MAJOR ANALYST EXAM: Reading a Proxy then Assessing Management and Directors


KO ten

You always read the proxies and the notes to the financials. Today you read Coke 2014 Proxy.   

What is your assessment of management and the Board of Directors? What do you notice? Please justify your reply.

If you are struggling, then here is a hint:

You react:  Why?

Another hint: KO_VL Jan 2015 for context.

Take a few days if necessary.   This is a critical case study that should be taught at every business school!

Lesson: READ WITH A PURPOSE.   Why do you read a proxy?  Unless it is a merger proxy, you focus on who the management and Board of Directors are and how they are compensated.   Go to the heart of the matter, don’t read all 100 pages.

Update: Between Euphoria and Despair.

If you invest in cyclical companies, then you should listen to and SALT-Earnings-Presentation-Q2-2016-Supplemental-Information and SALT 2Q 2016 Q Report

8 responses to “MAJOR ANALYST EXAM: Reading a Proxy then Assessing Management and Directors

  1. Are there particular sections/items that one should pay attention to when reading a proxy? Or is it best to read each proxy cover to cover?

    • Sorry about this second comment asking the same thing…

    • Probably the most important section is management compensation and incentive plans unless the proxy is for a merger or other major corporate event.

      No you don’t have to read all 80 to 100 pages. Time is precious.

  2. From the looks of it the management promised change, yet still paid themselves more.

  3. OK, but HOW MUCH MORE? If you were an institutional investor, what would you do?

  4. They are ripping off shareholders. Not only are they excessively compensated as it is, look at the payment upon termination or change in control. The excessive compensation includes not only the CEO but all of the executive officers.
    Although a small amount compared to the other compensation, just look at the compensation for aircraft use and car and driver.
    77% voted in favor of the compensation program. It sounds very high so I assume that an unused vote automatically means that the vote is counting as in favor. That would however mean that 23% already voted against it.
    As an institutional investor I would contact major shareholders directly and also get investor attention through media like the WSJ.

  5. It seems that the main bone of contention is the amount of potential payout and potentially a 10-16.8% dilution of the equity?

    500mln shares may be issued under the 2014 plan and given KO was trading around $42 thats a 21bn potential payout to senior management?

    I guess that is a maximum and the actual amount would be much less and option based/spread out over many years but it sounds like a huge amount

  6. Bingo C Lee and PW

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