Coca-Cola’s shareholder meeting at the cavernous Gwinnett Center in Duluth was wrapping up last month when John Evans rose from his seat in the audience after CEO Muhtar Kent asked for questions.
“The board of directors is just too old!” Evans said into the microphone, eliciting chuckles and a smattering of applause from the crowd. “And they need to be replaced. And I can say that safely because I’m 77 myself. I think we need a young movement.”
No matter how you calculate it, Coca-Cola’s 14-member board of directors is one of the oldest among its peers: large companies, beverage companies and Atlanta-area corporations. This despite Coca-Cola’s addition of three outside directors age 60 or younger in the last three years. Coca-Cola’s directors have also held their seats significantly longer on average than their counterparts at many other big companies.
Coca-Cola touts its board’s financial acumen, deep knowledge of operations, diplomatic savvy and range of other skills. Kent told the 400 attendees at the meeting that the board is plugged-in, well-traveled and well-qualified.
“Our share owners benefit from an incredible set of perspectives on our board,” Kent told Evans. “It is not as if we have just stayed where we are and not had any composition change on our board. ... I don’t think anybody could wish for a better, more-informed board.”
Coca-Cola directors are 68 on average, according to the company’s most recent proxy statement in March. By comparison, Fortune 500 directors average 63 1/2, according to The Corporate Library, a nonprofit corporate governance group.
Directors represent shareholders by making sure a company is investing in the right markets, products, and strategic partnerships. They oversee executive compensation, as well as risk-control policies and financial stability.
Coca-Cola’s success depends largely on capitalizing on the growth of the global teenage population, on mixing heritage with reinvention. Is the board’s average age an asset or hindrance?
“In terms of age or tenure, from our point of view it shouldn’t automatically disqualify anyone,” said Bob McCormick, chief policy officer at Glass Lewis, an independent corporate governance and proxy voting firm based in San Francisco.
In the United States, investors seem to believe that if directors are doing good jobs overseeing management, it is unfair to limit their tenures, McCormick said. Shareholders value youth less than a board’s diverse experience with consumer products, marketing or financial auditing, he said.
Still, the numbers show a striking generational difference between Coca-Cola and its peers. Directors at PepsiCo, Coca-Cola’s main rival, and Dr Pepper Snapple Group, the third-largest North American soft drink marketer, average about 60. The 14 directors at Coca-Cola Enterprises, Coca-Cola’s biggest bottler, average just shy of 59, nearly a decade younger than their counterparts at Coca-Cola. A similar story emerges when comparing Coca-Cola to the largest Georgia-based publicly traded companies.
Coca-Cola’s directors also have stayed with the company longer than directors at most large companies. On average, Coca-Cola’s directors have 15 1/2 years on the board. That’s more than six years longer than the average tenure of Fortune 500 directorships, according to The Corporate Library.
Morningstar analyst Phil Gorham said Coca-Cola generally has a high standard of corporate governance, and its board of directors is “an outstanding team” with broad executive, finance and accounting experience. But the board has at times lacked nimbleness, he said.
Several longtime directors, including four with tenures of over 25 years, “have presided over the company during times when the firm stuck too rigidly to a failing strategy,” Gorham wrote. Ten years ago, for example, Coca-Cola was slow to adapt to changing consumer tastes and PepsiCo’s major push into non-carbonated beverages, he said.
“I’ve thought for a while they needed some fresh blood,” said Gorham.
On the other hand, he said, the company’s recently announced plan to take over bottler Coca-Cola Enterprises’ operations in North America is a bold move and demonstrated that Kent has board support.
Newer, younger faces on Coke’s board include Alexis M. Herman, 62, who joined in 2007. Herman is the chair and CEO of a corporate consultancy called New Ventures and a former U.S. Secretary of Labor.
In 2008, Coca-Cola’s board got Jacob Wallenberg, 54, chairman of Swedish industrial holding company Board of Investor AB; and Maria Elena Lagomasino, 60, CEO of GenSpring Family Offices, an affiliate of SunTrust Banks. (All ages were listed in Coca-Cola’s proxy filing in early March.)
About half the companies in the Standard & Poor’s 500 had policies, as of 2008, that required or encouraged directors to retire at a certain age, with the average being 72, according to RiskMetrics Group. Coca-Cola requires directors who turn 74 to submit a letter of resignation to the Committee on Directors and Corporate Governance. The committee then makes a recommendation to the full board on whether to keep the director. To date, that provision has never been used to replace one.
Experts say the heightened expectations of shareholders, as well as stepped-up regulations and the complexity and globalization of business, have led companies to turn to directors who have retired from executive jobs. Retired directors, it is thought, may be able to focus their attention on board responsibilities rather than on running their own companies.
“Seventy is the new 50,” said Carol Bowie, the head of RiskMetrics Group’s Governance Institute.
Paul Lapides, director of the Corporate Governance Center at Kennesaw State University, said age isn’t a great indication of alertness. Wisdom and the ability to synthesize information from many quarters — possibly including 20-somethings — is the more important criteria.
“There are people in their 90s that are as sharp as they were in their 40s,” he said. “And there are people in their 40s who were never sharp.”
Lapides said of Coca-Cola’s board: “There’s no reason to think ... that there’s any problem at all with that board. This is a great board.”
Bowie said shareholder resolutions recommending maximum board tenure have slowed in recent years. The push for turnover is not as prominent as shareholder activism aimed at directors’ diversity or independence from management. But policies on retirement ages are still considered a good idea, she said.
“The key point here isn’t necessarily age, but the fact that it tends to reflect tenure on the board,” she said. “The longer a director serves, the more management-oriented he or she can become.”
Last year, Coca-Cola’s met six times, while its committees met a total of 30. Overall attendance was about 96 percent, and each director attended at least 75 percent of the meetings of the board or committees on which he or she served. Non-employee directors were paid between $175,000 and $217,000.
Kenneth Daly, president and CEO of the National Association of Corporate Directors, said Coca-Cola does an excellent job outlining each director’s qualifications and usefulness.
“Just because someone is of a particular age does not mean they are not great contributors,” said Daly, who added that his 96-year-old mother routinely wins crossword puzzle matches against people in their 70s. “You look through that board: these are not the kinds of folks who will lay back and not do the job.”
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Age breakdown
Directors’ average ages at big Georgia-based corporations (rounded to nearest year)
Coca-Cola: 68
Coca-Cola Enterprises: 59
UPS: 60
Delta Air Lines: 60
Home Depot: 59
Southern Co.: 62
Aflac: 59
SunTrust Banks: 66
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