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NY State Pension, Coca-Cola Reach Executive Pay Deal

Beverage giant promises to bring CEO, employee compensation more in alignment.

By Michael Katz

The $225.9 billion New York State Common Retirement Fund has struck a deal with Coca-Cola in which the company has agreed to consider the wages it pays all its employees when deciding executive salaries to help bring them into closer alignment.

The fund had filed a shareholder resolution calling for such a move, but has now withdrawn it as the agreement satisfies the intent of the proposal.

“Pay for CEOs and other corporate executives has dramatically outpaced wages for most other employees in recent years,” State Comptroller Thomas DiNapoli, trustee of the fund, said in a statement.

“We are encouraging companies to adopt executive compensation policies that take their entire workforce into consideration,” he said, adding that “I commend Coca-Cola for taking this step to help ensure that pay for its top executives is in line with the company’s overall compensation philosophy and long-term performance, not simply on what executives at other companies are making.”

Coca-Cola said it is revamping its compensation committee into what it now calls its “Human Capital Management & Compensation Committee” to reflect a broader scope that the committee now oversees. The company also agreed to add new language to its proxy statement regarding CEO and named executive officer (NEO) pay.

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“The compensation approach used to set CEO and NEO pay is the same approach used in determining compensation for the broader workforce, including pay competitiveness and the use of performance-based metrics that reward exceptional financial performance,” the company stated in a draft of the proxy statement. “The committee also can consider other factors which it regularly reviews, including shareowner and employee feedback; the advisory vote on compensation; the CEO pay ratio; global pay fairness; progress against diversity metrics; and others.”

The proxy statement draft also states that pay for the company’s executives is “at-risk and performance-based” with a metrics performance aligned to the company’s growth strategy. It said the company’s performance is assessed in multiple ways, such as operating performance, including results against long-term growth targets, and return to shareowners over time, both on an absolute basis and relative to other companies.

It also said that environmental and social goals “are critical to our business,” and that executives will be motivated to deliver results that align with company’s values and shareowner interests.

The comptroller’s office has complained that CEO pay at the largest US companies has risen dramatically over the past 50 years, while average wages have “made only meager gains” when adjusted for inflation. It said the pay ratio between CEOs and the typical worker has increased by as much as 1,400% in some cases and argues that this disparity can damage company morale, productivity, and reputation.

DiNapoli said he believes the companies the fund invests in should align executive pay practices with their compensation practices for other employees and provide supplemental information that informs investors.

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Home > News > Market Moves > Shiller: A Recession Is ‘Highly Likely’ Due to Virus Panic
Market Moves

Shiller: A Recession Is ‘Highly Likely’ Due to Virus Panic

Dwindling business activity is worrisome, and market slide isn’t over, Yale prof warns.

By Larry Light

The stock market, which classically tells us investors’ view of the future, may have posted a gain Tuesday—for a change. But to Yale economist Robert Shiller, the future looks pretty darn grim. Recession grim.

“It’s highly likely now that we’ll have a recession,” the Nobel laureate said. “It’s already disrupting business. It’s already causing people to pull back. We’re not going to see creative new investments blossom in this environment.”

And Tuesday’s market respite is no upward turning point to Shiller because the coronavirus infections are still rising throughout the world. “This disease is contagious even before it shows obvious symptoms. So it’s going to be harder to quarantine people in this epidemic. That’s the narrative, and we haven’t gotten very far into it yet,” he told CNBC. “So the potential for market disruption because of a scary narrative is quite high.”

Shiller is a proud member of the behaviorist camp on economics, which ascribes a lot of market behavior to the woolly-headed, often manic-depressive moods of the investing public, whether they’re Wall Street pros or rec room dilettantes. His latest book narrative, Economics: How Stories Go Viral and Drive Major Economic Events, is well-timed.

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His most famous book, 2000’s Irrational Exuberance, warned that the dot-com craze had made the market too frothy. Faddish (and ultimately doomed) stocks in earnings-free high-fliers such as Pets.com were all the rage. And sure enough, the market soon obliged, the bubble popped, and a nasty bear market followed. 

In 2003, he authored an academic paper that asked whether the housing market also was getting too crazed. He was early on that score, but the collapse of the sub-prime mortgage field and the subsequent 2008 financial crisis proved him right about the madness of crowds yet again.

“What we have now is really two epidemics. We have an epidemic of the coronavirus, but we also have an epidemic of fear based around a narrative that is not necessarily keeping up with scientific reality,” he said. “And this narrative has been quite striking, It’s a dangerous time for the stock market.”

For Shiller, the current market anxiety will likely persist whether the epidemic gets worse or not. “We’ll see how well the measures to reduce the coronavirus epidemic play out. But I wouldn’t put too much hope in that,” Shiller said. “It’s a dangerous epidemic and the epidemic of fear that accompanies it is dangerous also.”

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