionally, Warren Buffett has stated that the Heinz deal “created a partnership template that may be used by Berkshire in future acquisitions of size”² and stated at Berkshire’s 2014 shareholders meeting that "we haven’t bought Coca-Cola, yet.”

    As you may recall, the Heinz deal took place quickly, in part because there was no “go-shop” period in which Heinz could solicit competing offers and potentially increase the purchase price. In addition, Heinz agreed to a $750 million termination fee, which is about three times greater than if there had been a typical go-shop provision.³ All of this combined to make the deal “unusual” and the Heinz Board subsequently negotiated only with Berkshire and 3G.⁴ As adviser to longtime shareholders of Coca-Cola, we are concerned that a similar type of sweetheart, insider deal for Coca-Cola could, in our opinion, significantly undervalue Coca-Cola and irreparably harm Coca-Cola shareholders. Since Berkshire is Coca-Cola's largest shareholder, owning greater than 9% of the outstanding shares, and Warren Buffett's son Howard serves as a Director of both Coca-Cola and Berkshire Hathaway, we believe our concerns are valid.

    None of Coca-Cola, Berkshire or 3G has publicly commented on the accuracy of these media reports. However, the possibility of a Berkshire-3G bid puts both Warren Buffett's curious silence and subsequent abstention regarding the Coca-Cola 2014 Equity Plan that he thought was "quite excessive" and the Coca-Cola Board’s machinations to win shareholder approval of the excessive Plan, seemingly at any cost, in a worrisome context.

    Under the Plan, a buyout could trigger a change-of-control provision, immediately vesting equity awards granted to Coca-Cola’s top management and its Board members. In addition, the Plan removed a 5% cap on awards to any individual, potentially allowing Coca-Cola to front-load awards. As a result of these provisions, stock and options worth hundreds of millions of dollars at today's share price that would otherwise be paid out over a period of several years could vest overnight. If such a deal were completed today, Coca-Cola Chairman and CEO Muhtar Kent alone would stand to reap a nine-figure pay day. Coca-Cola's and Berkshire's failure to meaningfully address concerns regarding the Plan and the way it was adopted raise significant questions about whether passing the Plan was a pay off for Mr. Kent's acquiescence in going along with a future acquisition of Coca-Cola.

    Regardless of whether the Coca-Cola Board considers this accelerated vesting a feature or an oversight of the Plan, we are concerned that it incentivizes the Board and Mr. Kent to sell Coca-Cola, regardless of the price. In addition, in a "going-private" transaction, the buyers (here, potentially Berkshire and 3G) seek to pay the lowest possible price for the target company, whereas it is in the best interests of the shareholders to receive the highest premium possible. We remind the Coca-Cola Board members that in a potential buyout situation, they have a fiduciary duty to shareholders to obtain the highest price reasonably available, regardless of whether they have competing personal interests.

    In our opinion, any proposed transaction should be reviewed and priced by an independent committee of the Coca-Cola Board with the assistance of respected outside counsel and advisers. At a minimum, we believe there should be a go-shop period in which Coca-Cola solicits multiple bids and creates a truly competitive process in order to obtain the highest reasonable price for shareholders. Given the extent of the potential conflicts of interest and the events over the past few months, we expect nothing less.

    In addition, the Coca-Cola Board should consider heading off a potential bid by undertaking an immediate restructuring plan of its own under a new management team. We believe there is a great deal of additional value within Coca-Cola that a new management team could quickly unlock by running Coca-Cola more efficiently and on behalf of its true owners, the shareholders. We are concerned by current management’s recent track record of acquiring short-term growth at lofty valuations, such as the recent Keurig Green Mountain Inc. acquisition, rather than focusing on long-term growth and profitability at Coca-Cola’s core brands and products. Additional such deals will only dilute the enormous value of Coca-Cola’s existing brands and distract management from the task of restoring Coca-Cola to organic growth.

    Since Coca-Cola filed its 2014 Proxy Statement and subsequently muscled through the controversial Equity Plan, there are now more questions than answers. It increasingly appears to us that there are substantial conflicts of interests, extensive governance issues and perhaps plans to take Coca-Cola private. This is extremely troubling and is exacerbated by Coca-Cola's failure to address these legitimate concerns. The shareholders deserve prompt and complete answers.

    Regards,

    David J. Winters, CEO
    Wintergreen Advisers, LLC
    973-263-4500

    Cc: Board of Directors


    Footnotes:

    1. Fortune, "Warren Buffett, activist investor?" by Jen Wieczner, May 3, 2014. Istoe Dinheiro, "A próxima cortada de Buffett," By Cláudio Gradilone & Carlos Eduardo Valim, May 9, 2014. (With English translation). Full articles available at http://fortune.com/2014/05/03/warren-buffett-activist-investor/ and http://www.istoedinheiro.com.br/noticias/negocios/20140509/proxima-cortada-buffett/153158.shtml
    2. 2013 Berkshire Hathaway Annual Report, page 3
    3. The New York Times, “Buffett’s Kind of Deal” by Steven Davidoff, Feb 15, 2013. Full article available at http://dealbook.nytimes.com/2013/02/15/warren-buffetts-kind-of-deal/?_php=true&_type=blogs&_r=0
    4. HJ Heinz proxy statement, March 27, 2013, pages 37-49

     

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    Warren Buffett discusses why he abstained from voting on Coca-Cola’s 2014 Equity Plan

    April 23, 2014

    Following Coca-Cola’s Annual Meeting on April 23, 2014, Warren Buffett was interviewed by CNBC’s Becky Quick about his decision to abstain from voting on Coca-Cola’s controversial equity compensation plan, even though he thought the plan was "excessive." He also discusses why he didn’t publicly voice his concerns about the plan like Wintergreen Advisers CEO David Winters did, and why he has voted in favor of compensation plans in the past even when he did not agree with them.

     

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    David Winters talks about Coca-Cola and Warren Buffett on Fox Business

    May 7, 2014

    David Winters tells Fox Business’ Maria Bartiromo he believes that Warren Buffett and the Board of Directors at Coca-Cola have failed their fiduciary duties to shareholders by allowing Coca-Cola’s equity compensation plan to pass.

     

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    Wintergreen Advisers Writes Directors of Coca-Cola, Berkshire Hathaway

    May 7, 2014 10:30 AM Eastern Daylight Time

    NEW YORK -- (BUSINESS WIRE) -- Wintergreen Advisers today released the following letter, which was sent to the directors of The Coca-Cola Company (NYSE: KO) and Berkshire Hathaway (NYSE: BRK.A, 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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    David Winters Discussed the Coca-Cola Compensation Plan with Becky Quick on CNBC

    May 2, 2014

    Speaking from the site of the 2014 Berkshire Hathaway Annual Meeting in Omaha, NE, David Winters tells CNBC’s Becky Quick that he was "absolutely stunned" when he learned about Coca-Cola's equity compensation plan for executives. He also urged the beverage giant to withdraw the "extreme overreaching" plan, saying it raised questions about Coke's corporate governance.

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    Wintergreen Calls on Coca-Cola to Commit to Changes in Equity Plan

    May 02, 2014 08:00 AM Eastern Daylight Time

    NEW YORK -- (BUSINESS WIRE) -- Wintergreen Advisers today issued the following statement:

    After several weeks, Coca-Cola (NYSE: KO) appears to be taking seriously the issues we raised regarding its equity plan in our first letter to Coca-Cola's Board and Warren Buffett on March 21st.

    But vague promises from unnamed sources are not enough. Coca-Cola must make a detailed, publicly disclosed commitment to withdraw or substantially modify the plan. We would expect the modifications to include the reduced use of equity awards as incentive compensation. Coca-Cola's shareholders deserve nothing less.

    Shareholders also deserve an answer to an important question: What were the events that led up to the decision by the Board to accept a plan that Coca-Cola's largest shareholder and most famous investor agrees is excessive?

     

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    Wintergreen Questions Board Actions in Coca-Cola Equity Plan Vote

    May 01, 2014 10:00 AM Eastern Daylight Time

    NEW YORK -- (BUSINESS WIRE) -- Wintergreen Advisers today released the following letter, which was sent to the Coca-Cola (NYSE: KO) Board of Directors and Warren E. Buffett at approximately 2:00pm ET yesterday, April 30, 2014. The letter raises questions about the actions of Coca-Cola Chairman and CEO Muhtar Kent, Director Howard Buffett and Director Maria Elena Lagomasino, and statements made by the company in connection with the shareholder vote on the Coca-Cola 2014 equity plan.


    Board of Directors
    The Coca-Cola Company
    One Coca-Cola Plaza
    Atlanta, GA 30313

    April 30, 2014

    Dear Coca-Cola Board Members,

    Warren Buffett has publicly stated that he spoke with Coca-Cola Chairman and CEO Muhtar Kent multiple times leading up to Coca-Cola's annual shareholder meeting and expressed his lack of support for the 2014 Equity Plan. Mr. Buffett has also said that he spoke with his son Howard Buffett, who serves as a director of Coca-Cola, regarding the 2014 Equity Plan. In an interview with CNBC hours after the shareholder meeting, Mr. Buffett stated that the plan “really struck me as quite excessive.” We would like to know whether Mr. Muhtar Kent or Mr. Howard Buffett made the Compensation Committee or the full Board of Directors aware of Mr. Warren Buffett’s views on the 2014 Equity Plan. Did Mr. Buffett speak with any other Coca-Cola directors regarding his views of the 2014 Equity Plan, and if so, when?

    In particular, we would like to know whether, as head of the Compensation Committee, Ms. Lagomasino was informed of Mr. Buffett’s views? If so, we question how Coca-Cola could be comfortable with the statement “We are really pleased that we are seeing broad-based investor support for this plan." Further, we would like to know whether Coca-Cola reached out to institutional investors before the shareholder meeting to drum up support, even after it knew that its largest shareholder opposed the plan. If Coca-Cola did reach out to investors, did it state or imply that it had received generally positive feedback from other investors?

    Regarding the 2014 Equity Plan itself, we do not believe there is a reasonable basis for Ms. Lagomasino's statement at the shareholder meeting that “the new plan is not any more dilutive than historical plans and programs.” This is demonstrably false. The simple math is clear – the 2014 plan calls for more awards than previous plans, distributed in fewer years than previous plans. This is undeniably more dilution. Warren Buffett made this clear in his April 23rd interview on CNBC, stating “the plan – compared to past plans was a significant change…I thought it was too much.”

    As investment adviser with a fiduciary duty to our longtime shareholders, we are deeply concerned that Coca-Cola is becoming known not for great products but for excessive management compensation, the trampling of shareholders’ interests and a willful disregard for the valid concerns of its largest shareholder.

    We look forward to the board’s response to these urgent questions.

    Regards,

    David J. Winters

    Cc: Warren Buffett

     

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    Wintergreen Believes Coca-Cola Lacks Shareholder Mandate for Equity Plan

    April 24, 2014 02:30 PM Eastern Daylight Time

    NEW YORK -- (BUSINESS WIRE) -- Shareholders in the Coca-Cola Company (NYSE: KO) delivered a clear message at yesterday’s annual meeting that they do not support Coca-Cola's 2014 equity plan.

    Coca-Cola’s certified ballot results, filed with the SEC late yesterday, show that fewer than half of Coca-Cola’s total outstanding shares (2.19 billion out of 4.40 billion) were voted in favor of the 2014 equity plan. By contrast, 66% of the total outstanding shares were voted in favor of Coca-Cola's previous plan.

    David Winters, CEO of Wintergreen Advisers, said “Coca-Cola’s plan failed to attract support from a majority of shareholders, including its largest shareholder, Berkshire Hathaway (NYSE: BRK.B). Wintergreen believes that no company should implement an equity plan without the support of a majority of its shareholders, least of all a great company like Coca-Cola. It is clear to us that Coca-Cola failed to earn a shareholder mandate to fully implement the 2014 equity plan and we call on Coca-Cola's Board of Directors to withdraw or scale back the plan. According to SEC filings, Coca-Cola had more than 66 million shares available for issuance under existing equity plans as of February 20th, which we believe would allow it to continue to issue stock awards while developing a more shareholder friendly plan.”

     

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    Wintergreen Asks Shareholders to Consider Nine Points Before Voting on Coca-Cola's Equity Plan

    April 22, 2014 03:00 PM Eastern Daylight Time

    NEW YORK -- (BUSINESS WIRE) -- Ahead of the Coca-Cola Company (NYSE:KO) annual shareholders’ meeting tomorrow, April 23, David Winters, CEO of Wintergreen Advisers, wrote a letter intended for all Coca-Cola shareholders.

    Winters wrote “We believe Coca-Cola’s 2014 annual proxy statement fails to present important information ‘in a clear and easy to read manner’ with regard to the description of the proposed equity plan. We hope all fiduciaries will consider this letter and the attachment; ‘Nine Points to Consider Before Voting on Coca-Cola’s 2014 Equity Plan,’ in light of the material Coca-Cola has provided and ask themselves whether Coca-Cola has been forthcoming about the implications of the proposed equity plan.“

    Winters continued “If there is significant opposition to the proposed equity plan, we believe the Coca-Cola board should consider whether it has a sufficient mandate from shareholders to fully implement the plan. Should the board proceed with the plan, we will be watching closely to see whether it is executed in a manner that serves shareholders’ interests and will continue to communicate our concerns.”

    Separately, earlier today the Florida State Board of Administration, owner of approximately 6.4 million Coca-Cola shares, announced it has voted against the Coca-Cola 2014 equity plan.

    The full text of the letter is included below.


    Wintergreen Advisers, LLC Letter to Coca-Cola Shareholders

    April 22, 2014

    Dear Fellow Coca-Cola Shareholders:

    Since we made public our first letters to the Coca-Cola Board of Directors and Warren Buffett on March 21, we have been fortunate to receive expressions of support from many shareholders, both large and small, who share our concerns about Coca-Cola’s proposed equity plan. Several large institutional investors have publicly announced their opposition to the proposed equity plan, and we are hopeful that even more will come forward.

    Wintergreen Advisers, LLC, like other institutional investors, fund managers and financial advisers, has a fiduciary duty to its clients to act in their interests when voting on proxy matters. We all rely on a public company's proxy materials to present important information “in a clear and easy to read manner” and expect a “plain English explanation of how boards arrive at pay decisions.”¹

    Wintergreen believes Coca-Cola’s 2014 annual proxy statement fails to meet these standards with regard to the description of the proposed equity plan. We hope all fiduciaries will consider this letter and the attachment “Nine Points to Consider Before Voting on Coca-Cola’s Proposed 2014 Equity Plan” in light of the material Coca-Cola has provided and ask themselves whether Coca-Cola has been forthcoming about the implications of the proposed equity plan.

    Like many other institutions, Wintergreen reports its proxy voting record each year and gives careful consideration to every vote we cast on behalf of our clients. We simply could not justify a vote in favor of Coca-Cola's proposed equity plan once we understood its potential impact on our clients’ investment.

    We concluded that Coca-Cola was proposing a very bad plan. It is bad for Coca-Cola, the vast majority of Coca-Cola employees and above all, it is bad for shareholders.

    Recently, Coca-Cola issued a statement that the proposed equity plan is "closely in line with past plans approved by the Board and the shareowners,”² but we believe it is abundantly clear that this is simply not true. The proposed equity plan is potentially highly dilutive and destructive to long-term shareholder value. We do not believe it is in shareholders’ best interests to have their investment diluted so that the top 5% of Coca-Cola’s most highly compensated employees can be gifted with equity to this extent, above and beyond their cash compensation and other benefits.

    We are long-term investors and we want management to be well-rewarded if they do a great job for shareholders, but under the proposed plan the division of value tilts too far in favor of Coca-Cola’s management at the expense of shareholders. By increasing stock-option awards, shortening the award period and including lower performance hurdles, we believe the plan could lead to outsized rewards for management and increased dilution for shareholders. This is not in the best interest of Coca-Cola or its shareholders.

    We look forward to the results of the balloting on the proposed equity plan and believe the final vote will show that there are many investors who share our concerns.

    If there is significant opposition to the proposed equity plan, we believe the Coca-Cola board should consider whether it has a sufficient mandate from shareholders to fully implement the plan. Should the board proceed with the plan, we will be watching closely to see whether it is executed in a manner that serves shareholders’ interests and will continue to communicate our concerns.

    Sincerely,

    David J. Winters, CEO
    Wintergreen Advisers, LLC
    973-263-4500


    Nine Points to Consider Before Voting on Coca-Cola’s 2014 Equity Plan

    Wintergreen Advisers urges all shareholders to carefully consider the following items as they prepare vote on the plan.

    1. Coca-Cola’s proposed plan, unlike previous plans, allows an individual to receive more than 5% of the awards available under the plan.³
    2. The proposed plan permits the Compensation Committee to award "bonus shares" that are “not subject to any restrictions or conditions.
    3. The proposed plan includes 27 criteria that can potentially be used by the board to justify equity awards, many of which are not subject to any disclosed standard of success.⁵ In recent measurement periods, the hurdle rate that must be met to receive shares and options has been lowered. While the hurdle rate has been raised for the current measurement period, it is below what was required in previous periods.⁶
    4. The proposed plan allows Coca-Cola's Compensation Committee to “exclude” and “adjust” certain items from the evaluation of management performance.⁷ In football terms, this allows the Compensation Committee to move the goal posts closer once the ball is in the air.
    5. The proposed plan, when combined with previous plans, could dilute shareholders by up to 16.6%.
    6. The proposed plan, as envisioned by Coca-Cola, will result in the issuance of up to 340,000,000 shares and options.⁹ This represents a 21% increase in potential awards compared to the previous plan.¹⁰
    7. The proposed plan allows the Compensation Committee to issue these 340,000,000 shares and options over four years.¹¹ This time period is more than 33% shorter than the time period under the 2008 plan.¹²
    8. The proposed plan may require Coca-Cola to spend even more on share repurchases than the $1.3 billion it spent in 2013 in order to offset dilution.¹³ These 2013 buybacks comprised 27% of Coca-Cola’s “robust share repurchase program,”¹⁴ a figure that could rise under the proposed plan and divert a significant portion of the company’s cash flow away from more productive and profitable uses.
    9. Coca-Cola’s compensation policies get a low rating from a leading proxy advisory firm. Institutional Shareholder Services (ISS) gives Coca-Cola’s compensation policy a score of 8, near the bottom of the ISS scale.¹⁵

    Footnotes:

    1. “Message and Q&A from our Chairman and CEO,” 2014 Coca-Cola proxy statement, page 5.
    2. Coca-Cola press release, March 28, 2014.
    3. 2008 Coca-Cola proxy statement, page 87.
    4. The Coca-Cola Company 2014 Equity Plan, page 14, article 13.1.
    5. 2014 Coca-Cola proxy statement, pages 87-88.
    6. 2014 Coca-Cola proxy statement, page 57.
    7. 2014 Coca-Cola proxy statement, page 88.
    8. 2014 Coca-Cola proxy statement, page 86; 16.6% calculation excludes Total Award Shares from denominator.
    9. Assumes 60/40 option/full value award split, per 2014 Coca-Cola proxy statement, page 86.
    10. 2008 Plan allowed 280,000,000 shares , 2-for-1 split adjusted; see 2008 Coca-Cola proxy statement, page 87.
    11. 2014 Coca-Cola proxy, page 85.
    12. 2008 Plan made grants from 2009 to 2014 and still has shares available.
    13. 2014 Coca-Cola proxy, page 86.
    14. Coca-Cola press release, March 28 2014.
    15. https://link.issgovernance.com/qs/free/31989.

     

    THIS IS NOT A SOLICITATION OF DIRECT OR INDIRECT AUTHORITY TO VOTE YOUR PROXY. PLEASE DO NOT SEND US YOUR PROXY CARD; WINTERGREEN ADVISERS, LLC AND ITS AFFILIATES ARE NOT ABLE TO VOTE YOUR PROXIES AND THIS COMMUNICATION DOES NOT CONTEMPLATE SUCH AN EVENT.

    THIS LETTER INCLUDES INFORMATION BASED ON DATA FOUND IN FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INDEPENDENT INDUSTRY PUBLICATIONS AND OTHER SOURCES. ALTHOUGH WE BELIEVE THAT THE DATA ARE RELIABLE, WE HAVE NOT SOUGHT, NOR HAVE WE RECEIVED, PERMISSION FROM ANY THIRD-PARTY TO INCLUDE THEIR INFORMATION IN THIS LETTER. MANY OF THE STATEMENTS IN THIS LETTER REFLECT OUR SUBJECTIVE BELIEF.

    THE INFORMATION CONTAINED HEREIN IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF THE COCA-COLA COMPANY MAY TRADE AT ANY TIME. THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. INVESTORS SHOULD MAKE THEIR OWN DECISIONS REGARDING THE COCA-COLA COMPANY AND ITS PROSPECTS BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN. NEITHER WINTERGREEN ADVISERS, LLC, NOR ANY OF ITS AFFILIATES ACCEPTS ANY LIABILITY WHATSOEVER FOR ANY DIRECT OR CONSEQUENTIAL LOSS HOWSOEVER ARISING, DIRECTLY OR INDIRECTLY, FROM ANY USE OF THE INFORMATION CONTAINED HEREIN HOWSOEVER ARISING, DIRECTLY OR INDIRECTLY, FROM ANY USE OF THE INFORMATION CONTAINED HEREIN.

     

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    Wintergreen Advisers Sends Second Letter to Warren Buffett on Coca-Cola Equity Plan

    April 21, 2014 04:38 PM Eastern Daylight Time

    NEW YORK -- (BUSINESS WIRE) -- As investors continue to prepare to cast their proxy ballots ahead of the Coca-Cola Company (NYSE:KO) annual shareholders' meeting on April 23, David Winters, CEO of Wintergreen Advisers, sent a second letter to Coca-Cola's largest shareholder, Warren Buffett, CEO of Berkshire Hathaway (NYSE:BRK.B).

    Winters wrote, "We do not believe it would be consistent with Berkshire's long ingrained culture to support such a plan at any of your equity holdings, much less one worth nearly $16 billion. If the proposed 2014 Coca Cola Equity Plan were to be approved by its shareholders, the implication for investment returns in our country may be devastating."

    The full text of the letter is included below.


    Wintergreen Advisers, LLC Letter to Warren Buffett

    Warren E. Buffett
    Berkshire Hathaway Inc.
    3555 Farnam St.
    Omaha, NE 68131

    April 16, 2014

    Dear Warren,

    Over the years your conviction and passion for corporate diligence and responsibility has echoed through the American consciousness. Like Jiminy Cricket you sit on our shoulders reminding us to do what is right. Work hard, be fair, save for our future, stand up for what is right, and think like an owner. Now the United States and investors are at a crossroads. People of all political persuasions recognize the enormous disparity in financial wealth between the vast majority of Americans and the very top ranks of the corporate elite.

    Millions of investors depend upon Coca-Cola as a staple in their financial security planning. Some invest directly in Coca-Cola, others invest in index or actively managed equity funds, and some invest indirectly through the investment vehicle most near and dear to your heart, Berkshire Hathaway. Whether in the initial formative years of saving, in the midst of their careers or in the payout period of a well-deserved retirement, there are millions of people who worked hard for their money and believed the promise that their money would work hard for them.

    Later this month at the company’s annual meeting, shareholders will vote to determine whether they will transfer a meaningful portion of Coca-Cola’s intrinsic value from the shareholders to the top five percent of the company’s employees. The proposed equity plan, when combined with existing plans, could dilute all Coca-Cola shareholders by taking up to 16.6% of the value of each share, worth $6.67 per Coca-Cola share at last night’s closing price of $40.18, and handing it to the top 5% of Coke management. If Coke uses the share repurchase program to offset the issuance of these shares as they have done in recent years, shareholders will be further damaged. The company may have to divert approximately $2 billion per year (one-quarter of its free cash flow) from productive uses to offsetting dilution. To a business with a 27% return on equity, the opportunity cost of spending $2 billion per year to offset dilution is enormous.

    As you stated in your 2013 letter to Berkshire shareholders,

    Meanwhile, stock repurchases at Coca-Cola and American Express raised our percentage ownership. Our equity in Coca-Cola grew from 8.9% to 9.1%...And, if you think tenths of a percent aren’t important, ponder this math: For the four companies in aggregate, each increase of one-tenth of a percent in our share of their equity raises Berkshire’s share of their annual earnings by $50 million.

    Coca-Cola repurchased 121 million shares in 2013, but turned around and issued 54 million shares and options to management, reducing the share count by only 67 million shares. Now realize that if Coca-Cola hadn’t issued those 54 million shares to executives, Berkshire’s ownership of Coca-Cola would now be 9.2% instead of 9.1% and Berkshire’s share of Coca-Cola’s earnings would be $10 million larger. We agree with you - one tenth of a percent IS a big deal to Berkshire! With the proposed 2014 Equity Plan potentially issuing more shares in fewer years than previous equity compensation plans, this dilution headwind to Berkshire and all Coca-Cola shareholders will likely only grow worse.

    In the 52 years you have been Chairman and CEO, you have not implemented such a dilutive compensation plan at Berkshire Hathaway, and it is unthinkable that you ever will. We do not believe it would be consistent with Berkshire’s long ingrained culture to support such a plan at any of your equity holdings, much less one worth nearly $16 billion. If the proposed 2014 Coca Cola Equity Plan were to be approved by its shareholders, the implication for investment returns in our country may be devastating.

    We believe that approval of the proposed Coca-Cola plan will harm the returns of all Coca-Cola shareholders, including Berkshire. If the proposed plan becomes the model for subsidiaries within Berkshire, the financial returns for all Berkshire shareholders would be dramatically diminished. Similar plans implemented by more companies in the S&P 500 Index could starve index fund owners of their expected returns. Investors who vote for these excessively dilutive plans risk becoming enablers in the spiral of ever-higher executive pay.

    With enough shares remaining under existing plans to function well for another year, Coca-Cola does not need a new plan at this time. Coca-Cola’s board of directors should take the time to rethink and refine the proposed equity plan in a manner that will be fair and reasonable from the perspective of both shareholders and employees.

    We believe that Coca-Cola’s proposed 2014 Equity Plan is bad for Berkshire Hathaway, bad for Coca-Cola, and bad for the investment outlook for U.S. companies. This is a moment in time when America again looks to you to continue to stand up for what is best for our corporations and our country, just as you have talked about and done for decades. Coca-Cola and Berkshire shareholders, and in reality all of America, are counting on you to demand that shareholders be treated as partners instead of piggy banks. This is an opportunity to champion the true owners of American businesses – the shareholders.

    Regards,

    David J. Winters, CEO
    Wintergreen Advisers, LLC
    973-263-4500

    THIS IS NOT A SOLICITATION OF DIRECT OR INDIRECT AUTHORITY TO VOTE YOUR PROXY. PLEASE DO NOT SEND US YOUR PROXY CARD; WINTERGREEN ADVISERS, LLC AND ITS AFFILIATES ARE NOT ABLE TO VOTE YOUR PROXIES AND THIS COMMUNICATION DOES NOT CONTEMPLATE SUCH AN EVENT.

    THIS LETTER INCLUDES INFORMATION BASED ON DATA FOUND IN FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INDEPENDENT INDUSTRY PUBLICATIONS AND OTHER SOURCES. ALTHOUGH WE BELIEVE THAT THE DATA ARE RELIABLE, WE HAVE NOT SOUGHT, NOR HAVE WE RECEIVED, PERMISSION FROM ANY THIRD-PARTY TO INCLUDE THEIR INFORMATION IN THIS LETTER. MANY OF THE STATEMENTS IN THIS LETTER REFLECT OUR SUBJECTIVE BELIEF.

    THE INFORMATION CONTAINED HEREIN IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF THE COCA-COLA COMPANY MAY TRADE AT ANY TIME. THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. INVESTORS SHOULD MAKE THEIR OWN DECISIONS REGARDING THE COCA-COLA COMPANY AND ITS PROSPECTS BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN. NEITHER WINTERGREEN ADVISERS, LLC, NOR ANY OF ITS AFFILIATES ACCEPTS ANY LIABILITY WHATSOEVER FOR ANY DIRECT OR CONSEQUENTIAL LOSS HOWSOEVER ARISING, DIRECTLY OR INDIRECTLY, FROM ANY USE OF THE INFORMATION CONTAINED HEREIN HOWSOEVER ARISING, DIRECTLY OR INDIRECTLY, FROM ANY USE OF THE INFORMATION CONTAINED HEREIN.

     

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    David Winters Discussed the Coca-Cola Compensation Plan
    with Liz Claman on Fox Business

    April 16, 2014

    David Winters appeared on Fox Business Network's "Countdown to the Closing Bell" with Liz Claman, and discussed his opposition to Coca-Cola’s 2014 equity compensation plan. Winters said, "Coca-Cola is a good company with a bad equity plan."

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    Wintergreen Advisers Urges All Investors to Review
    Coca-Cola’s 2014 Equity Plan Before Voting

    Fiduciaries should conduct an independent analysis, not rubber-stamp recommendations of proxy advisors

    April 15, 2014 07:00 AM Eastern Daylight Time

    NEW YORK -- (BUSINESS WIRE) -- As investors prepare to cast their proxy ballots ahead of the Coca-Cola Company (NYSE:KO) annual shareholders’ meeting on April 23, David Winters, CEO of Wintergreen Advisers, today sent the following letter to Coca-Cola’s top 25 institutional shareholders, urging them to carefully review the Coca-Cola 2014 equity plan before they vote.

    “Every fiduciary has a responsibility to consider the impact of Coca-Cola’s proposed equity plan,” Mr. Winters said. “Proxy advisers will make recommendations, but ultimately it is up to the fiduciaries or other executives of each institutional investor to vote based on what they think is best for their investors. I urge these executives not to outsource their fiduciary responsibility: Read the plan, read our analysis and reach your own conclusions.”

    The letter is being sent to the following individuals, listed in order of share ownership in The Coca-Cola Company, are:

    • Warren E. Buffett, CEO, Berkshire Hathaway (NYSE: BRK.B)
    • F. William McNabb III, Chairman & CEO, Vanguard
    • Laurence D. Fink, Chairman & CEO, BlackRock (NYSE: BLK)
    • Joseph L. Hooley, President & CEO, State Street Corporation (NYSE: STT)
    • Edward Johnson III, Chairman & CEO, Fidelity Investments
    • James Rothenberg, Chairman, Capital Group
    • Frederick H. Waddell, Chairman & CEO, Northern Trust Co. (NASDAQ: NTRS)
    • Gerald L. Hassell, Chairman & CEO, Bank of NY Mellon (NYSE: BK)
    • Donald Yacktman, President, Yacktman Asset Management
    • Brad Hilsabeck, CEO, Grantham Mayo Van Otterloo
    • Jeff Raikes, CEO, The Bill & Melinda Gates Foundation
    • Anshu Jain, Co-CEO, Deutsche Bank (NYSE: DB)
    • Yngve Slyngstad, CEO, Norges Bank Investment Management
    • Fayez Sarofim, Chairman, Fayez Sarofim & Co.
    • Vince Gubitosi, President & Chief Investment Officer, Geode Capital Management
    • James Dimon, Chairman & CEO, J.P. Morgan Chase (NYSE: JPM)
    • Brian T. Moynihan, CEO, Bank of America (NYSE: BAC)
    • Edward B. Rust, Jr. Chairman & CEO, State Farm Mutual Auto Insurance Co.
    • Richard Rossi, President, Eagle Asset Management
    • Roger W. Ferguson Jr, President & CEO, TIAA-CREF
    • Mark Zinkula, CEO, Legal & General Investment Management (LSE: LGEN)
    • James Kennedy, President & CEO, T Rowe Price Group (NYSE: TROW)
    • Sergio Ermotti, CEO, UBS AG (NYSE: UBS)
    • Gregory E. Johnson, Chairman & CEO, Franklin Resources (NYSE: BEN)

     


    Wintergreen Advisers, LLC Letter to Institutional Shareholders of Coca Cola

    April 15, 2014

    To My Fellow Institutional Shareholders:

    At this moment, Coca-Cola shareholders are being asked to approve Coca-Cola’s 2014 Equity Plan, which we believe is deeply flawed and contrary to shareholders’ interests.

    Wintergreen Advisers, LLC’s clients own more than 2.5 million shares of Coca-Cola and we have expressed our concerns about the Plan by writing letters to Coca-Cola’s Board of Directors, its largest shareholder, Berkshire Hathaway, and certain other institutional investors. We have also communicated our concerns in our presentation earlier this month.¹

    We urge all institutional investors to review Coca-Cola’s proposed plan for themselves before they decide how they will vote.

    I am writing today to urge you, the institutional shareholders in Coca-Cola, as fiduciaries for many thousands of individual investors, retirement funds, union and other pension plans to undertake a careful, thorough and independent review of Coca-Cola’s proposed plan before casting your vote.

    Existing equity plans at the Coca-Cola Company are more than adequate to meet the Company’s needs. There are 66,948,651 awards remaining under existing Coca-Cola equity plans, enough to last another year at the recent pace of 65 million awards per year.²

    It has become a common practice in recent years for institutional investors to rely on the recommendations of proxy advisory firms when voting on shareholder matters, the largest being Institutional Shareholder Services (“ISS”). Following these recommendations to award shares as part of a new Coca-Cola equity plan without performing your own due diligence would, in our view, be a disservice to the investors that you represent and serve.

    We believe the methodology described in the ISS publicly available proxy guidelines understates the true cost to shareholders of Coca-Cola’s equity plan.

    The ISS proxy-voting guidelines state that ISS, while reviewing each plan on its own merits, will generally vote against plans in which the total cost is “unreasonable” and which have a three-year burn rate exceeding the burn rate cap of its industry peers.³

    ISS uses what it calls “shareholder value transfer” (SVT) to assess the cost of a plan, and will consider a plan “reasonable” if it does not exceed a threshold ISS calculates based on other companies in the industry.

    The use of peer-group comparisons as a fundamental analytical tool carries an embedded bias that can result in increasingly expensive plans. To the extent every board wants to be in the top half or third of its peer group, equity plan costs will continue to rise.

    Warren Buffett of Berkshire Hathaway, Coca-Cola’s largest shareholder, has warned against this trend:

    “The drill is simple: Three or so directors – not chosen by chance – are bombarded for a few hours before a board meeting with pay statistics that perpetually ratchet upwards. Additionally, the committee is told about new perks that other managers are receiving. In this manner, outlandish “goodies” are showered upon CEOs simply because of a corporate version of the argument we all used when children: “But, Mom, all the other kids have one. When comp committees follow this “logic,” yesterday’s most egregious excess becomes today’s baseline.”

    The ISS guidelines support equity plans that have a “burn rate” (a measure of how rapidly shares are issued under the plan) that is within peer-group norms. The guidelines also include a minimum burn rate cap of 2%, which essentially rubber-stamps any equity plan that dilutes shareholders by “only” 2% per year.⁵ Wintergreen believes that 2% annual dilution from management equity awards is excessive for a slow-growth company such as Coca-Cola.

    In addition, the level of SVT determined by ISS is an unacceptably high cost for shareholders to bear. For Coca-Cola and others in its sector, ISS sets the acceptable SVT threshold at 9 percent, according to published reports,⁶ which in Wintergreen’s view is an excessively high transfer of shareholder wealth.

    There are many different ways of calculating the true cost shareholders pay for equity plans. Investors need to be cognizant of not only the share dilution caused by equity plans, but also the cash cost of repurchasing these shares to offset dilution. There is also the opportunity cost of not using that cash for more productive purposes, such as reinvesting it in the business.

    In Coca-Cola’s case, we believe that the company may need to spend $2 billion per year to offset dilution. The failure to use that $2 billion more productively could mean billions of dollars in future earnings will never be realized. Over the past three years, Coca-Cola’s average return on equity has been 27%.⁷ This means that if Coca-Cola retained that annual $2 billion, it could potentially grow earnings by $540 million each year. These are real costs that need to be considered by investors.

    Coca-Cola’s 2014 proposed equity plan appears to fall short of publicly available ISS guidelines in a number of areas.

    Although the ISS report on Coca-Cola’s 2014 proxy is not available to the public, an analysis of ISS standards as stated on its website suggests the Coca-Cola plan falls short in several important respects

    We believe that

    • The Coca-Cola plan fails to meet the ISS standard for linking pay to performance, because Coca-Cola has lowered its performance targets for management over the past two performance periods. While the targets were modestly raised for the current performance period, they are still below historical levels.⁸
    • The fact that every named officer at Coca-Cola has received more equity option grants over each of the past two years,⁹ even as Coke’s performance has failed to meet targets, demonstrates that Coke is not properly linking pay to performance.
    • The proposed plan fails to meet the publicly available ISS standard for investors that manage union pension plans under the Taft-Hartley Act. The proposed equity plan far exceeds the maximum acceptable voting power dilution under ISS Taft-Hartley guidelines of 10% over ten years.¹⁰
    • The proposed Plan may also fall short of Taft-Hartley guidelines that discourage excessive pay practices because it does not have a cap on the amount of equity that can be awarded to an individual. Prior Coca-Cola equity plans limited the maximum award to any single employee to 5% of the plan.

    Coca-Cola’s compensation practices have been given a poor grade by ISS.

    Publicly available information from ISS gives Coke’s compensation practices a low ranking.¹¹ On a range of 1 to 10, where 1 is the best and 10 the worst, Coca-Cola earned an 8, close to the bottom of the ISS scale. A detailed evaluation of Coke’s governance policies that lead to this ranking by ISS is available only to ISS customers and Coca-Cola.

    It is difficult to see how ISS can give Coke a near-failing grade on its compensation policy yet still recommend to investors that they vote for an equity plan that could produce a windfall for management and huge dilution for owners.

    Sincerely,

    David J. Winters, CEO
    Wintergreen Advisers, LLC


    Notes:

    1. The presentation is available at: http://wintergreenadvisers.com/pdf/Wintergreen_KO_FINAL_040214.pdf
    2. Coca-Cola 2014 proxy statement, page 87.
    3. ISS U.S. Proxy Voting Summary Guidelines, March 2014, page 42.
    4. 2005 Berkshire Hathaway annual report
    5. ISS U.S. Proxy Voting Summary Guidelines, March 2014, page 44.
    6. Coca-Cola’s Stock Handouts get New Coke Reaction,” Reuters BreakingViews, April 9, 2014.
    7. Return on equity figure sourced from Bloomberg
    8. See page 57 of the 2014 Coca-Cola proxy statement.
    9. See page 68 of the 2014 Coca-Cola proxy statement, page 71 of the 2013 Coca-Cola proxy statement, and page 61 of the 2012 Coca-Cola proxy statement.
    10. ISS 2014 Taft-Hartley U.S. Proxy Voting Guidelines, page 28.
    11. https://link.issgovernance.com/qs/free/31989

     

    THIS IS NOT A SOLICITATION OF DIRECT OR INDIRECT AUTHORITY TO VOTE YOUR PROXY. PLEASE DO NOT SEND US YOUR PROXY CARD; WINTERGREEN ADVISERS, LLC AND ITS AFFILIATES ARE NOT ABLE TO VOTE YOUR PROXIES AND THIS COMMUNICATION DOES NOT CONTEMPLATE SUCH AN EVENT.

    THIS LETTER INCLUDES INFORMATION BASED ON DATA FOUND IN FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INDEPENDENT INDUSTRY PUBLICATIONS AND OTHER SOURCES. ALTHOUGH WE BELIEVE THAT THE DATA ARE RELIABLE, WE HAVE NOT SOUGHT, NOR HAVE WE RECEIVED, PERMISSION FROM ANY THIRD-PARTY TO INCLUDE THEIR INFORMATION IN THIS LETTER. MANY OF THE STATEMENTS IN THIS LETTER REFLECT OUR SUBJECTIVE BELIEF.

    THE INFORMATION CONTAINED HEREIN IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF THE COCA-COLA COMPANY MAY TRADE AT ANY TIME. THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. INVESTORS SHOULD MAKE THEIR OWN DECISIONS REGARDING THE COCA-COLA COMPANY AND ITS PROSPECTS BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN. NEITHER WINTERGREEN ADVISERS, LLC, NOR ANY OF ITS AFFILIATES ACCEPTS ANY LIABILITY WHATSOEVER FOR ANY DIRECT OR CONSEQUENTIAL LOSS HOWSOEVER ARISING, DIRECTLY OR INDIRECTLY, FROM ANY USE OF THE INFORMATION CONTAINED HEREIN.

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    David Winters Discussed the Coca-Cola Compensation Plan with Yahoo Finance

    April 11, 2014

    David Winters was interviewed by The Daily Ticker’s Aaron Task about his opposition to Coca-Cola’s 2014 equity compensation plan.

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    Wintergreen Advisers Welcomes Vote by Calvert Investments
    Against Coca-Cola Equity Plan

    April 10, 2014 03:13 PM Eastern Daylight Time

    NEW YORK -- (BUSINESS WIRE) -- David Winters, CEO of Wintergreen Advisers, today issued the following statement:

    “We welcome the news that Calvert Investments has voted against the Coca-Cola (NYSE: KO) Equity Plan. Wintergreen Advisers continues to believe that the plan is deeply flawed and unfair to shareholders.”

    Information on the Calvert Investments vote is available at:
    http://vds.issproxy.com/SearchPage.php?CustomerID=1641

     

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    Wintergreen: Pleased That the Ontario Teachers’ Pension Plan Is Voting
    Against Coca-Cola’s 2014 Equity Compensation Plan

    April 8, 2014 04:25 PM Eastern Daylight Time

    NEW YORK -- (BUSINESS WIRE) -- David Winters, CEO of Wintergreen Advisers, today issued the following statement:

    “We are very pleased that the Ontario Teachers’ Pension Plan has announced they are voting against the Coca-Cola (NYSE: KO) 2014 Equity Plan. We believe a growing number of investors, large and small, are recognizing that the Coca-Cola plan is not in the best interest of shareholders.”

    Information on the Ontario Teachers’ Pension Plan is available at:
    http://www.otpp.com/investments/responsible-investing/voting-our-shares/proxy-votes

     

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    David Winters discusses the Coca-Cola equity compensation plan on CNBC

    April 3, 2014

    David Winters talks about Coca-Cola's 2014 equity compensation plan with Bill Griffeth, Kelly Evans, and Sara Eisen on CNBC’s "Closing Bell."

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    Wintergreen: Coca-Cola’s Equity Compensation Plan is a ‘Big Grab’ by Management

    David Winters rebuts Coca-Cola’s defense of its plan for up to $13 billion in additional equity awards, calling the proposal ‘potentially highly dilutive’ and ‘grossly outsized’

    April 2, 2014

    NEW YORK -- (BUSINESS WIRE) -- David Winters, CEO of Wintergreen Advisers, said the response by The Coca-Cola Company (NYSE: KO) to Wintergreen’s criticism of its proposed 2014 equity compensation plan was "disappointing, defensive and inadequate."

    Mr. Winters made the comments during a webcast for fiduciaries, analysts and the media in which he provided details of Wintergreen’s analysis of the Coca-Cola 2014 Equity Plan. The call followed Wintergreen’s March 21, 2014 letter to the board of directors in which it characterized the proposed plan as an "excessive transfer of wealth" from Coca-Cola shareholders to the top five percent of the company’s management.

    In reviewing his firm’s analysis and Coca-Cola’s response, Winters said his firm would vote against the 2014 Equity Plan because it believes the plan is:

    • Potentially highly dilutive to shareholders
    • Unsupported by any strategic rationale
    • Unnecessary, since adequate capacity exists under Coca-Cola’s current plans
    • Inadequately disclosed in the proxy materials
    • Grossly outsized for a company with earnings growth in the single digits
    • A bad precedent for corporate America

     

          View the Presentation (PDF) Listen to the Webcast (WMA | MP3)      

     

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    Wintergreen Advisers to Hold Informational Webcast on
    Coca-Cola’s Equity Compensation Plan

    April 2, 2014

    NEW YORK -- (BUSINESS WIRE) -- Wintergreen Advisers, LLC, which on behalf of its clients beneficially owns over 2.5 million shares of The Coca-Cola Company (“Coke”), (NYSE: KO), today announced it will hold an informational webcast regarding Coke’s 2014 Equity Compensation Plan, which is now before shareholders for approval.

    The webcast is open to institutional investors, including those that are Coke shareholders; Coke bottlers and employees; as well as corporate governance analysts and members of the media.

    DATE: Wednesday, April 2, 2014
    TIME: 12:00 pm, EDT
    WEBCAST: The event will be accessible via live webcast on WebEx by logging on directly to: https://thebiggrab.webex.com

    An audio-only version of the event can be accessed by calling: 1-415-655-0003 User Passcode: 669817444 (required).

    A live Q&A period will follow the presentation, and those wishing to ask questions anonymously will have the option to do so via the WebEx meeting.

    Participants are advised to register in advance, as capacity is limited.

    A copy of the presentation materials and an audio recording of the webcast will also be available for download following the completion of the presentation at: http://www.wintergreenadvisers.com

    Copies of Wintergreen Advisers’ letters to the Coke Board of Directors and Warren E. Buffett are available at: http://www.wintergreenadvisers.com.

     

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    Wintergreen Advisers, LLC Urges Coca-Cola Board of Directors to Withdraw Proposed 2014 Equity Compensation Plan, Put Forward an Improved Plan for Consideration in 2015

    March 27, 2014 02:00 PM Eastern Daylight Time

    NEW YORK -- (BUSINESS WIRE) -- Wintergreen Advisers, LLC expands upon concerns with Coca-Cola’s (NYSE:KO) proposed 2014 Equity Plan in letters to Coca-Cola shareholders and the Coca-Cola Board of Directors and Warren Buffett

    Dear Fellow Coca-Cola Shareholders,

    Wintergreen Advisers, LLC on behalf of its clients has asked the Board of Directors and the Compensation Committee of The Coca-Cola Company to withdraw the proposed 2014 Equity Plan from shareholder consideration at the 2014 Shareholder Meeting. We believe the proposed Plan should be redesigned in a manner which is fair to both Coca-Cola shareholders and Coca-Cola management. Existing Coca-Cola equity plans contain more than 66 million shares which should be more than adequate to cover awards for 2014. The full text of the letter, which has been sent to Coca-Cola’s Board of Directors and Coca-Cola’s largest shareholder Warren Buffett, CEO of Berkshire Hathaway (NYSE:BRK.B), is included below.

    For questions or inquiries, please contact press@wintergreen.com or 973-263-4500


    Wintergreen Advisers, LLC Letter to Coca Cola Board of Directors

    Board of Directors
    The Coca-Cola Company
    One Coca-Cola Plaza
    Atlanta, GA 30313


    March 27, 2014

    Dear Fellow Coca-Cola Shareholders,

    In our prior communications, Wintergreen Advisers, LLC (“Wintergreen”) relied solely on The Coca-Cola Company’s (“Coca-Cola” or “the Company”) 2014 proxy statement and the Company’s 2014 Equity Plan (the “Plan”) to inform ourselves on the issue at hand.  The “single number” we pulled from the Company’s proxy statement, the 14.2% potential dilution figure from page 86, is in our minds the single most important number found in the filing, as it represents the portion of shareholder wealth which could be transferred to management for services rendered.  With share awards adequate to last for another year available under previous equity plans, we do not believe there is a need for Coca-Cola to seek shareholder approval for a new plan at this time.

    Let us be very clear – we love The Coca-Cola Company.  It is a solid company with many of the world’s most valuable brands; it possesses a deep economic moat; and it has generally strong management.  It has all the attributes of a wonderful long-term investment, as evidenced by the Company’s lengthy history as a widely-held public company.  But the proposed 2014 Equity Plan is a bad plan.  It is bad for all shareholders. It is bad for the approximately 95% of Coca-Cola employees who will not be eligible to participate in this plan.  We are perfectly happy to see managers who produce outstanding results be very well compensated.  But asking for nearly 8% of the company over the next 4 years, on top of the potential dilution from outstanding equity awards, is simply too much.

    I propose that the Board of Directors (“the Board”) withdraw the 2014 Equity Plan from consideration at the 2014 Annual Meeting of Shareholders.  Coca-Cola’s Board and Compensation Committee should rely on existing equity plans which, according to the Company’s proxy statement, have 66,948,651 shares remaining, which should suffice to cover awards for another year.  This will provide the Board with time to design an improved plan which can be proposed for a vote at the 2015 Shareholders Meeting.

    The new plan should include many of the same positive attributes that the Board recently touted – no re-pricing of options, a fungible share pool, and claw-back provisions.  It should have publicly disclosed and clearly defined performance hurdles for named executives which must be met to be eligible for awards.

    The current Plan discloses only the criteria which may be used as performance goals, but does not disclose the hurdle rate for those criteria.  How can shareholders judge the fairness of a performance award if we don’t know if the executive is required to clear a six inch hurdle or a six foot hurdle?  These performance goals should also take the Company’s amount of debt into consideration, a criteria currently absent from the list.  Coca-Cola’s debt level has increased significantly in recent years, and the impact of that debt should be accounted for when evaluating executive performance.

    As far as what size is appropriate for a revised equity plan, we think the plan should envision an annual dilution rate at or below the recent annual average of 1.3% rather than the proposed Plan’s 1.9%. Although the difference between 1.3% and 1.9% dilution may seem trivial on its face, the difference translates into an additional 26 million shares of potential dilution per year. The 2008 Plan authorized a split-adjusted 280,000,000 for awards and lasted for approximately six years; the 2014 proposal envisions 340,000,000 grants being made over only four years.  This is a dramatic increase in the number of potential awards, made over a much shorter number of years. This means increased potential dilution for all shareholders.  The 2008 Plan also included a provision that no individual could be awarded more than 5% of the shares authorized by the plan, a clause notably absent from the 2014 Plan.  We believe Coca-Cola’s shareholders would be better served by something much more closely resembling the 2008 Plan in duration and size than the 2014 Plan.

    When details of a new equity plan are disclosed, we believe Coca-Cola should present the potential dilutive impact in a more candid manner.  Currently, the Company calculates dilution by including “total award shares” in addition to current outstanding shares in the denominator, a formula found on page 86 of the Company proxy and which is replicated below.

    Potential dilution = Total Award Shares = 14.2%
    Total number of issued and outstanding shares of Common Stock + Total Award shares

    We believe this is misleading.  The true potential dilutive impact of an equity plan is diminished by including award shares in the denominator as opposed to using only current outstanding shares.  If potential dilution were to be calculated in a more straightforward manner, by excluding Award Shares from the denominator, the 14.2% figure from page 86 of the proxy statement would rise to approximately 16.6%, as shown below.

    Potential dilution = Total Award Shares = 16.6%
    Total number of issued and outstanding shares of Common Stock

    By calculating potential dilution in the manner the Company has, we believe the combined potential dilutive impact of the prior plans and 2014 Plan could be understated by several billion dollars.  While 14.2% of Coca-Cola is worth approximately $24 billion at today’s share price, 16.6% is worth approximately $28 billion, an additional $4 billion in potential value that shareholders are being asked to give to management.  In 2001 the SEC noted that “overhang” from equity compensation plans is “often expressed as a percentage of the total number of outstanding securities. ”  Although this is not a formal SEC rule, it clearly provides a truer picture of the dilutive impact of equity compensation plans than the method currently used by Coca-Cola.  General Electric is another prominent American company which has chosen to disclose potential dilution in this manner and we hope that Coca-Cola would follow suit.  We believe that the Company should disclose the critically important potential dilution number in a more straightforward and prominent manner - front and center within your proxy statement, rather than burying it 86 pages deep where most shareholders are unlikely to see it.

    No matter how the potential dilutive impacts of the Coca-Cola’s equity compensation plans are calculated, the impact is clear – there will potentially be a staggeringly large transfer of wealth from shareholders to management at a time when we believe Company’s results have been less than stellar.  Between existing plans and the proposed 2014 Plan, there is the potential for several percentage points of dilution each year.  This would directly reduce shareholder returns by a similar amount each year.  It is hard to see how this proposed Plan is in the best interests of the Coca-Cola Company, its investors, or corporate America, which may mimic such pay practices.

    We hope these issues can be resolved quickly and to the satisfaction of concerned shareholders so that the Company may get back to the business of growing volumes and profits.

    Sincerely,
    David J. Winters, CEO
    Wintergreen Advisers, LLC.
    973-263-4500

    Cc: Warren E. Buffett

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    David Winters appeared on Fox Business to discuss his opposition to Coca-Cola’s equity compensation plan

    March 24, 2014

    David Winters discusses his opposition to Coca-Cola's compensation plan with Maria Bartiromo on Fox Business Network's "Opening Bell."

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    Wintergreen Advisers, LLC Expresses Disappointment with
    Coca-Cola’s Proposed 2014 Equity Plan

    March 21, 2014 09:20 PM Eastern Daylight Time

    NEW YORK, N.Y. --(BUSINESS WIRE)--Wintergreen Advisers, LLC details concerns with Coca-Cola’s (NYSE: KO) proposed 2014 Equity Plan in letters to Coca-Cola shareholders and the Coca-Cola Board of Directors and Warren Buffett

    Dear Fellow Coca-Cola Shareholders,

    Wintergreen Advisers, LLC on behalf of its clients expresses its deep disappointment with Coca-Cola’s proposed 2014 Equity Plan. As further detailed in the attached letters to the Coca-Cola board of directors and Berkshire Hathaway CEO Warren Buffett, Wintergreen Advisers believes this plan to be an unnecessarily large transfer of wealth from Coca-Cola’s shareholders to members of the Company’s management team. We can find no reasonable basis for gifting management 14.2% of the share capital of Coca-Cola, worth $24 billion at today’s share price. No matter how well a management team performs, it is unfathomable that they would require such astronomical sums of money to provide motivation. As representatives of the shareholders, it is the number one priority of the board to look after the owners’ interests. This compensation plan appears to place the economic well-being of management far ahead of the interests of the Company’s owners.

    Although the Company has a “robust” share repurchase plan, we believe that a large portion of those repurchased shares will likely be allocated to satisfying the issuance demands of the proposed Plan. The purpose of the Company’s share repurchase plan should be to shrink the number of shares outstanding and increase value on a per share basis, not merely serve to offset share issuance to Company executives. We also believe that Article 13.1 of the 2014 Equity Plan, which allows the Compensation Committee to award shares to management “purely as a ‘bonus’ and not subject to any restrictions or conditions” is an excessively large amount of power to delegate to a select few members of the board. While such a practice may be an “industry norm,” we expect a greater show of leadership from one of the world’s preeminent corporations. Coca-Cola should be the industry leader for best practices in corporate governance and pay practices; the 2014 Equity Plan clearly falls far short of this bar.

    Attached please see a video from Wintergreen Advisers CEO and Portfolio Manager David Winters discussing these issues.

    For questions or inquiries, please contact info@wintergreen.com or 973-263-4500


    Wintergreen Advisers, LLC Letter to Coca Cola Board of Directors

    Board of Directors
    The Coca-Cola Company
    One Coca-Cola Plaza
    Atlanta, GA
    30313

    March 21, 2014

    Dear Coca-Cola Board Members,

    On behalf of our clients, Wintergreen Advisers, LLC (“Wintergreen”) owns over 2.5 million shares of The Coca-Cola Company (“Coke,” “Coca-Cola,” or “the Company”), Wintergreen Advisers writes today to express our disappointment with the Company’s proposed 2014 Equity Plan (“the Plan”). The Company’s Board of Directors is asking shareholders to approve an equity compensation plan which, we believe, will significantly erode the per-share value of Coca-Cola shares. If approved, this Plan in conjunction with previous equity compensation plans, will dilute existing shareholders by a Company estimated 14.2%. The Company expects that the 2014 Plan will award a mix of 60% options, 40% full value shares, resulting in the issuance of 340,000,000 Coca-Cola shares. At the current share price, these shares would be worth approximately $13 billion. In effect, the Board is asking shareholders for approval to transfer approximately $13 billion from all of our pockets to the Company’s management over the next four years. When combined with awards from previously approved compensation plans, this figure rises to $24 billion. This is a staggering transfer of value from shareholders to management. Shareholders are in effect being asked to give Coca-Cola management, at no cost to management, 14.2% of the Company. These billions of dollars given to management will come at the sole expense of the many teachers, nurses, federal and state government employees, and union members who have invested their hard-earned savings in Coca-Cola shares, either directly or through pensions and mutual funds.

    The proposed Plan will meaningfully increase the number of Coca-Cola shares outstanding, reducing the ownership stake of all shareholders in the Company. At a time when Coke is facing slowing growth in both sales and profit, we do not believe it is in the best interest of shareholders to compound the Company’s headwinds by significantly diluting shareholders. Coca-Cola is a mature business in a low-growth industry. By necessity, a large portion of the Company’s growth in per-share earnings and value must come from shrinking the number of shares outstanding, so that each share is entitled to a larger share of the Company’s profits. The Company had been on the path to doing just this, with a share repurchase program totaling 500 million shares, 11% of shares outstanding, announced just 17 months ago. Now instead of meaningfully reducing shares outstanding and growing value on a per-share basis, this share repurchase program will merely help to offset the new shares issued to management under the Plan. Rather than shrinking the number of slices in the pie and increasing the size of each our slices, management wants to take a $13 billion bite out of the pie, at the expense of all shareholders. When the share repurchase program was announced in October 2012, current Coke Chairman and CEO Muhtar Kent said that it “underscores our continued commitment to delivering increased value to shareholders.” It now seems that the Company’s executives are more interested in increasing the value of their own accounts, with shareholders footing the bill.

    From a shareholders perspective, the details of the Plan itself are not any more appealing than the idea of transferring 14.2% of the Company to management. For example, the Plan allows the Company’s Compensation Committee to ignore the impact of such things as asset write-downs and impairment, reorganization and restructuring expenses, and extraordinary non-recurring items when determining whether or not management has met their performance goals. Who but management could possibly bear responsibility for these types of expenses, and why should management not equally share the pain of their impact along with shareholders? If a company takes a write-down or impairment charge, it is usually due to past business decisions made by management; why should these decisions then be ignored when it comes time to determine the compensation of those individuals who made those decisions?

    The Plan also allows participants to be awarded up to 3,000,000 share options, 3,000,000 stock appreciation rights, and 1,000,000 shares of common stock each year, in addition to their cash compensation. On top of this, the Plan allows the Compensation Committee of the board to grant “without limitation Shares awarded purely as a ‘bonus’ and not subject to any restrictions or conditions.” This could lead to Coca-Cola executive’s earnings tens or even hundreds of millions of dollars in a single year. We do not believe there is any justifiable reason to allow for the possibility of such excessive compensation.

    In summary, Wintergreen Advisers believes the proposed Coca-Cola 2014 Equity Plan is a raw deal for all shareholders. It will serve to enrich a small number of Coca-Cola executives, while significantly diluting existing shareholders and diminishing the per-share value of all Coca-Cola shares. Particularly at a time of slowing growth for the Company, shareholders cannot afford to transfer 14% of their ownership in Coca-Cola to management. Coca-Cola remains a world class company with some of the most valuable brands in the world. The economics of the underlying business are as strong as ever. The proposed 2014 Equity Plan, however, presents a headwind that we believe will harm Coca-Cola as an investment. The proposal is an excessive transfer of wealth from its shareholders, the true owners of Coca-Cola, to Company management, and we believe it should be voted down by shareholders.

    Sincerely,
    David J. Winters, CEO
    Wintergreen Advisers, LLC.
    973-263-4500


    Wintergreen Advisers, LLC Letter to Warren Buffett

    Warren E. Buffett
    Berkshire Hathaway Inc.
    3555 Farnam St.
    Omaha, NE
    68131

    March 21, 2014

    Dear Warren,

    On behalf of our clients, we are fellow shareholders of Coca-Cola, as well as Berkshire Hathaway (NYSE: BRK.B). As the largest owner of Coca-Cola stock, you are almost certainly aware that the company is seeking shareholder approval for a new equity compensation plan at their 2014 shareholder meeting. It is our belief that Coca-Cola will be best served by shareholders voting against approval of the new plan, for the reasons laid out below. Over the course of your career, you have spent a great deal of time discussing the importance of management compensation and proper alignment of managements interests with those of shareholders. The excessive compensation of management and the expense it imposes upon long-term shareholders has been a topic you have frequently touched upon. As you review the details of Coke’s new equity compensation proposal in their proxy statement, I believe you will find that it contains elements of both misalignment of management and shareholder interests and excessive compensation. This new equity compensation plan, when combined with existing equity compensation plans, could dilute existing shareholders by more than 14% according to Coca-Cola’s own calculations. You will not need your calculator to estimate the worth of that 14% stake and the value the share issuance could transfer from shareholders to management. It will likely also negate much of the Company’s current 500 million share repurchase program, making it all the more difficult to grow Coca-Cola’s value on a per-share basis.

    On top of the sheer magnitude of dollars of this plan, the proposed plan allows Coca-Cola’s Compensation Committee to exclude things such as write-downs, impairments and other extraordinary nonrecurring items when deciding whether or not management has met the performance goals required to trigger their pay day. They can, in effect, move the goal posts closer once the ball is in the air. Buried deep within the plan document (and seemingly excluded from the proxy statement itself) is the fact that the proposal also allows the Compensation Committee to award “bonus” shares which are “not subject to any restrictions or conditions.” This hardly appears to be the “pay for performance” type of compensation which is so critical to incenting management to create long term per-share value for shareholders.

    You have often decried how excessive compensation is so difficult to reign in precisely because shareholders have no direct voice in the negotiation with management and because Compensation Committees are often comprised of lap dogs rather than Dobermans. In this situation, with Berkshire as the largest shareholder of the company in question, you hold significant sway over the process. We believe Coca-Cola is setting a poor precedent with regard to corporate pay practices with this proposal, and as a leading global corporation, others will inevitably and unfortunately follow their lead.

    We believe that the shareholders of Coca-Cola, including Berkshire Hathaway, will be best served by shareholders voting down Coca-Cola’s Equity Plan proposal.

    Regards,
    David J. Winters, CEO
    Wintergreen Advisers, LLC
    973-263-4500

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