The renowned investor, Warren Buffett, the owner of Berkshire Hathaway is the largest share owner in Coca Cola's stock (KO). Recently, Coke's Chairman and CEO Muhtar Kent presented an equity plan at the company's annual shareholder meeting this past Wednesday. This has been a very controversial plan, but Muhtar Kent maintains the pay-for-performance plan is in line with the company's goals. Warren Buffett was not convinced by Coke's CEO and abstained from voting at the annual shareholder meeting. Hedge fund manager David Winters argued the plan will dilute Coke's existing shareholder value by 14.2%. The plan based on one equity investment will award executives with $13 billion over four years, which Winters claims will be taken from shareholders. The fundamental purpose for firms in capitalism is to maximize shareholder wealth, but it appears this plan might not accomplish this goal. On April 23, 2014 Coke's equity plan passed without Buffett's vote. There was much discussion about Buffett's decision to abstain from voting. He did not agree with the plan, but instead of voting against it he abstained. I believe that he assumed the plan would pass even if he voted against the equity plan. However, if he did vote against the plan, Coke investors would likely overreact and possible sell the stock which would drive down share price, thus decreasing Mr. Buffett's profitability. By abstaining, he made it clear to Coke's executives that he did not agree with the equity plan, but did not cause a panicked sell-off of shares. A great tactical move by Mr. Buffett, but the fact remains for Coke its largest share owner does not exactly see "eye-to-eye" with the executive team and could create potential problems considering how significant Mr. Buffett's actions have on the market.
http://www.insidecounsel.com/2014/04/25/warren-buffett-calls-out-cokes-excessive-executive
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