Aligning Director Incentives with Shareholder Value: A Comprehensive Analysis of Coca-Cola's Compensation Policy (2019-2023)
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Aligning Director Incentives with Shareholder Value: A Comprehensive Analysis of Coca-Cola's Compensation Policy (2019-2023)

Dongxiao He 1*
1 Guangdong University of Foreign Studies
*Corresponding author: Hedx20031029@sina.com
Published on 13 August 2025
Volume Cover
AEMPS Vol.207
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-299-7
ISBN (Online): 978-1-80590-300-0
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Abstract

This paper provides a comprehensive analysis of The Coca-Cola Company's director compensation policies from 2019 to 2023, evaluating their effectiveness in aligning board member incentives with long-term shareholder value creation. Grounded in agency theory and optimal contracting principles, the study examines three critical dimensions of Coca-Cola's compensation structure: cash versus equity composition, performance-based incentives, and stock ownership requirements. Through comparative benchmarking against industry peers (PepsiCo, Procter & Gamble, Nike, and McDonald's), the analysis reveals that while Coca-Cola maintains baseline governance standards, including a 55:45 cash-equity split and a 3x stock ownership guideline lag behind leading practices in key areas. Notably, the absence of performance-vested equity (e.g., PSUs) and ESG-linked metrics contrasts with innovations adopted by peers like P&G (50% PSUs) and McDonald's (ESG-linked awards). The paper proposes concrete measures to strengthen the alignment between director incentives and shareholder value creation through compensation policy reforms. A critical recommendation involves introducing performance-based equity that incorporates both financial metrics such as a three-year return on invested capital and revenue growth targets alongside material sustainability indicators including water usage efficiency and packaging recyclability goals. The analysis further advocates for elevating stock ownership requirements to five times the annual cash retainer amount, which would bring Coca-Cola's policy in line with industry leaders while allowing for a five-year transitional implementation period for current board members.

Keywords:

Director compensation, shareholder alignment, corporate governance, performance-vested equity, ESG metrics

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He,D. (2025). Aligning Director Incentives with Shareholder Value: A Comprehensive Analysis of Coca-Cola's Compensation Policy (2019-2023). Advances in Economics, Management and Political Sciences,207,70-76.

References

[1]. Berle, A. A., & Means, G. C. (1932). The Modern Corporation and Private Property. Macmillan.

[2]. Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure. Journal of Financial Economics, 3(4), 305-360.

[3]. Ntim. C.G. (2015). Executive Compensation, Corporate Governance and Corporate Performance: A Simultaneous Equation Approach. Managerial and Decision Economics, 36(2), 67-96.

[4]. Fich, E. M., & Shivdasani, A. (2004). The Impact of Stock Option Compensation for Outside Directors on Firm Value. Journal of Business, 78(6), 2229-2254.

[5]. Edmans, A., & Gabaix, X. (2016). Executive Compensation: A Modern Primer. Journal of Economic Literature, 54(4), 1232-1287.

[6]. Dey, A., & Liu, X. (2014). The Interplay between Director Compensation and CEO Compensation. The International Journal of Business and Finance Research, 8 (2), 11-26.

[7]. Coca-Cola Company. (2019-2023). DEF 14A Proxy Statements. U.S. SEC. (https: //www.sec.gov/Archives/edgar/data/21344/000130817923000117/ko_coutesy-pdf.pdf)

[8]. Greenwood, R., Hanson, S.G. et al. (2022). Predictable Financial Crises. Journal of Finance, 77(2), 1021-1065.

[9]. Institutional Shareholder Services. (2023). Global Director Compensation Trends Report. (https: //www.issgovernance.com/library/global-director-compensation-trends-2023/)

[10]. PepsiCo’s DEF 14A Proxy Statement, 2023.(https: //www.sec.gov/ Archives/edgar/data/77476/ 000130817923000279/pep_courtesy-pdf.pdf)

[11]. Procter & Gamble’s DEF 14A Proxy Statement, 2023.(https: //www.sec.gov/Archives/edgar/data/77476/ 000130817923000279/pep_courtesy-pdf.pdf)

[12]. The DEF 14A Proxy Statement of McDonald’s, 2023. (https: //www.sec.gov/ Archives/edgar/ data/63908/ 000155837023005957/mcd-20230525xdef14a_c.pdf)

[13]. Nike’s DEF 14A Proxy Statement, 2023.(https: //www.sec.gov/Archives/edgar/data/ 320187/ 000032018723000040/nikecourtesypdf2023a.pdf)

References

[1]. Berle, A. A., & Means, G. C. (1932). The Modern Corporation and Private Property. Macmillan.

[2]. Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure. Journal of Financial Economics, 3(4), 305-360.

[3]. Ntim. C.G. (2015). Executive Compensation, Corporate Governance and Corporate Performance: A Simultaneous Equation Approach. Managerial and Decision Economics, 36(2), 67-96.

[4]. Fich, E. M., & Shivdasani, A. (2004). The Impact of Stock Option Compensation for Outside Directors on Firm Value. Journal of Business, 78(6), 2229-2254.

[5]. Edmans, A., & Gabaix, X. (2016). Executive Compensation: A Modern Primer. Journal of Economic Literature, 54(4), 1232-1287.

[6]. Dey, A., & Liu, X. (2014). The Interplay between Director Compensation and CEO Compensation. The International Journal of Business and Finance Research, 8 (2), 11-26.

[7]. Coca-Cola Company. (2019-2023). DEF 14A Proxy Statements. U.S. SEC. (https: //www.sec.gov/Archives/edgar/data/21344/000130817923000117/ko_coutesy-pdf.pdf)

[8]. Greenwood, R., Hanson, S.G. et al. (2022). Predictable Financial Crises. Journal of Finance, 77(2), 1021-1065.

[9]. Institutional Shareholder Services. (2023). Global Director Compensation Trends Report. (https: //www.issgovernance.com/library/global-director-compensation-trends-2023/)

[10]. PepsiCo’s DEF 14A Proxy Statement, 2023.(https: //www.sec.gov/ Archives/edgar/data/77476/ 000130817923000279/pep_courtesy-pdf.pdf)

[11]. Procter & Gamble’s DEF 14A Proxy Statement, 2023.(https: //www.sec.gov/Archives/edgar/data/77476/ 000130817923000279/pep_courtesy-pdf.pdf)

[12]. The DEF 14A Proxy Statement of McDonald’s, 2023. (https: //www.sec.gov/ Archives/edgar/ data/63908/ 000155837023005957/mcd-20230525xdef14a_c.pdf)

[13]. Nike’s DEF 14A Proxy Statement, 2023.(https: //www.sec.gov/Archives/edgar/data/ 320187/ 000032018723000040/nikecourtesypdf2023a.pdf)

Cite this article

He,D. (2025). Aligning Director Incentives with Shareholder Value: A Comprehensive Analysis of Coca-Cola's Compensation Policy (2019-2023). Advances in Economics, Management and Political Sciences,207,70-76.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

About volume

Volume title: Proceedings of ICEMGD 2025 Symposium: Innovating in Management and Economic Development

ISBN: 978-1-80590-299-7(Print) / 978-1-80590-300-0(Online)
Editor: Florian Marcel Nuţă Nuţă, Ahsan Ali Ashraf
Conference website: https://2025.icemgd.org/Lahore.html
Conference date: 23 September 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.207
ISSN: 2754-1169(Print) / 2754-1177(Online)

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