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Coca-Cola Amends Bylaws to Allow Proxy Access -- Update

09/03/2015 | 03:17pm US/Eastern
By Mike Esterl And Chelsey Dulaney 

Coca-Cola Co. said Thursday it will permit so-called proxy access, joining a growing list of large U.S. companies making it easier for shareholders to nominate directors.

The move comes at a critical juncture for the beverage giant, which is trying to win over investors after missing growth targets and already has replaced several board members with younger directors in recent years.

Coke will allow a shareholder or a group of up to 20 shareholders owning 3% of company shares for at least three years to nominate up to two individuals, or 20% of the board, whichever is greater. Coke currently has 15 directors.

The Atlanta-based company said it amended the proxy rule after consulting with investors. "Through these discussions, it was clear that the majority of our shareowners wanted to see some kind of proxy access right in place," it added in a statement.

A similar shareholder proposal was almost approved at Coke's annual meeting in April, securing 40.6% of votes cast in favor. Directors recommended at the time that shareholders vote against the proposal, saying the company was "seriously evaluating" proxy access but more deliberation was needed.

Big companies including Microsoft Corp., General Electric Co. and Monsanto Co. have agreed this year to include board nominees proposed by shareholders on corporate ballots before annual shareholder meetings. About 5% of companies in the S&P 500 index have adopted or are committed to proxy access, proxy adviser Institutional Shareholder Services estimated recently.

The changes come more than three years after a federal court shot down an effort by the Securities Exchange Commission to impose proxy access on U.S. firms, leaving shareholders to push the issue company by company. The court-scuttled SEC rule would have allowed an investor or group of investors owning at least 3% of a company's stock for at least three years to win the right to nominate.

Coke has faced heightened investor scrutiny after the maker of Minute Maid juice, Powerade sports drink and its namesake cola missed its profit and revenue targets last year and warned 2015 would be similar as consumers scale back on soda. Its share price has slumped 6% over the past year.

But Coke hasn't been targeted by any major activist campaign and the company said Thursday that activist investors hadn't sought a board seat. Warren Buffett's Berkshire Hathaway Inc. is Coke's largest shareholder, with 9% of Coke's stock. Mr. Buffett has publicly backed Coke's management and strategy and his son Howard Buffett is a Coke director.

The change to Coke's proxy bylaw is effective immediately but director nominations for the 2016 shareholder annual meeting must be submitted between Oct. 14 and Nov. 13 of this year, according to a company spokesman.

Coke already has taken steps to overhaul its veteran board. Six directors have stepped down since 2013, all but one of them in their 70s or 80s. Seven of the current board members have joined since 2011, including Marc Bolland and David Weinberg earlier this year.

Write to Mike Esterl at mike.esterl@wsj.com and Chelsey Dulaney at Chelsey.Dulaney@wsj.com

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