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
Copyright Business Wire 2014