Coke's day a mix of profits, protests
By Scott Leith
The Atlanta Journal-Constitution
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Issue: April 20, 2005
Wilmington, Del. — Coca-Cola had a dual dose of drama Tuesday — at the company's annual meeting and on Wall Street.
In recent times, Coke's annual gathering has become a forum for protesters to levy a litany of complaints against the famous company.
Tuesday was no different, but the loudest of the activists got the least support from Coke shareowners, while quieter efforts to rein in executive compensation and severance actually fared well.
Coke also released its first-quarter earnings, providing an upside surprise that helped lead to a spike in the company's stock price.
It was a milestone day for new Coke Chairman and Chief Executive Neville Isdell, who ran the company's annual meeting for the first time since taking the helm last year. Before wading into the controversies, he reiterated that Coca-Cola continues to seek ways to improve its business, which faces challenges in huge markets like North America and Germany.
"I know what we still are, and I know what we are capable of being," Isdell said. "We still have the world's favorite brands. We still have the world's most extensive beverage distribution system."
With that worldwide presence, however, comes much attention and sometimes criticism, as shown at Tuesday's meeting at the Hotel du Pont in Wilmington.
A group of about 30 activists, mostly college students, gathered outside the posh hotel to press their claims about Coke's alleged complicity in union violence in Colombia and about alleged overuse of water in parched areas of India.
Some of them spoke at the meeting as well, getting a rare chance to address Isdell directly.
Unlike last year, when fiery activist Ray Rogers scuffled with security staffers and was pulled from the meeting, this year's event was far calmer. Isdell tried to defuse the problems by bringing them up in his opening remarks, focusing on Colombia and India.
Isdell, who referred to himself as a "former student activist," defended the company. "The allegations are not true," he said about charges that Coke hasn't prevented violence against union members in war-torn Colombia.
Rejects calls for inquiry
Isdell, who said the issues have been examined many times without finding Coke at fault, rejected calls for another investigation of murders of union members, citing an ongoing lawsuit that chiefly involves bottler Coca-Cola Femsa.
He also said Coke isn't at fault for water shortages in India, noting that water tables have continued to fall in an area where a Coke plant has been closed for a year.
"Most of what you've read or heard about… is simply not true," he said.
Nonetheless, one activist after another rose to sharply criticize Coke. Supporters have been organizing their campaign for months and worked to make their presence felt in Wilmington.
Rogers, a longtime activist and ringleader in the anti-Coke movement, was the first to speak. He noted that there is a growing list of colleges and unions that have decided to boycott Coke products. He challenged Isdell to a "head-to-head" debate, which Isdell calmly declined.
A shareowner proposal that asked for an independent inquiry about past events in Colombia was handily defeated as well, with only about 5.5 percent of owners favoring the request.
A Coke defender
One native of Colombia, Juan Pablo Gnecco, rose to defend Coke, citing the vast amount of violence that has afflicted his homeland for decades. "It is very easy to point fingers to someone who has money," he said. "It is unfair."
Tuesday's most surprising votes came in the form of the number of shareowners who favored proposals related to pay and executive performance.
Nearly 32 percent of shareowners backed a proposal that, among other things, would require approval for the premature release of restricted stock, a form of enhanced compensation for executives. Last year, similar proposals offered by Atlantan and Coke annual meeting regular Elton Shepherd received 28 percent support, up from 6 percent in 2003.
Another proposal, by the International Brotherhood of Teamsters General Fund, urged directors to get shareholder approval for severance agreements given to top executives. It received a hefty "yes" vote of about 41 percent.
Carin Zelenko, director of the office of corporate affairs for the Teamsters, said she was pleased with the high level of support.
The votes reflect ongoing dissatisfaction with lucrative payouts to ex-executives, especially in light of Coke's poor performance on the stock market.
A relatively high number of shareholders also made another stand against the re-election of Warren Buffett to the board of directors.
Like last year, the famed investor's re-election was opposed by some who believe he shouldn't serve on the board's audit committee, given the business ties of his company, Berkshire Hathaway, to Coca-Cola.
While more than 83 percent of Coke's shareowners approved Buffett's re-election, that was far less than the total for any other director. All others were approved at a rate of roughly 97 percent or above.
Voting aside, Tuesday brought some good news for Coca-Cola, as it announced better-than-expected first-quarter earnings.
While net income fell 11 percent, to $1 billion, the company reported earnings per share of 42 cents.
Adding back 5 cents per share in reductions that were due to a handful of one-time events, Coke earned 47 cents per share, besting Wall Street estimates of 43 cents.
With that, Coke's stock jumped, gaining $1.43 to close at $42.40.
Marc Cohen, of Goldman Sachs, said Coke seems to be "getting solid early returns" from its "transformation efforts."
Case volume, an important measure of Coke's performance, increased 3 percent worldwide.
In North America, performance was flat. Coke's growth was again led by international markets, notably China, Brazil, Russia and Turkey.
"While we have lots of work still ahead of us, we are making progress," Isdell said.
Mary Minnick, currently head of Coke's vast operations in Asia, will be taking a new job as head of marketing, innovation and strategy. In a conference call with analysts before the annual meeting, she said the company has many good products internationally that can be introduced in markets like the United States.
The company, Minnick said, also needs to look at innovation and planning differently.
"We don't have a shortage of ideas," she said. "We have a shortage of focus. We also have a bit of risk aversion. I'm confident we can do a better job of embracing risk."
Two problems are gone
Despite the many critics that Isdell faced Tuesday, he did enter the day with two fewer problems on his plate.
On Monday, it was revealed that the Securities and Exchange Commission and the Department of Justice have ended their nearly two-year probes of Coca-Cola.
The SEC found that Coke made misleading statements about some of its business practices in Japan in the late 1990s, but the Justice Department dropped its investigation. The two agencies looked at a variety of accounting allegations and other issues.
Coke was not fined by the SEC.
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