Coca-Cola Executives to Get $3.6 Million in ‘Awards’ After Being Denied Bonuses

By Duane D. Stanford, The Atlanta Journal-Constitution

Feb. 16–Coca-Cola Enterprises will pay seven top executives $3.6 million in “discretionary cash awards” to replace bonuses they missed after failing to hit performance targets.

The awards, granted Feb. 8, were disclosed in a federal filing Wednesday, just a day after Chief Executive John Brock announced CCE will cut 3,500 employees during the next two years.

Brock, 58, will receive a cash award of about $1 million, according to the filing. His annual salary is about $1.1 million.

CCE’s board of directors said Brock and six others didn’t get bonuses for 2006 because the company recorded a $2.9 billion noncash impairment charge during the fourth quarter. The charge was the result of an estimated decline in the value of CCE’s North American franchise rights to sell Coke products. Bottling companies CCE acquired more than a decade ago no longer sell carbonated soft drinks at the rate they once did, the company said.

In its Securities and Exchange Commission filing, the board said, “It was appropriate to provide discretionary awards based on the company’s sales volume performance and its operating income results for 2006, adjusted to exclude the effects of this impairment charge.”

CCE spokesman John Downs said that aside from the impairment charge, the company posted strong results during 2006, beating Wall Street expectations.

“The compensation committee deliberated and said that they agreed with the fact that the noncash bottling franchise rights charge related to past acquisitions 10 years ago was not under the control of this current management team,” Downs said.

Board Chairman Lowry Kline, who has been with CCE since the mid-1990s, will receive an $811,000 award. The rest of the group of executives will get between $320,000 and $393,000.

John Coffee, a professor of securities law at Columbia Law School, said CCE’s board has a legal right to award bonuses in any amount it wants, as long the payments can be justified.

“The big issue in executive compensation today is whether pay is being linked to performance,” Coffee said. “This looks like a case where the incentive is being paid even though its conditions are not being satisfied.”

In addition, from a public relations perspective, the timing of the cash awards isn’t ideal for CCE. The company said Tuesday it will cut nearly 5 percent of its global work force of 74,000 by the end of next year. The cuts will take place mostly in North America.

About 300 jobs will be cut in metro Atlanta, primarily through attrition, the company has said.

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