CalSTRS reversed its position on Coca-Cola Co. and will now support the pay package of Muhtar Kent, the company's chairman and CEO, and other top executives, according to the pension fund's proxy voting disclosure.
“Initially we voted no on say on pay,” said Michael Sicilia, CalSTRS media relations manager.
But the $180.8 billion California State Teachers' Retirement System, West Sacramento, changed its position after a discussion by phone April 7 with some Coca-Cola executives, including Mark Preisinger, Coca-Cola director of corporate governance, said Aeisha Mastagni, CalSTRS investment officer, corporate governance, who led the talks for CalSTRS.
“They do have some historical practices that caused pay and performance not to be aligned as much as we like,” Ms. Mastagni said. But after the talks, CalSTRS believes the pay will be better aligned with performance, leading it to change its vote, she added.
In addition, CalSTRS now will oppose the election as director of only one nominee, Ronald W. Allen, an independent director and member of the compensation and audit committees.
CalSTRS initially declared it will vote against all five members of Coca-Cola's board's compensation committee — Alexis M. Herman, Maria Elena Lagomasino, Helene Gayle and James D. Robinson III, as well as Mr. Allen. Ms. Mastagni said CalSTRS usually votes against an entire compensation committee when the pension funds votes against ratifying executive compensation. But when CalSTRS decided to support the pay package, it reversed its position on the election of board members and now will support all directors for election, except for Mr. Allen.
CalSTRS opposes Mr. Allen because he serves on too many boards, Ms. Mastagni said. CalSTRS' policy is not to support a director who is a CEO and who sits on more than one outside board. Mr. Allen sits on three boards.
“The demands of being a public company director are increasing,” Ms. Mastagni said. “We want to make sure they are tending to the company” they oversee as CEO, because CalSTRS probably owns shares in it. Mr. Allen is chairman, president and CEO of Aaron's Inc.
CalSTRS will continue to support Coca-Cola's proposed 2014 executive equity compensation plan and a shareholder proposal calling for an independent chairman.
Separately, Glass Lewis & Co., a proxy-voting advisory firm, recommended its clients vote against independent director Barry Diller's re-election to the Coca-Cola board, citing him for serving on too many boards. He is a director at three other companies.
Glass Lewis also recommended support for the executive pay package, the proposed equity plan and the proposal for an independent chairman. “An independent chairman is better able to oversee the executives of a company and set a pro-shareholder agenda,” according to a Glass Lewis report on Coca-Cola.
Coca-Cola's annual meeting is April 23.