Coca Cola Co. will consider the wages it pays all of its employees when setting executive salaries, aiming to bring them into closer alignment, State Comptroller Thomas P. DiNapoli, trustee of the New York State Common Retirement Fund (Fund), announced today. In response to the agreement, the Fund withdrew its shareholder resolution with the Atlanta-based beverage giant.
“Pay for CEOs and other corporate executives has dramatically outpaced wages for most other employees in recent years," DiNapoli said. "We are encouraging companies to adopt executive compensation policies that take their entire workforce into consideration. 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."
Many companies' compensation committees use peer group benchmarks to set their CEO compensation, which is then subject to performance adjustments. While many corporations target CEO compensation at the median of their peer group, certain companies have set their CEO's pay well above the median. In addition, peer groups can be "cherry-picked" to include larger or more successful companies where CEO compensation is higher.
Coca-Cola agreed to add the following language to its proxy statement regarding CEO and NEO (named executive officer) pay:
“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] 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.”
CEO pay at the largest US companies has risen dramatically over the past 50 years, while average wages, adjusted for inflation, have made only meager gains. By some measures, the pay ratio between CEO’s and the typical worker has increased by nearly 1,400 percent. Disparities like these can damage company morale, productivity and reputation. DiNapoli believes the Fund's portfolio companies should align executive pay practices with their compensation practices for other employees and provide supplemental information that informs investors.
About the New York State Common Retirement Fund
The New York State Common Retirement Fund is the third largest public pension fund in the United States with $210.5 billion in assets under management as of March 31, 2019. The Fund holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. The Fund has consistently been ranked as one of the best managed and best funded plans in the nation. The Fund's fiscal year ends March 31.