UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.      )

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to §240.14a-12

 

The Coca-Cola Company

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

o  Fee paid previously with preliminary materials.

 

 

 

 

 

 

 

 

 

 

ATLANTA, GEORGIA

 

MUHTAR KENT

CHAIRMAN OF THE BOARD AND

   CHIEF EXECUTIVE OFFICER

 

March 5, 2010

 

Dear Shareowner:

 

I would like to extend a personal invitation for you to join us at our Annual Meeting of Shareowners on Wednesday, April 21, 2010, at 9:00 a.m. at the Gwinnett Center, Grand Ballroom, 6400 Sugarloaf Parkway, Duluth, Georgia 30097. Duluth is located in the Atlanta metropolitan area.

 

At this year’s meeting, you will be asked to vote on the election of 14 Directors, ratification of Ernst & Young LLP’s appointment as independent auditors, and four proposals of shareowners.

 

Attached you will find a notice of meeting and proxy statement that contain further information about these items and the meeting itself, including:

 

• how to obtain an admission card, if you plan to attend; and

 

• different methods you can use to vote your proxy, including the telephone and Internet.

 

If you are unable to attend the meeting in person, you may view the meeting on the web. Instructions on how to view the live webcast are set forth in the accompanying proxy statement. You cannot record your vote on this website.

 

Your vote is important to us and to our business. I encourage you to sign and return your proxy card, or use telephone or Internet voting prior to the meeting, so that your shares will be represented and voted at the meeting even if you cannot attend.

 

I hope to see you at the meeting.

 

 

 

Muhtar Kent

NOTICE OF ANNUAL MEETING OF SHAREOWNERS

 

TO THE OWNERS OF COMMON STOCK
OF THE COCA-COLA COMPANY

 

 

The Annual Meeting of Shareowners of The Coca-Cola Company (the “Company”) will be held at the Gwinnett Center, Grand Ballroom, 6400 Sugarloaf Parkway, Duluth, Georgia 30097, on Wednesday, April 21, 2010, at 9:00 a.m., local time. The purposes of the meeting are:

 

 

The Board of Directors set February 22, 2010 as the record date for the meeting. This means that owners of record of shares of Common Stock of the Company at the close of business on that date are entitled to:

 

 

We will make available a list of shareowners of record as of the close of business on February 22, 2010 for inspection by shareowners for any purpose germane to the meeting during normal business hours from April 9 through April 20, 2010 at the Company’s principal place of business, One Coca-Cola Plaza, Atlanta, Georgia 30313. This list also will be available to shareowners for any such purpose at the meeting.

 

By Order of the Board of Directors

 

 

Carol Crofoot Hayes
Associate General Counsel
and Secretary

 

Atlanta, Georgia

March 5, 2010

 

We urge each shareowner to promptly sign and return the enclosed proxy card or to use telephone or Internet voting. See our questions and answers about the meeting and voting section for information about voting by telephone or Internet, how to revoke a proxy, and how to vote shares in person.

 

TABLE OF CONTENTS

 

THE COCA-COLA COMPANY
One Coca-Cola Plaza
Atlanta, Georgia 30313

 

 

March 5, 2010

 

 

PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREOWNERS
TO BE HELD APRIL 21, 2010

 

Our Board of Directors (the “Board”) is furnishing you this proxy statement to solicit proxies on its behalf to be voted at the 2010 Annual Meeting of Shareowners of The Coca-Cola Company (the “Company”). The meeting will be held at the Gwinnett Center, Grand Ballroom, Duluth, Georgia on April 21, 2010, at 9:00 a.m., local time. The proxies also may be voted at any adjournments or postponements of the meeting.

 

The mailing address of our principal executive offices is The Coca-Cola Company, P.O. Box 1734, Atlanta, Georgia 30301. We are first furnishing the proxy materials to shareowners on March 5, 2010.

 

All properly executed written proxies, and all properly completed proxies submitted by telephone or Internet, that are delivered pursuant to this solicitation will be voted at the meeting in accordance with the directions given in the proxy, unless the proxy is revoked prior to completion of voting at the meeting.

 

Only owners of record of shares of Common Stock of the Company (the “Common Stock”) at the close of business on February 22, 2010, the record date, are entitled to notice of and to vote at the meeting, or at any adjournments or postponements of the meeting. Each owner of record on the record date is entitled to one vote for each share of Common Stock held. On February 22, 2010, the record date, there were 2,305,123,938 shares of Common Stock issued and outstanding.

 

 

It is your legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. We have designated three of our officers as proxies for the 2010 Annual Meeting of Shareowners. These three officers are Alexander B. Cummings, Jr., Gary P. Fayard and Geoffrey J. Kelly.

 

 

It is a document that Securities and Exchange Commission (“SEC”) regulations require us to give you when we ask you to sign a proxy card designating Alexander B. Cummings, Jr., Gary P. Fayard and Geoffrey J. Kelly as proxies to vote on your behalf.

 

 

If your shares are registered directly in your name with the Company’s registrar and transfer agent, Computershare Trust Company, N.A., you are considered a shareowner of record with respect to those shares.

 

If your shares are held in a brokerage account or bank, you are considered the “beneficial owner” of those shares.

 

 

You need to bring documentation showing that you owned Common Stock on the record date of February 22, 2010. If you are a shareowner of record and received your proxy materials by mail, your admission ticket is attached to your proxy card. If you received your proxy materials by e-mail and voted your shares electronically via the Internet, you can print an admission ticket after you have voted by clicking on the link provided.

 

If you are a beneficial owner, bring the notice or voting instruction form you received from your bank, brokerage firm or other nominee for admission to the meeting. You also may bring your brokerage statement reflecting your ownership of Common Stock as of February 22, 2010 with you to the meeting. Please note that upon admittance to the meeting, you will not be able to vote your shares at the meeting without a legal proxy, as described in the response to question 5.

 

You also will need to bring a photo ID to gain admission.

 

Please note that cameras, sound or video recording equipment, cellular telephones, blackberries or other similar equipment, electronic devices, large bags, briefcases or packages will not be allowed in the meeting room.

 

 

You will need to ask your broker, bank or other intermediary to furnish you with a legal proxy. You will need to bring the legal proxy with you to the meeting and hand it in with a signed ballot

that will be provided to you at the meeting. You will not be able to vote your shares at the meeting without a legal proxy.

 

Please note that if you request a legal proxy, any previously executed proxy will be revoked, and your vote will not be counted unless you appear at the meeting and vote in person or legally appoint another proxy to vote on your behalf.

 

If you do not receive the legal proxy in time, you can follow the procedures described in the response to question 4 to gain admission to the meeting. However, you will not be able to vote your shares at the meeting.

 

 

If you are a shareowner of record you will receive only one proxy card for all the shares of Common Stock you hold:

 

 

If you hold shares of Common Stock in any Company benefit plan and do not vote your shares or specify your voting instructions on your proxy card, the administrators of the benefit plans will not vote your benefit plan shares. To allow sufficient time for voting by the administrators, your voting instructions must be received by April 16, 2010.

 

 

You can view the live webcast of the meeting by visiting our website at www.thecoca-colacompany.com, click on “Investors”, click on “Investor Webcasts”, click on the link to the webcast. An archived copy of the webcast will be available until May 21, 2010.

 

We have included the website address for reference only. The information contained on our website is not incorporated by reference into this proxy statement.

 

 

By Written Proxy.  All shareowners of record can vote by written proxy card. If you are a beneficial owner, you will receive a written proxy card or a vote instruction form from your bank or broker.

 

By Telephone or Internet.  All shareowners of record also can vote by touchtone telephone from the U.S., Puerto Rico and Canada, using the toll-free telephone number on the proxy card, or through the Internet, using the procedures and instructions described on the proxy card. Beneficial owners may vote by telephone or Internet if their bank or broker makes those methods available, in which case the bank or broker will enclose the instructions with the proxy materials. The telephone and Internet voting procedures are designed to authenticate shareowners’ identities, to allow shareowners to vote their shares, and to confirm that their instructions have been recorded properly.

 

In Person.  All shareowners of record may vote in person at the meeting. Beneficial owners may vote in person at the meeting if they have a legal proxy, as described in the response to question 5.

 

The record date for the 2010 Annual Meeting of Shareowners is February 22, 2010. The record date is established by the Board as required by the Delaware General Corporation Law (“Delaware Law”) and the Company’s By-Laws. Owners of record of Common Stock at the close of business on the record date are entitled to:

 

 

 

Shareowners can revoke a proxy prior to the completion of voting at the meeting by:

 

 

 

We will continue our long-standing practice of holding the votes of all shareowners in confidence from Directors, officers and employees except:

 

 

We also will continue, as we have for many years, to retain an independent tabulator to receive and tabulate the proxies and independent inspectors of election to certify the results.

 

 

In the vote on the election of 14 Director nominees identified in this proxy statement to serve until the 2011 Annual Meeting of Shareowners, shareowners may:

 

 

Directors will be elected by a majority of the votes cast by the holders of the shares of Common Stock voting in person or by proxy at the meeting.

 

The Board recommends a vote FOR each of the nominees.

 

13.  What are my voting choices when voting on the ratification of the appointment of Ernst &
       Young LLP as independent auditors, and what vote is needed to ratify their appointment?

 

In the vote on the approval of the appointment of Ernst & Young LLP as independent auditors, shareowners may:

 

 

The proposal to ratify the appointment of Ernst & Young LLP as independent auditors will require approval by a majority of the votes cast by the holders of the shares of Common Stock voting in person or by proxy at the meeting.

 

The Board recommends a vote FOR the ratification.

 

 

A separate vote will be held on each of the four shareowner proposals that is properly presented at the meeting. In voting on each of the proposals, shareowners may:

 

 

In order to be approved, each shareowner proposal will require approval by a majority of the votes cast by the holders of the shares of Common Stock voting in person or by proxy at the meeting.

 

The Board recommends a vote AGAINST each of the four shareowner proposals.

 

 

Shareowners should specify their choice for each matter on the enclosed proxy card. If no specific instructions are given, proxies which are signed and returned will be voted:

 

 

 

As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank, broker or other nominee by the deadline provided in

the materials you receive from your bank, broker or other nominee. If you do not provide voting instructions to your bank, broker or other nominee, whether your shares can be voted by such person depends on the type of item being considered for vote.

 

Non-Discretionary Items.  The election of Directors and approval of shareowner proposals are non-discretionary items and may not be voted on by brokers, banks or other nominees who have not received specific voting instructions from beneficial owners.

 

Discretionary Items.  The ratification of the appointment of the independent registered public accounting firm is a discretionary item. Generally, brokers, banks and other nominees that do not receive voting instructions from beneficial owners may vote on this proposal in their discretion.

 

 

Abstentions and broker non-votes are included in determining whether a quorum is present, but will not be included in vote totals and will not affect the outcome of the vote on any matter.

 

 

The Company does not have a policy about Directors’ attendance at the Annual Meeting of Shareowners. All persons who were serving as Directors at the time attended the 2009 Annual Meeting of Shareowners.

 

 

The Notice of Annual Meeting, Proxy Statement, and Annual Report on Form 10-K for the fiscal year ended December 31, 2009 are available at www.edocumentview.com/coca-cola. Instead of receiving future copies of our Notice of Annual Meeting, Proxy Statement, and Annual Report on Form 10-K by mail, shareowners of record and most beneficial owners can elect to receive an e-mail that will provide electronic links to these documents. Opting to receive your proxy materials online will save us the cost of producing and mailing documents to your home or business, and also will give you an electronic link to the proxy voting site.

 

Shareowners of Record.  If you vote on the Internet at www.envisionreports.com/coca-cola, simply follow the prompts for enrolling in the electronic proxy delivery service. You also may enroll in the electronic proxy delivery service at any time in the future by going directly to www.eTree.com/coca-cola and following the enrollment instructions. As a thank you to each shareowner enrolling in electronic delivery, the Company will have a tree planted on the shareowner’s behalf at no cost to the shareowner.

 

Beneficial owners.  If you hold your shares in a bank or brokerage account, you also may have the opportunity to receive copies of these documents electronically. Please check the information provided in the proxy materials mailed to you by your bank or broker regarding the availability of this service.

 

 

We bear all expenses incurred in connection with the solicitation of proxies. We have engaged D.F. King & Co. to assist with the solicitation of proxies for an estimated fee of $26,500 plus

expenses. We will reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of Common Stock.

 

Our Directors, officers and employees also may solicit proxies by mail, telephone and personal contact. They will not receive any additional compensation for these activities.

 

 

(Item 1)

 

Board of Directors

 

Election Process

 

The Company’s By-Laws provide for the annual election of Directors. The Company’s By-Laws also provide that the number of Directors shall be determined by the Board, which has set the number at 14. The Company’s By-Laws further provide that, in an election of Directors where the number of nominees does not exceed the number of Directors to be elected, each Director must receive the majority of the votes cast with respect to that Director. If a Director is not elected, he or she has agreed that an irrevocable letter of resignation will be submitted to the Board. The Committee on Directors and Corporate Governance will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the resignation taking into account the recommendation of the Committee on Directors and Corporate Governance and publicly disclose its decision and its rationale within 100 days of the certification of the election results. The Director who tenders his or her resignation will not participate in the decisions of the Committee on Directors and Corporate Governance or the Board of Directors that concern such resignation.

 

Director Nominations

 

The Committee on Directors and Corporate Governance is responsible for identifying and evaluating nominees for Director and for recommending to the Board a slate of nominees for election at each Annual Meeting of Shareowners. Nominees may be suggested by Directors, members of management, shareowners or, in some cases, by a third-party firm. In identifying and considering candidates for nomination to the Board, the Committee on Directors and Corporate Governance considers, in addition to the requirements set out in the Company’s Corporate Governance Guidelines and its charter, quality of experience, the needs of the Company and the range of talent and experience already represented on the Board.

 

The Committee on Directors and Corporate Governance will consider recommendations for directorships submitted by shareowners. Shareowners who wish the Committee on Directors and Corporate Governance to consider their recommendations for nominees for the position of Director should submit their recommendations in writing to the Committee on Directors and Corporate Governance in care of the Office of the Secretary, The Coca-Cola Company, P.O. Box 1734, Atlanta, Georgia 30301. Recommendations by shareowners that are made in accordance with these procedures will receive the same consideration by the Committee on Directors and Corporate Governance as other suggested nominees.

 

For detailed information concerning Directors’ qualifications, see the discussion beginning on page 14.

2010 Nominees for Director

 

Upon the recommendation of the Committee on Directors and Corporate Governance, the Board has nominated each of Herbert A. Allen, Ronald W. Allen, Cathleen P. Black, Barry Diller, Alexis M. Herman, Muhtar Kent, Donald R. Keough, Maria Elena Lagomasino, Donald F. McHenry, Sam Nunn, James D. Robinson III, Peter V. Ueberroth, Jacob Wallenberg, and James B. Williams for election as Director. All of the nominees are independent under New York Stock Exchange corporate governance rules, except Herbert A. Allen, Muhtar Kent and Donald R. Keough.

 

Each of our Director nominees currently serves on the Board and was elected by the shareowners at the 2009 Annual Meeting of Shareowners. If elected, all of these Directors will hold office until the 2011 Annual Meeting of Shareowners and until his or her successor is elected and qualified.

 

We have no reason to believe that any of the nominees will be unable or unwilling for good cause to serve if elected. However, if any nominee should become unable for any reason or unwilling for good cause to serve, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of Directors.

 

 

The Board of Directors recommends a vote FOR the election of each of the following nominees.

 

Director Qualifications

 

Directors are responsible for overseeing the Company’s business consistent with their fiduciary duty to shareowners. This significant responsibility requires highly-skilled individuals with various qualities, attributes and professional experience. The Board believes that there are general requirements for service on the Company’s Board of Directors that are applicable to all Directors and that there are other skills and experience that should be represented on the Board as a whole but not necessarily by each Director. The Board and the Committee on Directors and Corporate Governance consider the qualifications of Directors and Director candidates individually and in the broader context of the Board’s overall composition and the Company’s current and future needs.

 

Qualifications for All Directors

 

In its assessment of each potential candidate, including those recommended by shareowners, the Committee on Directors and Corporate Governance considers the nominee’s judgment, integrity, experience, independence, understanding of the Company’s business or other related industries and such other factors the Committee on Directors and Corporate Governance determines are pertinent in light of the current needs of the Board. The Committee on Directors and Corporate Governance also takes into account the ability of a Director to devote the time and effort necessary to fulfill his or her responsibilities to the Company.

 

The Board and the Committee on Directors and Corporate Governance require that each Director be a recognized person of high integrity with a proven record of success in his or her field. Each Director must demonstrate innovative thinking, familiarity with and respect for corporate governance requirements and practices, an appreciation of multiple cultures and a commitment to sustainability and to dealing responsibly with social issues. In addition to the qualifications required of all Directors, the Board conducts interviews of potential Director candidates to assess intangible qualities including the individual’s ability to ask difficult questions and, simultaneously, to work collegially.

 

The Board does not have a specific diversity policy, but considers diversity of race, ethnicity, gender, age, cultural background and professional experiences in evaluating candidates for Board membership. Diversity is important because a variety of points of view contribute to a more effective decision-making process.

 

Qualifications, Attributes, Skills and Experience to be Represented on the Board as a Whole

 

The Board has identified particular qualifications, attributes, skills and experience that are important to be represented on the Board as a whole, in light of the Company’s current needs and the business priorities as set forth in the Company’s 2020 Vision and Roadmap for Winning Together (the “2020 Vision”). The 2020 Vision – produced based on collective input from bottlers, associates and other key stakeholders – is an action plan that sets forth a common set of strategies guiding the Coca-Cola system that we believe are essential in order for us to succeed in this changing environment over the next decade.

 

The Company’s products are sold in over 200 countries around the world and significant areas of future growth are located outside of the United States. The Company’s business is truly global and multicultural. Therefore, the Board believes that international experience or specific knowledge of a key geographic growth area and diversity of race, gender, age, cultural background and professional experiences should be represented on the Board. The Company’s business is multifaceted and

involves complex financial transactions in many countries and in many currencies. Therefore, the Board believes that the Board should include some Directors with a high level of financial literacy and some Directors who possess relevant business experience as a Chief Executive Officer or a President. Marketing is the core focus of our business and the Company seeks to develop and deploy the world’s most innovative and effective marketing and technology. Therefore, the Board believes that marketing and technology experience should be represented on the Board. Our business is a complicated global enterprise and most of the Company’s products are manufactured and sold by bottling partners around the world. Therefore, the Board believes that extensive knowledge of the Company’s business, the Coca-Cola system, the industry and manufacturing should be represented on the Board. The Company’s business also requires compliance with a variety of regulatory requirements across a number of countries and relationships with various governmental entities. Therefore, the Board believes that governmental, political or diplomatic expertise should be represented on the Board.

 

Summary of Qualifications of 2010 Nominees for Director

 

Set forth below are a chart and a narrative disclosure that summarize the specific qualifications, attributes, skills and experiences described above. An “X” in the chart below indicates that the item is a specific reason that the Director has been nominated to serve on the Company’s Board. The lack of an “X” for a particular qualification does not mean that the Director does not possess that qualification or skill. Rather, an “X” indicates a specific area of focus or expertise of a Director on which the Board currently relies.

 

Herbert A. Allen

 

 

Ronald W. Allen

 

 

Cathleen P. Black

 

 

 

Barry Diller

 

 

Alexis M. Herman

 

 

Muhtar Kent

 

 

Donald R. Keough

 

 

Maria Elena Lagomasino

 

 

Donald F. McHenry

 

 

Sam Nunn

 

 

 

James D. Robinson III

 

 

Peter V. Ueberroth

 

 

Jacob Wallenberg

 

 

 

James B. Williams

 

 

The Board believes that the combination of the various qualifications, skills and experiences of the 2010 Director nominees would contribute to an effective and well-functioning Board. The Board and the Committee on Directors and Corporate Governance believe that, individually and as a whole, the Directors possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to the Company’s management.

 

Information about the Board of Directors and Corporate Governance

 

The Board is elected by the shareowners to oversee their interest in the long-term health and the overall success of the business and its financial strength. The Board serves as the ultimate decision-making body of the Company, except for those matters reserved to or shared with the shareowners. The Board selects and oversees the members of senior management, who are charged by the Board with conducting the business of the Company.

 

Board Leadership Structure

 

Our governance documents provide the Board with flexibility to select the appropriate leadership structure for the Company. In making leadership structure determinations, the Board considers many factors, including the specific needs of the business and what is in the best interests of the Company’s shareowners. Our current leadership structure is comprised of a combined Chairman of the Board and Chief Executive Officer, an independent Director serving as Presiding Director and strong, active independent Directors.

Under the Company’s By-Laws, the Chairman of the Board presides over meetings of the Board of Directors, presides over meetings of shareowners, consults and advises the Board of Directors and its committees on the business and affairs of the Company, and performs such other duties as may be assigned by the Board. The Chief Executive Officer is in general charge of the affairs of the Company, subject to the overall direction and supervision of the Board of Directors and its committees and subject to such powers as reserved by the Board. Muhtar Kent serves as both Chairman of the Board and Chief Executive Officer.

 

The Company also has designated the Chairman of the Committee on Directors and Corporate Governance, who must be an independent Director, as the Presiding Director. James D. Robinson III serves in this position. The Presiding Director:

 

 

Importantly, all Directors play an active role in overseeing the Company’s business both at the Board and Committee level. As set forth in our Corporate Governance Guidelines, the core responsibility of the Directors is to exercise their business judgment to act in what they reasonably believe to be in the best interests of the Company and its shareowners. Our Board is comprised of one Director who serves as a member of management and 13 non-employee Directors. Our non-employee Directors are skilled and experienced leaders in business, education, government and public policy. They currently serve or have served as CEOs and members of senior management of Fortune 500 companies and investment banking firms and members of the U.S. Cabinet, the U.S. Senate and academia. In these roles, our non-employee Directors have been called upon to provide answers to various complex issues, and most importantly are expected to, and do, ask hard questions of management. We believe that this is one of the many reasons our non-employee Directors are well-equipped to oversee the success of the business and to provide advice and counsel to the Chief Executive Officer and other senior officers of the Company.

 

Under our By-Laws, regular meetings of the Board are held at such times as the Board may determine. As part of each regularly scheduled Board meeting, the non-employee Directors meet without the Chief Executive Officer present. These meetings allow non-employee Directors to discuss issues of importance to the Company, including the business and affairs of the Company as well as matters concerning management, without any member of management present. In addition, at each regularly scheduled Board meeting, the independent Directors meet separately. Also, pursuant to our By-Laws, a majority of the Directors may call a special meeting of the Board in addition to the Chief Executive Officer or the Secretary of the Company. All of the Board Committees, except the Management Development Committee and the Executive Committee, are chaired by independent Directors.

The Board believes that this leadership structure – a combined Chairman of the Board and Chief Executive Officer, a Presiding Director, active and strong non-employee Directors, and Committees led primarily by independent Directors – is the most effective for the Company at this time. The Company’s business is complex and our products are sold in more than 200 countries around the world. Because the Chief Executive Officer travels extensively and is closest to the many facets of our business, the Board believes the Chief Executive Officer is in the best position to lead most effectively and to serve in the critical role of Chairman of the Board. In addition, as he is directly involved in managing the Company, having a Chairman who also serves as the Chief Executive Officer allows timely communication with the Board on critical business matters given the complexity and global reach of our business. Further, most of the Company’s products are manufactured and sold by bottling partners around the world, most of which are separate, unconsolidated companies. This franchise structure requires our leader to have strong relationships with the leaders of the bottlers. Having a single person in both roles is important so that the Company is represented by a single voice to bottlers, customers and consumers. The Board believes that leadership of both the Board and the Company by Mr. Kent is the optimal structure to guide the Company and maintain the focus required to achieve the business goals set forth in the Company’s 2020 Vision. The Board also believes there is a very well-functioning and effective balance between strong Company leadership and appropriate safeguards and oversight by non-employee Directors.

 

Board Meetings and Committees

 

In 2009, the Board of Directors held six meetings and Committees of the Board of Directors held a total of 30 meetings. Overall attendance at such meetings was approximately 96%. Each Director attended 75% or more of the aggregate of all meetings of the Board of Directors and the Committees on which he or she served during 2009.

 

The Board of Directors has an Audit Committee, a Compensation Committee, a Committee on Directors and Corporate Governance, an Executive Committee, a Finance Committee, a Management Development Committee and a Public Issues and Diversity Review Committee. The Board of Directors has adopted a written charter for each of these Committees. The Company has adopted a Code of Business Conduct for Non-Employee Directors. In addition, the Company has adopted a Code of Business Conduct applicable to the Company’s employees, including the Named Executive Officers. The full text of each Committee charter, the Company’s Corporate Governance Guidelines and the Company’s Codes of Business Conduct is available on the Company’s website located at www.thecoca-colacompany.com, click on “Investors”, click on “Corporate Governance”.

The following table describes the current members of each of the Committees and the number of meetings held during 2009.

 

* Independent Director

 

¹ Presiding Director

 

² The Board of Directors has appointed Mr. Williams to the Audit Committee even though he serves on the audit committees of three other public companies. The Board of Directors believes its decision is in the best interests of shareowners. Mr. Williams is retired and has extensive experience with and knowledge of the Company. The other three companies are related in that they share a common management and are under common control. As a result, the Board of Directors believes that service on the audit committees of these other companies is less burdensome than would be the case for three unrelated public companies.

 

The following summarizes the responsibilities of the various committees. The complete committee charters are located at www.thecoca-colacompany.com, click on “Investors”, click on “Corporate Governance”.

 

Audit Committee

 

Under the terms of its charter, the Audit Committee represents and assists the Board in fulfilling its oversight responsibility relating to the integrity of the Company’s financial statements and the financial reporting process, the systems of internal accounting and financial controls, the internal audit function and the annual independent audit of the Company’s financial statements. The Audit Committee also oversees the Company’s compliance with legal and regulatory requirements and its

ethics program, the independent auditors’ qualifications and independence, the performance of the Company’s internal audit function and the performance of its independent auditors.

 

Each member of the Audit Committee meets the independence requirements of the New York Stock Exchange, the Securities Exchange Act of 1934, as amended (the “1934 Act”) and the Company’s Corporate Governance Guidelines. Each member of the Audit Committee is financially literate, knowledgeable and qualified to review financial statements. The “audit committee financial expert” designated by the Board is Peter V. Ueberroth.

 

Compensation Committee

 

Under the terms of its charter, the Compensation Committee has overall responsibility for evaluating and approving compensation plans, policies and programs of the Company applicable primarily to elected officers and senior executives of the Company.

 

The Compensation Committee also makes decisions that affect a larger group of employees. The Compensation Committee approves proposed plans and rewards systems applicable to more persons than the senior executives. For example, the Compensation Committee approves all stock option awards and all awards of restricted stock and performance share units that may be awarded to employees who are not elected officers or senior executives.

 

To assist the Compensation Committee with its responsibilities, it has retained the services of the compensation consulting firm, Towers Perrin (now known as Towers Watson). The consultant reports to Cathleen P. Black, the Compensation Committee Chair. Additional information regarding the Compensation Committee’s engagement of Towers Perrin is disclosed beginning on page 57.

 

Each member of the Compensation Committee meets the independence requirements of the NYSE, the Internal Revenue Code of 1986, as amended (the “Tax Code”), and the Company’s Corporate Governance Guidelines.

 

Committee on Directors and Corporate Governance

 

Under the terms of its charter, the Committee on Directors and Corporate Governance is responsible for considering and making recommendations concerning the function and needs of the Board, and the review and development of corporate governance guidelines. As discussed on page 22, the Chairman of the Committee on Directors and Corporate Governance is designated as the Presiding Director.

 

Each member of the Committee on Directors and Corporate Governance meets the independence requirements of the NYSE and the Company’s Corporate Governance Guidelines.

 

Executive Committee

 

Under the terms of its charter, the Executive Committee has the authority to exercise the power and authority of the Board between meetings, except the powers reserved for the Board or the shareowners by Delaware Law.

 

Finance Committee

 

Under the terms of its charter, the Finance Committee helps the Board fulfill its responsibilities relating to oversight of the Company’s financial affairs, including reviewing and recommending capital expenditures and dividend policy to the Board.

Management Development Committee

 

Under the terms of its charter, the Management Development Committee helps the Board fulfill its responsibilities relating to oversight of talent development for senior positions and succession planning.

 

Public Issues and Diversity Review Committee

 

Under the terms of its charter, the Public Issues and Diversity Review Committee helps the Board fulfill its responsibilities relating to public issues and diversity. The Public Issues and Diversity Review Committee reviews the Company’s policy and practice relating to significant public issues of concern to shareowners, the Company, the business community and the general public.

 

The Board’s Role in Risk Management

 

The Board oversees that the assets of the Company are properly safeguarded, that the appropriate financial and other controls are maintained, and that the Company’s business is conducted wisely and in compliance with applicable laws and regulations and proper governance. Included in these responsibilities is the Board of Directors’ oversight of the various risks facing the Company. In this regard, the Board seeks to understand and oversee critical business risks. The Board does not view risk in isolation. Risks are considered in virtually every business decision and as part of the Company’s business strategy. The Board recognizes that it is neither possible nor prudent to eliminate all risk. Indeed, purposeful and appropriate risk-taking is essential for the Company to be competitive on a global basis and to achieve the objectives set forth in its 2020 Vision.

 

Effective risk oversight is an important priority of the Board. The Board has implemented a risk governance framework to:

 

 

While the Board oversees risk management, Company management is charged with managing risk. The Company has robust internal processes and a strong internal control environment to identify and manage risks and to communicate with the Board. These include an enterprise risk management program, a risk management committee co-chaired by the Chief Financial Officer and the General Counsel, regular internal management disclosure committee meetings, Codes of Business Conduct, robust product quality standards and processes, a strong ethics and compliance office, and a comprehensive internal and external audit process. The Board and the Audit Committee monitor and evaluate the effectiveness of the internal controls and the risk management program at least annually. Management communicates routinely with the Board, Board Committees and individual Directors on the significant risks identified and how they are being managed. Directors are free to, and indeed often do, communicate directly with senior management.

The Board implements its risk oversight function both as a whole and through Committees. Much of the work is delegated to various Committees, which meet regularly and report back to the full Board. All Committees play significant roles in carrying out the risk oversight function. In particular:

 

 

In addition, annually, one meeting of the full Board of Directors is dedicated primarily to evaluating and discussing risk, risk mitigation strategies, and the Company’s internal control environment. Topics examined at this meeting include, but are not limited to, financial risks, political and regulatory risks, legal risks, supply chain and quality risks, information technology risks, economic risks, and risks related to the Company’s transformation efforts. Because overseeing risk is an ongoing process and inherent in the Company’s strategic decisions, the Board also discusses risk throughout the year at other meetings in relation to specific proposed actions.

 

The Company believes that its leadership structure, discussed in detail beginning on page 21, supports the risk oversight function of the Board. While the Company has a combined Chairman of the Board and Chief Executive Officer, strong Directors chair the various committees involved with risk oversight, there is open communication between management and Directors, and all Directors are actively involved in the risk oversight function.

 

Independence and Related Person Transactions

 

Independence Determinations

 

Under the corporate governance listing standards of the New York Stock Exchange (“NYSE”) and the Company’s Corporate Governance Guidelines, the Board of Directors must consist of a majority of independent Directors. In making independence determinations, the Board observes

NYSE and SEC criteria and considers all relevant facts and circumstances. Under NYSE corporate governance rules, to be considered independent:

 

 

To aid in the Director independence assessment process, the Board has adopted categorical standards that identify categories of relationships that the Board has determined would not affect a Director’s independence. As a result, these relationships are not considered by the Board in determining Director independence. The categorical standards, which are part of the Company’s Corporate Governance Guidelines, provide that the following will not be considered material relationships that would impact a Director’s independence:

 

 

In addition, the Board did not consider transactions with entities in which the Director or an immediate family member served only as a director or trustee. Nor did the Board consider transactions of less than $120,000 or transactions with entities in which the Director or an immediate family member had a less than 10% interest.

 

The Board, through its Committee on Directors and Corporate Governance, annually reviews all relevant business relationships any Director or nominee for Director may have with the Company. As a result of its annual review, the Board has determined that none of the following Directors/2010 nominees for Director has a material relationship with the Company and, as a result, such Directors/2010 nominees for Director are independent: Ronald W. Allen, Cathleen P. Black, Barry Diller, Alexis M. Herman, Maria Elena Lagomasino, Donald F. McHenry, Sam Nunn, James D. Robinson III,

Peter V. Ueberroth, Jacob Wallenberg and James B. Williams. None of the Directors/2010 nominees for Director who were determined to be independent had any relationships that were outside the categorical standards identified above.

 

The Board examined the Company’s relationship with Hearst Corporation and its subsidiaries. Cathleen P. Black, one of our Directors, is Senior Vice President and a director of Hearst Corporation. She is also Senior Vice President and a director of Hearst Communications, Inc. and President of its Hearst Magazines unit. The Board determined that the relationship was not material since (i) the amounts involved were less than 1% of the consolidated gross revenues of both the Company and Hearst Corporation, (ii) the payments were for print and media advertising in the ordinary course of business, and (iii) the Company has had a relationship with Hearst Corporation for many years prior to Ms. Black’s relationship with either the Company or Hearst Corporation. This relationship is within the rules of the NYSE and falls within categorical standard number 1 above. The relationship is consistent with Ms. Black’s status as an independent Director.

 

The Board examined payments made by the Company to IAC/InterActiveCorp and its subsidiaries (“IAC”) where Barry Diller, one of our Directors, is Chairman of the Board and Chief Executive Officer. The Board determined that the relationship was not material since (i) the amounts involved were less than 1% of the consolidated gross revenues of both the Company and IAC, (ii) the payments were for online advertising and ticket sales service fees in the ordinary course of business, and (iii) the Company has had a relationship with the predecessors of IAC for many years prior to Mr. Diller’s service as a Director of the Company. This relationship is within the rules of the NYSE and falls within categorical standard number 1 above. The relationship is consistent with Mr. Diller’s status as an independent Director.

 

The Board examined the Company’s charitable donations and sponsorships to Points of Light Institute, where a daughter of Sam Nunn, one of our Directors, serves as Chief Executive Officer and a Director. The Board determined that this relationship was not material since (i) the amounts involved were a small percentage of the revenues or donations received by Points of Light Institute and a small percentage of the Company’s overall charitable donations and sponsorships, and (ii) the donations and sponsorships were within the Company’s philosophy of supporting local and civic organizations in the communities where we operate. This relationship is within the rules of the NYSE and falls within categorical standard number 5 above. The relationship is consistent with Mr. Nunn’s status as an independent Director.

 

The indirect relationship between the Company and James D. Robinson III, one of our Directors, is described on page 31. The Board determined that this relationship was not material since (i) the amounts involved were less than 1% of the consolidated gross revenues of both the Company and Delaware North Companies, Inc. (“Delaware North”), (ii) the marketing and sponsorship payments and the payments made to purchase fountain syrups and other products were in the ordinary course of business, (iii) the interest is indirect, and (iv) the Company has had a business relationship with Delaware North for over 75 years. This relationship is within the rules of the NYSE and falls within categorical standard number 1 above. The relationship is consistent with Mr. Robinson’s status as an independent Director.

 

A daughter of Peter V. Ueberroth, one of our Directors, is an executive officer of the National Basketball Association (the “NBA”) with which the Company has a contractual relationship. The relationship is described on page 31. The Board determined that this indirect relationship was not material since (i) the amounts involved were less than 1% of the consolidated gross revenues of both

the Company and the NBA, and (ii) the Company’s relationship with the NBA has been in existence since the late 1980’s, long before Mr. Ueberroth’s daughter served as an executive officer of that organization. This relationship is within the rules of the NYSE and falls within categorical standard number 1 above. The relationship is consistent with Mr. Ueberroth’s status as an independent Director.

 

During 2009, E. Neville Isdell served as executive Chairman of the Board of Directors of the Company until his retirement in April 2009 and therefore, was determined not to be independent during his service as a Director in 2009. Muhtar Kent, the Chairman of the Board of Directors since April 2009, also serves as the Company’s Chief Executive Officer and is therefore currently determined not to be independent. Even though neither Herbert A. Allen nor Donald R. Keough currently is determined to be independent, both of these Directors have contributed greatly to the Board of Directors and the Company through their wealth of experience, expertise and judgment.

 

All of our Directors who serve as members of the Audit Committee, Compensation Committee and Committee on Directors and Corporate Governance are independent as required by the NYSE corporate governance rules. Under these rules, Audit Committee members also must satisfy a separate SEC independence requirement that provides that no member may accept directly or indirectly any consulting, advisory or other compensatory fee from the Company or any of its subsidiaries other than compensation for services as a Director.

 

Certain Related Person Transactions

 

Herbert A. Allen

 

Herbert A. Allen, one of our Directors, is President, Chief Executive Officer and a Director of Allen & Company Incorporated (“ACI”) and a principal shareowner of ACI’s parent. ACI is an indirect equity holder of Allen & Company LLC (“ACL”). ACI transferred its investment and financial advisory services business to ACL in September 2002.

 

ACI has leased and subleased office space since 1977 in a building owned by one of our subsidiaries and located at 711 Fifth Avenue, New York, New York. In June 2005, ACI assigned the lease and sublease to ACL. In 2009, ACL paid approximately $4.9 million in rent and related expenses and it is expected that ACL will pay a similar amount in 2010 under the terms of the current lease. In the opinion of management, the terms of the lease are fair and reasonable and as favorable to the Company as those that could have been obtained from unrelated third parties at the time of the execution of the lease.

 

In 2009, the Company paid ACL $1.0 million for investment banking services it provided in connection with the proposed business combination transaction between the Company and Coca-Cola Enterprises Inc. Under the terms of the investment banking services agreement, the Company is required to pay ACL a success fee equal to $15 million, less any advisory fees payable under the agreement, upon consummation of any transactions or series of transactions involving Coca-Cola Enterprises Inc. For more information regarding the transaction see page 94. In the opinion of management, the terms of the investment banking services agreement are fair and reasonable and as favorable to the Company as those that could be obtained from unrelated third parties.

Donald R. Keough

 

A son of Donald R. Keough, one of our Directors, is an executive officer of, and holds a significant equity interest in, Marsys Digital, LLC (“Marsys Digital”). In 2009, the Company and Marsys Digital entered into a five-year services agreement relating to the Company’s use of Marsys Digital’s platform technology and infrastructure. In 2009, the Company paid Marsys Digital approximately $5 million for infrastructure design associated with a digital infrastructure platform. Under the terms of the services agreement, the Company is required to pay Marsys Digital $2.9 million annually over the next five years for services associated with the operation, maintenance and support of the platform technology and infrastructure. In 2009, the Company paid Marsys Digital approximately $507,000 for such services and additional hardware. In 2009, the Company also entered into a warrant agreement with Marsys Digital whereby the Company was granted the right to purchase, for a period of up to six years, a 5% equity interest in Marsys Digital for an exercise price that is to be determined by the terms of the warrant agreement. The exercise price is based on a formula dependent on the fair market value of such equity interest and is subject to credit adjustments based on revenues recognized by Marsys Digital pursuant to its services agreement with the Company. Since Marsys Digital is a startup company, the value of the Company’s equity interest is not currently determinable.

 

James D. Robinson III

 

A daughter-in-law of James D. Robinson III, one of our Directors, has an indirect minority equity interest in Delaware North. The Company has a sponsorship agreement with Delaware North relating to the TD Banknorth Garden in Boston, which was renewed in 2009 for an additional period of five years. In 2009, the Company paid Delaware North approximately $749,000 in marketing and sponsorship payments in the ordinary course of business. In 2009, Delaware North and its subsidiaries made payments totaling approximately $2.7 million to the Company directly and through bottlers and other agents to purchase fountain syrups and other products in the ordinary course of business. The Company has had a relationship with Delaware North for more than 75 years. In the opinion of management, the terms of the sponsorship agreement are fair and reasonable and as favorable to the Company as those that could have been obtained from unrelated third parties at the time of the execution of the agreement.

 

Peter V. Ueberroth

 

A daughter of Peter V. Ueberroth, one of our Directors, is an executive officer of the NBA. The Company and the NBA have entered into a marketing agreement. The Company made payments totaling approximately $17.6 million to the NBA’s affiliated companies in 2009 for marketing, media placement, advertising, and sponsorship in the ordinary course of business. The Company has had a relationship with the NBA since the late 1980’s. In the opinion of management, the terms of the agreement are fair and reasonable.

 

Berkshire Hathaway Inc. (“Berkshire Hathaway”)

 

Berkshire Hathaway’s holdings constituted approximately 8.68% of the Company’s outstanding Common Stock as of February 22, 2010. Business Wire, Inc. (“Business Wire”) is a wholly owned subsidiary of Berkshire Hathaway. In 2009, the Company paid approximately $132,000 to Business Wire to disseminate news releases for the Company in the ordinary course of business. This business relationship was in place prior to Berkshire Hathaway’s acquisition of Business Wire in 2006, is fair

and reasonable, and is on terms as favorable to the Company as those that could have been obtained from unrelated third parties.

 

FlightSafety International, Inc. (“FlightSafety”) is a wholly owned subsidiary of Berkshire Hathaway. In August 2009, the Company agreed to a new five-year agreement with FlightSafety to provide pilot training services to the Company. FlightSafety continues to provide flight attendant and mechanic training services to the Company under a five-year agreement entered into in March 2006. In 2009, the Company paid FlightSafety approximately $673,000 for providing pilot, flight attendant and mechanic training services to the Company in the ordinary course of business. In the opinion of management, the terms of the FlightSafety agreements pursuant to which these services are provided are fair and reasonable, and as favorable to the Company as those that could have been obtained from unrelated third parties at the time of the execution of the agreements.

 

International Dairy Queen, Inc. (“IDQ”) is a wholly owned subsidiary of Berkshire Hathaway. In 2009, IDQ and its subsidiaries made payments totaling approximately $2.1 million to the Company directly and through bottlers and other agents to purchase fountain syrup and other products for its corporate stores in the ordinary course of business. Payments from franchised stores are not included. Also in 2009, IDQ and its subsidiaries received promotional and marketing incentives based on the volume of both corporate and franchised stores, totaling approximately $1.5 million from the Company in the ordinary course of business. This business relationship was in place for many years prior to Berkshire Hathaway’s acquisition of IDQ, is fair and reasonable, and is on terms substantially similar to the Company’s relationships with other customers.

 

McLane Company, Inc. (“McLane”) is a wholly owned subsidiary of Berkshire Hathaway. In 2009, McLane made payments totaling approximately $145.5 million to the Company to purchase fountain syrup and other products in the ordinary course of business. Also in 2009, McLane received from the Company approximately $5.5 million in agency commissions, marketing payments and other fees relating to the sale of the Company’s products to customers in the ordinary course of business. This business relationship was in place for many years prior to Berkshire Hathaway’s acquisition of McLane in 2003, is fair and reasonable, and is on terms substantially similar to the Company’s relationships with other customers.

 

Berkshire Hathaway also holds a significant equity interest in American Express Company (“American Express”). In 2009, the Company paid fees of approximately $410,000 for credit card memberships, business travel and other services in the ordinary course of business to American Express or its subsidiaries. The Company received from American Express approximately $1.1 million in rebates and incentives in the ordinary course of business. The relationship with American Express is fair and reasonable.

 

Berkshire Hathaway holds a significant equity interest in Moody’s Corporation (“Moody’s”). In 2009, the Company paid fees of $262,000 to a subsidiary of Moody’s for rating our commercial paper programs. Also in 2009, the Company paid fees of $875,000 to a subsidiary of Moody’s for rating the Company’s offering of debt securities. The relationship with Moody’s is fair and reasonable and is on terms substantially similar to the Company’s relationships with similar companies.

 

Berkshire Hathaway also holds a significant equity interest in The Washington Post Company (“Washington Post”). In 2009, the Company paid fees of approximately $313,000 to Washington Post for print media advertising in the ordinary course of business. The relationship with Washington Post is fair and reasonable, and is on terms as favorable to the Company as those that could have been obtained from unrelated third parties.

BlackRock, Inc.

 

BlackRock, Inc.’s holdings constitute approximately 5.42% of the Company’s outstanding Common Stock as of February 22, 2010. The Coca-Cola Company Master Retirement Trust (the “Trust”), a trust established by the Company for purposes of providing retirement benefits under certain employee benefit plans, and BlackRock Realty Advisors, Inc., a subsidiary of BlackRock, Inc., have entered into an investment management agreement. Certain assets of the Company’s U.S. defined benefit pension plans (the “Trust Assets”) are invested in the BlackRock Granite Property Fund, Inc. (the “Fund”), an investment fund which is managed by BlackRock Realty Advisors, Inc. In 2009, the Trust paid fees of approximately $473,000 to BlackRock Realty Advisors, Inc. for its services as an investment manager to the Company’s U.S. defined benefit pension plans in the ordinary course of business. The Trust Assets have been invested in the Fund since the 1990s, when it was managed by an entity that was acquired by BlackRock, Inc. in 2006. The relationship with BlackRock Realty Advisors, Inc. is fair and reasonable and is on terms substantially similar to the Company’s relationship with other investment managers.

 

Approval of Related Person Transactions

 

Our policies and procedures regarding related person transactions are in writing in the committee charters for the Committee on Directors and Corporate Governance and the Audit Committee, and in our Codes of Business Conduct. These documents can be found on the Company’s website, www.thecoca-colacompany.com, under the “Investors’’ section.

 

A “Related Person Transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which the Company (including any of its subsidiaries) was, is or will be a participant and, as relates to Directors or shareowners who have an ownership interest in the Company of more than 5%, the amount involved exceeds $120,000, and in which any Related Person had, has or will have a direct or indirect material interest. Under our policy, there is no threshold amount applicable to Executive Officers with regard to Related Person Transactions.

 

A “Related Person” means:

 

 

Related Person Transactions Involving Directors

 

In general, the Company will enter into or ratify Related Person Transactions only when the Board of Directors, acting through the Committee on Directors and Corporate Governance, determines that the Related Person Transaction is reasonable and fair to the Company.

 

When a new Related Person Transaction is identified, it is brought to the Committee on Directors and Corporate Governance to determine if the proposed transaction is reasonable and fair to the Company. The Committee on Directors and Corporate Governance considers, among other things, the evaluation of the transaction by employees directly involved and the recommendation of the Chief Financial Officer.

 

However, many transactions that constitute Related Person Transactions are ongoing and some arrangements predate any relationship with the Director or predate the Director’s relationship with the Company. For example, ACI’s lease of space at 711 Fifth Avenue predates Mr. Herbert Allen’s service as a Director and was in place when the Company acquired the property as part of the purchase of Columbia Pictures in 1982.

 

When a transaction is ongoing, any amendments or changes are reviewed and the transaction is reviewed annually for reasonableness and fairness to the Company.

 

Identifying possible Related Person Transactions involves the following procedures in addition to the completion and review of the customary Directors’ Questionnaires.

 

The Company annually requests each Director to verify and update the following information:

 

 

A nominee for Director also is required to provide the Company with the foregoing information.

 

Related Person Transactions Involving Executive Officers

 

Likewise, each Executive Officer is required to complete an Executive Officers’ Questionnaire annually. In addition, any Related Person Transaction involving an Executive Officer must be preapproved by the Chief Executive Officer. Any such transaction involving the Chief Executive Officer must be submitted to the Audit Committee for approval.

 

Related Person Transactions Involving Shareowners With More Than 5% Ownership

 

The process for evaluating transactions involving a shareowner who has an ownership interest of more than 5% is essentially the same as that used for Directors, except that the transactions are submitted to the Audit Committee for approval. The Company annually requests that a shareowner (other than a passive investor) who has an ownership interest of more than 5% complete a Principal Shareowner Questionnaire that is similar to the questionnaires completed by Directors and Executive Officers.

Verification Process

 

When the Company receives the requested information, the Company compiles a list of all such persons and entities, including all subsidiaries of the entities identified. The Office of the Secretary reviews the updated list and expands the list if necessary, based on a review of SEC filings, Internet searches and applicable websites.

 

Once the list of persons and entities, generally totaling approximately 2,300 entities when shareowners who have an ownership interest of more than 5% are included, has been reviewed and updated, it is distributed within the Company to identify any potential transactions. This list also is sent to each of the Company’s approximately 318 accounting locations to be compared to payments and receipts.

 

All ongoing transactions, along with payment and receipt information, are compiled for each person and entity. The information is reviewed and relevant information is presented to the Committee on Directors and Corporate Governance or the Audit Committee, as the case may be, in order to obtain approval or ratification of the transactions and to review in connection with its recommendations to the Board on the independence determinations of each Director.

 

Directors who also serve as employees of the Company do not receive payment for services as Directors. The Committee on Directors and Corporate Governance is responsible for reviewing and making recommendations to the Board regarding all matters pertaining to fees and retainers paid to Directors for Board, Committee and Committee Chair services. Under the Committee’s charter, the Committee is authorized to engage consultants or advisors in connection with its compensation review and analysis. The Committee did not engage any consultants in 2009.

 

In making non-employee Director compensation recommendations, the Committee on Directors and Corporate Governance takes various factors into consideration, including, but not limited to, the responsibilities of Directors generally, as well as committee chairs, and the forms of compensation paid to directors by comparable corporations. The Board reviews the Committee’s recommendations and determines the form and amount of Director compensation.

 

The current compensation program for non-employee Directors, The Coca-Cola Company Compensation and Deferred Compensation Plan for Non-Employee Directors (the “Directors’ Plan”), has been in effect since January 1, 2009. The Board believes that non-employee Director compensation should be designed:

 

 

Prior Directors’ Plan

 

In 2006, the Board of Directors adopted the Compensation Plan for Non-Employee Directors of The Coca-Cola Company, which was amended on December 13, 2007 (the “Prior Directors’ Plan”).

The Prior Directors’ Plan, which was effective through December 31, 2008, ties the Directors’ annual pay to the Company’s performance over a three-year period. For all of the performance periods, the Board set a target of 8% compound annual growth in comparable earnings per share. For the 2006–2008 performance period, the Company’s 2005 comparable earnings per share of $2.17 was used as the base for this calculation. For the 2007–2009 performance period, the Company’s 2006 comparable earnings per share of $2.37 was used as the base for this calculation. For the 2008–2010 performance period, the Company’s 2007 comparable earnings per share of $2.70 is used as the base for this calculation. For all performance periods, the calculation of comparable earnings per share growth is adjusted for significant structural changes, accounting changes and non-recurring charges and gains.

 

Under the Prior Directors’ Plan, each Director, except a new Director, was credited with share units as compensation for each year in an amount equal to the number of shares of Common Stock that could be purchased for $175,000 on the date of the first regularly-scheduled board meeting that occurred in February. When a dividend is paid on Common Stock, the number of units is increased by the number of shares of Common Stock that could be purchased with the amount of the dividend on the dividend payment date. If the performance goal is met at the end of the three-year period, each participating Director is paid in cash an amount equal to the number of units multiplied by the fair market value of a share of Common Stock on the date the Audit Committee certifies performance results. If performance goals are not met, the Directors receive nothing for that year of service. Pursuant to the terms of this plan, new Directors were paid $175,000 in cash for their first twelve months of service and thereafter were eligible to participate in the performance portion of this plan.

 

In February 2009, the Audit Committee reviewed and certified the Company’s comparable earnings per share performance for the 2006–2008 performance period. Each Director participating in the Prior Directors’ Plan for that performance period was credited with 4,587 share units as of February 18, 2009 and earned $195,617 for 2006 compensation.

 

In February 2010, the Audit Committee reviewed and certified that the performance target of 8% compound comparable earnings per share growth for the 2007–2009 performance period was achieved. As of February 17, 2010, each Director participating in the Prior Directors’ Plan for this performance period, other than Ms. Herman, had accrued 3,986 share units for 2007 compensation. Based on the average of the high and low prices of the Common Stock on February 17, 2010, these Directors earned $219,861 for this performance period upon the Board’s authorization of payout on February 18, 2010. As a new 2007 Director, Ms. Herman was not eligible to participate in the performance portion of this plan. Mr. Wallenberg and Ms. Lagomasino did not participate in the 2007–2009 performance plan because they became Directors in 2008.

 

The performance plan for 2008 compensation (the 2008–2010 performance period) is the final plan in progress under the Prior Directors’ Plan and will pay out in February 2011, if the performance criterion is met. Currently, it is not known whether the target for this period will be met. As of the end of 2009, we believed it was not probable that the target would be achieved for this period based on performance through 2009. The volatility in the global economic environment and the impact of currency over the remaining year of the performance period will have a significant impact on whether or not the program ultimately pays out.

2009 Annual Compensation

 

Under the Directors’ Plan, 2009 annual compensation of $175,000 was paid or credited to each non-employee Director. Of this amount, $50,000 (or approximately 29%) was paid in cash in quarterly installments and $125,000 (or approximately 71%) was credited in deferred share units (“DSUs”). Non-employee Directors have the option of deferring all or a portion of their cash compensation in DSUs. The number of DSUs is equal to the number of shares of Common Stock that could be purchased for $125,000 based on the average of the high and low prices of a share of Common Stock on April 1st (or the next business day if April 1st is not a business day). Each DSU is equal in value to a share of Common Stock, but does not have voting rights. DSUs are credited with hypothetical dividends to the extent dividends on Common Stock are received by shareowners. The DSUs will be paid out in cash to non-employee Directors on the later of (i) January 15 of the year following the year in which the Director leaves the Board or (ii) six months after the Director leaves the Board. Directors may elect to take their DSU cash payment in a lump sum or in up to five annual installments. The Board believes that the Directors’ Plan:

 

 

In addition, each non-employee Director who served as a Committee Chair in 2009 received an additional $20,000 in cash. Directors do not receive fees for attending Board or committee meetings. Non-employee Directors are reimbursed for reasonable expenses incurred in connection with Board-related activities.

 

2009 Director Compensation

 

 

E. Neville Isdell served as the executive Chairman of the Board of Directors from January 2009 through April 2009 when he retired. No compensation information is included in the table above for Mr. Isdell because in 2009 he was an executive officer of the Company, other than a Named Executive Officer (as defined on page 40), who did not receive any additional compensation for his services as a Director.

 

Fees Earned or Paid in Cash (Column (b))

 

As required under the terms of the Directors’ Plan, $50,000 of the $175,000 annual retainer was paid in cash to each of the non-employee Directors named in the table above for 2009 Board service. Each of Ms. Black and Messrs. Keough, McHenry, Robinson, Ueberroth and Williams received an additional $20,000 in cash for 2009 Committee Chair service.

 

Stock Awards (Column (c))

 

The amounts reported in the Stock Awards column reflect the grant date fair value associated with each Director’s DSUs under the Directors’ Plan, calculated in accordance with the provisions of the Financial Accounting Standards Board Accounting Standards Codification 718, Compensation – Stock Compensation (“FASB Topic 718”).

 

All Other Compensation (Column (g))

 

The amounts reported in the All Other Compensation column reflect, where applicable, the premiums for business travel accident insurance, life insurance (including accidental death and

dismemberment coverage), medical and dental insurance, and Company matching gifts to non-profit organizations for Directors who participated in that program.

 

For Directors who elected coverage prior to 2006, the Company provides health and dental insurance coverage on the same terms and cost as available to U.S. employees and life insurance coverage, which includes $30,000 term life insurance and $100,000 group accidental death and dismemberment insurance. The premiums for life insurance (including accidental death and dismemberment) were: for each of Messrs. Ronald Allen and Diller $611; for Ms. Black $354; and for each of Messrs. McHenry, Nunn, Robinson, Ueberroth and Williams $1,033. Group travel accident insurance coverage of $200,000 is provided to all Directors while traveling on Company business, at a Company cost of $3 per Director. The total cost for these insurance benefits to all of the non-employee Directors in 2009 was $42,759.

 

The Directors are eligible to participate in the Company’s matching gifts program, which is the same program available to all U.S. based employees and retirees. In 2009, this program matched up to $10,000 of charitable contributions to tax-exempt arts, cultural, environmental or educational organizations, on a two for one basis. The total cost of matching contributions on behalf of the non-employee Directors for 2009 was $68,000. Mr. Nunn’s and Mr. McHenry’s designated charities received $20,000 each. Mr. Robinson’s and Mr. Williams’ designated charities received $10,000 each. Mr. Ueberroth’s designated charity received $8,000.

 

The Company also provides its products to Directors. The total cost of Company products provided during 2009 to all of the non-employee Directors was approximately $16,040, which is not reflected in the table.

 

Directors and Executive Officers

 

The following table sets forth information regarding beneficial ownership of Common Stock by each Director, each individual named in the Summary Compensation Table on page 65 (the “Named Executive Officers”), and our Directors and Executive Officers as a group, all as of February 22, 2010.

 

 

* Less than 1% of issued and outstanding shares of Common Stock.

 

¹ Includes 2,847,920 shares held by ACI and 5,400 shares held in three trusts in which Mr. Allen, in each case, is one of five trustees. Does not include 18,348 share units deferred under the Directors’ Plan, which are settled in cash on the later of (i) January 15 of the year following the year in which the Director leaves the Board or (ii) six months following the date on which the Director leaves the Board. Does not include 3,199 share units credited under the Prior Directors’ Plan, which are subject to the achievement of performance goals.

 

² Includes 2,000 shares held by Mr. Allen’s wife. Mr. Allen has disclaimed beneficial ownership of such shares. Does not include 17,135 share units deferred under the Directors’ Plan, which are settled in cash on the later of (i) January 15 of the year following the year in which the Director leaves the Board or (ii) six months following the date on which the Director leaves the Board. Does not include 3,199 share units credited under the Prior Directors’ Plan, which are subject to the achievement of performance goals.

 

³ Includes 10,200 shares jointly held with Ms. Black’s husband. Does not include 40,217 share units deferred under the Directors’ Plan, which are settled in cash on the later of (i) January 15 of the year following the year in which the Director leaves the Board or (ii) six months following the date on which the Director leaves the Board. Does not include 3,199 share units credited under the Prior Directors’ Plan, which are subject to the achievement of performance goals.

 

⁴ Does not include 23,787 share units deferred under the Directors’ Plan, which are settled in cash on the later of (i) January 15 of the year following the year in which the Director leaves the Board or (ii) six months following the date on which the Director leaves the Board. Does not include 3,199 share units credited under the Prior Directors’ Plan, which are subject to the achievement of performance goals.

 

⁵ Does not include 2,917 share units deferred under the Directors’ Plan, which are settled in cash on the later of (i) January 15 of the year following the year in which the Director leaves the Board or (ii) six months following the date on which the Director leaves the Board. Does not include 808 share units credited under the Prior Directors’ Plan, which are subject to the achievement of performance goals.

 

⁶ Includes 6,000 shares held by a trust of which a management company in which Mr. Keough holds a significant interest is the trustee. Also includes 131,000 shares held by a foundation of which he is one of eight trustees. Mr. Keough disclaims beneficial ownership of these 137,000 shares held by the trust and the foundation. Also includes 366,600 shares held by two limited liability companies in which Mr. Keough’s children hold a majority of the economic interest. Mr. Keough and his wife have investment control over these shares. Mr. Keough disclaims beneficial ownership of these 366,600 shares except to the extent of his pecuniary interest therein. Does not include 15,585 share units deferred under the Directors’ Plan, which are settled in cash on the later of (i) January 15 of the year following the year in which the Director leaves the Board or (ii) six months following the date on which the Director leaves the Board. Does not include 3,199 share units credited under the Prior Directors’ Plan, which are subject to the achievement of performance goals.

 

⁷ Does not include 2,917 share units deferred under the Directors’ Plan, which are settled in cash on the later of (i) January 15 of the year following the year in which the Director leaves the Board or (ii) six months following the date on which the Director leaves the Board.

 

⁸ Includes 520 shares held by Mr. McHenry’s grandchildren. Does not include 19,939 share units deferred under the Directors’ Plan, which are settled in cash on the later of (i) January 15 of the year following the year in which the Director leaves the Board or (ii) six months following the date on which the Director leaves the Board. Does not include 3,199 share units credited under the Prior Directors’ Plan, which are subject to the achievement of performance goals.

 

⁹ Does not include 34,764 share units deferred under the Directors’ Plan, which are settled in cash on the later of (i) January 15 of the year following the year in which the Director leaves the Board or (ii) six months following the date on which the Director leaves the Board. Does not include

3,199 share units credited under the Prior Directors’ Plan, which are subject to the achievement of performance goals.

 

¹⁰ Includes 29,698 shares held by a trust of which Mr. Robinson is a co-trustee. Does not include 1,580,000 shares held by a trust of which Mr. Robinson is a beneficiary with no voting or investment power. Does not include 34,534 share units deferred under the Directors’ Plan, which are settled in cash on the later of (i) January 15 of the year following the year in which the Director leaves the Board or (ii) six months following the date on which the Director leaves the Board. Does not include 3,199 share units credited under the Prior Directors’ Plan, which are subject to the achievement of performance goals.

 

¹¹ Includes 22,000 shares held by a trust of which Mr. Ueberroth is one of two trustees and a beneficiary, 10,000 shares held by his wife and 8,000 shares held by a foundation of which he is one of six directors. Does not include 44,502 share units deferred under the Directors’ Plan, which are settled in cash on the later of (i) January 15 of the year following the year in which the Director leaves the Board or (ii) six months following the date on which the Director leaves the Board. Does not include 3,199 share units credited under the Prior Directors’ Plan, which are subject to the achievement of performance goals.

 

¹² Includes 83,880,786 shares held by four foundations of which Mr. Williams is, in all cases, one of five trustees, and 15,786,700 shares held by a foundation of which he is one of three trustees. Does not include 58,376 share units deferred under the Directors’ Plan, which are settled in cash on the later of (i) January 15 of the year following the year in which the Director leaves the Board or (ii) six months following the date on which the Director leaves the Board. Does not include 3,199 share units credited under the Prior Directors’ Plan, which are subject to the achievement of performance goals.

 

¹³ Includes 30,104 shares credited to Mr. Kent’s accounts under The Coca-Cola Company Thrift & Investment Plan (the “Thrift Plan”), 97,387 shares of restricted stock, 50,000 shares that are subject to performance criteria and 1,121,526 shares that may be acquired upon the exercise of options, which are presently exercisable or that will become exercisable on or before April 23, 2010. Does not include 9,280 share units credited to his account under The Coca-Cola Company Supplemental Thrift Plan (the “Supplemental Thrift Plan”), which are settled in cash after retirement.

 

¹⁴ Includes 6,961 shares credited to Mr. Cummings’ accounts under the Thrift Plan, 83,607 shares of restricted stock, and 989,852 shares that may be acquired upon the exercise of options, which are presently exercisable or that will become exercisable on or before April 23, 2010. Does not include 6,939 share units credited to his account under the Supplemental Thrift Plan, which are settled in cash after retirement.

 

¹⁵ Includes 8,317 shares credited to Mr. Fayard’s accounts under the Thrift Plan, 107,217 shares of restricted stock, 50,000 shares that are subject to performance criteria, and 1,451,471 shares that may be acquired upon the exercise of options, which are presently exercisable or that will become exercisable on or before April 23, 2010. Does not include 9,985 share units credited to his account under the Supplemental Thrift Plan, which are settled in cash after retirement.

 

¹⁶ Includes 82,125 shares of restricted stock, 50,000 shares that are subject to performance criteria, and 705,261 shares that may be acquired upon the exercise of options, which are presently exercisable or that will become exercisable on or before April 23, 2010. Does not include 5,837 share

units credited to Mr. Finan’s account under The Coca-Cola Export Corporation International Thrift Plan (the “International Thrift Plan”), which are settled in cash after retirement.

 

¹⁷ Includes 103,116 shares held by a trust in which Mr. Reyes has an indirect beneficial interest. Also includes 1,109,043 shares that may be acquired upon the exercise of options, which are presently exercisable or that will become exercisable on or before April 23, 2010. Does not include 88,050 unvested restricted stock units, which will be settled in shares upon vesting, and 822 share units credited to Mr. Reyes’ account under the International Thrift Plan, which are settled in cash after retirement.

 

¹⁸ Includes 574,847 shares of restricted stock, 184,000 shares that are subject to performance criteria, 8,923,642 shares that may be acquired upon the exercise of options, which are presently exercisable or that will become exercisable on or before April 23, 2010 and 95,589 shares credited to accounts under the Thrift Plan. Does not include 315,938 share units deferred under the Directors’ Plan, 32,798 share units credited under the Prior Directors’ Plan which are subject to the achievement of performance goals, 248,535 unvested restricted stock units, which will be settled in shares upon vesting, 16,223 share units credited to accounts under the International Thrift Plan and 50,265 share units credited to accounts under the Supplemental Thrift Plan.

 

¹⁹ Share units credited under the Directors’ Plan, the Prior Directors’ Plan, the International Thrift Plan and the Supplemental Thrift Plan are not included as outstanding shares in calculating these percentages. Unvested restricted stock units, which will be settled in shares upon vesting, also are not included.

 

Principal Shareowners

 

Set forth in the table below is information about the number of shares held by persons we know to be the beneficial owners of more than 5% of the issued and outstanding Common Stock.

 

 

¹ Berkshire Hathaway, a diversified holding company, has informed the Company that, as of December 31, 2009, it held an aggregate of 200,000,000 shares of Common Stock through subsidiaries.

 

² The information is based on a Schedule 13G filed by BlackRock, Inc. with the SEC on January 29, 2010 reporting beneficial ownership as of December 31, 2009. BlackRock, Inc. reported that it has sole voting and dispositive power with respect to these shares of Common Stock.

 

³ The ownership percentages set forth in this column are based on the Company’s outstanding shares of Common Stock on February 22, 2010 and the assumption that each of the principal

shareowners continued to own the number of shares reflected in the table above on February 22, 2010.

 

Executive Officers, Directors and certain persons who own more than 10% of the outstanding shares of Common Stock are required by Section 16(a) of the 1934 Act and related regulations:

 

 

We received written representations from each such person who did not file an annual statement on Form 5 with the SEC that no Form 5 was due. Based on our review of the reports and representations, we believe that all Section 16(a) reports were filed timely in 2009, except one. On February 12, 2010, one late Form 4 was filed with respect to the September 29, 2009 sale of 1,902 shares of Common Stock held by a trust where Mr. Robinson, a Director, serves as co-trustee with Wachovia Bank N.A.

 

Overview

 

Our compensation programs are designed to reward employees for producing sustainable growth for our shareowners and to attract and retain world-class talent. Most compensation for senior executives is tied to the Company’s performance and, therefore, is not guaranteed. If the Company or the executive does not perform, executives may receive only a fraction of their total direct compensation.

 

In 2009, the Company continued to deliver solid operating performance in line with our long-term growth targets despite global macroeconomic challenges. Specifically, in 2009, the Company achieved:

 

 

In addition, the Company’s total return to shareowners, reflecting stock price appreciation and dividends, was approximately 30%, which was higher than the average total shareowner return of the Dow Jones Industrial Average companies.

 

The Company’s performance was reflected in elements of compensation earned or awarded to executives in 2009 as follows:

 

 

Our Compensation Philosophy and Risk Considerations

 

Philosophy

 

Our compensation philosophy is to drive and support the Company’s business goals as set forth in the Company’s 2020 Vision, by paying for measurable performance and achievement of approved

individual goals. The 2020 Vision – produced based on collective input from bottlers, associates and other key stakeholders – is an action plan that sets forth a common set of strategies guiding the Coca-Cola system that we believe are essential in order for us to succeed in this changing environment over the next decade.

 

Awards are made with due consideration to balancing risk and reward. We design compensation programs to:

 

 

We seek to provide the highest performing employees with the highest rewards. Executives are encouraged to meet both business goals and their personal goals, such as developing talent, achieving diversity, and personal skills development.

 

Risk Considerations

 

The Compensation Committee reviews the risks and rewards associated with the Company’s compensation programs. The Compensation Committee designs compensation programs with features that mitigate risk without diminishing the incentive nature of the compensation. We believe our programs encourage and reward prudent business judgment and appropriate risk-taking over the long term. With respect to specific elements of compensation:

 

 

 

 

 

 

Management and the Compensation Committee evaluate regularly the risks involved with all compensation programs globally and do not believe any of the Company’s compensation programs create risks that are reasonably likely to pose a material adverse impact to the Company.

What We Pay and Why: Elements of Compensation

 

Total direct compensation is comprised of base salary, annual incentive and long-term equity compensation. When we evaluate the market competitiveness of executive pay practices, we consider total direct compensation. Each element is intended to encourage and foster the following results and behaviors:

 

 

Base Salary

 

We pay base salary to attract talented executives and to provide a fixed base of cash compensation. This generally comprises 15-20% of total direct compensation for executives and it is usually a smaller percentage for the highest level executives. Since several other elements of compensation are driven by base salary, the Compensation Committee is careful to set the appropriate level of base salary.

 

For each salaried position in the Company, including the Named Executive Officers, we assign a job grade. Each job grade has a salary range. The salary range is informed by a survey of our peer group’s (as set forth beginning on page 56) pay practices, noting the 50^th, 60^th and 75^th percentiles. The salary range may be narrowed or broadened for a particular job grade based on the various jobs within the job grade. The salary range also may be broadened if necessary to facilitate the movement of senior executive talent around the globe.

These ranges are used as guidelines in determining individual salaries. Then, base salaries for Named Executive Officers are individually determined by the Compensation Committee within their salary range after consideration of various factors. The salary is set by considering:

 

 

Fairness in this context means ensuring that employees with similar responsibilities, experience and historical performance are rewarded comparably. We do not set the base salary of any employee, including any Named Executive Officer, at a certain multiple of the salary of another employee.

 

Finally, a review is conducted by comparing the recommended salary to a reference point. We do not target a specific percentile of our peer group’s pay for any job. The reference point is typically the midpoint of the range for the job grade and job position. This reference point is determined by evaluating a number of factors including an analysis of competitive pay for all jobs within each job grade, fairness, and a comparison of the reference point for each job grade to ensure a logical progression from grade to grade. The reference point is used for the Compensation Committee to see where in the range the recommended base pay falls and to evaluate market competitiveness.

 

There are three situations that may warrant an adjustment to base pay: annual merit increases, promotions or changes in role, and market adjustments.

 

Annual merit increases.  Senior executives did not receive merit increases in 2009 based on the Compensation Committee’s evaluation of the global economic environment at the time. Merit increases for senior executives have been approved for 2010, effective April 1, based on the Compensation Committee’s review of market data and the solid performance of the Company. Individual increases are determined after a case-by-case evaluation by the employee’s manager. While all individuals are reviewed annually, not all individuals receive an increase. Any adjustments take into account the individual’s performance, responsibilities, and experience, as well as fairness and external market practices. These increases generally are awarded based on a pre-established budget approved by the Compensation Committee.

 

Mr. Kent did not receive a salary increase for 2010. The Committee discussed Mr. Kent’s base pay in light of his strong performance. Mr. Kent’s base pay is competitive from a market perspective when compared with the data from the peer group. The Committee determined not to increase Mr. Kent’s base pay at this time and instead focus on variable rewards related to performance.

 

Promotions or changes in role.  We also may recommend a salary increase to recognize an increase in responsibilities resulting from a change in an employee’s role or a promotion to a new position. Increases are not guaranteed for a promotion or change in role. No increases were awarded to Named Executive Officers in 2009 based on promotions or changes in role.

 

Market adjustments.  Market adjustments are awarded to individuals who are performing successfully when we recognize a significant gap between the market data and the individuals’ base salaries. These gaps can be driven by inflation or by scarce supply of talent for a particular role. In general, market adjustments are determined as part of the annual merit review process and are not automatic. No Named Executive Officers received market adjustments in 2009.

Annual Incentive

 

The Company pays annual incentives to drive the achievement of key business results and to recognize individuals based on their contributions to those results. The annual incentive generally comprises 15-20% of total direct compensation for executives. The Compensation Committee recognizes that short-term results against defined performance measures contribute directly to achieving long-term goals.

 

Annual incentives are awarded under the Company’s Performance Incentive Plan. As discussed in the Company’s 2009 Definitive Proxy Statement, the business performance factors used in prior years were competitively sensitive. In order to protect competitively-sensitive information from disclosure and to ensure tax deductibility of the payments, for 2009, the formula was redesigned for executive officers. For these reasons, the business performance factors used for executive officers are different than those used for the general population of eligible employees. The Compensation Committee approved the same plan design for executive officers for 2010.

 

Annual Performance Incentive Plan Formula.  For the Named Executive Officers for 2009, the formula was as follows:

 

 

 

The formula is designed to yield the maximum payment that may be awarded to a Named Executive Officer. Once the maximum amount is determined, the Compensation Committee may use its discretion to pay any amount, from zero to the maximum determined by the formula, to each Named Executive Officer.

 

Annual Performance Incentive Plan Payouts.  The following table summarizes the annual Performance Incentive Plan payouts, showing the target percentages, the maximum plan payment, the range of potential payouts based on business results, and the actual amounts awarded.

 

 

Business Performance Factor.  For Named Executive Officers, the measures and targets used for the Business Performance Factor were determined in February 2009. For Messrs. Kent, Cummings, Fayard, and Finan, the measures were (i) overall Company volume growth and (ii) comparable currency neutral earnings per share growth, each weighted equally. For Mr. Reyes, who leads the Latin America Group, 50% of the Business Performance Factor was based on total Company performance (identical to the other Named Executive Officers) and 50% was based on Latin America Group volume and profit results.

These factors were selected because they are part of the Company’s long-term growth model and together contribute to sustainable growth and improved productivity. Earnings per share growth is calculated after adjusting for the impact of currency and certain other items affecting comparability. We believe these adjustments are appropriate because they are consistent with how the Company measures performance against its long-term growth targets and they ensure a more consistent comparison against the prior year.

 

The specific measures comprising the Business Performance Factor for overall Company performance for 2009 were as follows:

 

 

The factor for unit case volume growth is added to the factor for earnings per share growth to determine the total Business Performance Factor. Results are rounded to the nearest tenth of a percentage point and the factor is extrapolated between each level on a linear basis. The results in 2009 for overall Company performance were as follows:

 

 

As noted above, earnings per share growth is adjusted for currency and certain other items affecting comparability. This number, therefore, differs from earnings per share growth as reported using U.S. Generally Accepted Accounting Principles. The impact of currency was the most significant difference. Earnings per share was also adjusted for non-recurring items including asset impairments/restructuring, productivity initiatives, equity investees, transaction gain and certain tax matters.

 

For Mr. Reyes, the total business performance factor was 215%, reflecting both the total Company business performance and the Latin America Group business performance. The specific targets for the Latin America Group are not disclosed because they relate to a specific geography and disclosure would result in competitive harm. The targets are set to be challenging but reasonably attainable. The maximum award is intended to be difficult to achieve.

 

Quantitative and Qualitative Factors.  No Named Executive Officer received the maximum award permitted under the formula. In utilizing its discretion to determine the amount of each Named Executive Officer’s actual award, the Compensation Committee considered a number of quantitative and qualitative factors, including, but not limited to, global volume and value share gains, share of sales, currency gains and losses, total return to shareowners, including share price appreciation and

dividends, impact of significant acquisitions and innovations, and internal equity and fairness. In addition, the Compensation Committee considered performance against individual goals as follows:

 

 

Long-Term Equity Compensation

 

General.  We provide performance-based long-term equity compensation to our senior executives, including the Named Executive Officers, to reward employees for overall long-term Company performance thereby tying the interests of these individuals directly to the interests of our shareowners. We also believe that long-term equity compensation is an important retention tool. Long-term equity compensation generally comprises 60-70% of total direct compensation for executives.

 

The Compensation Committee set ranges for long-term equity compensation for each job within a job grade using the same process it uses to set the base salary ranges, as described above. This

includes surveying our peer group’s (as set forth beginning on page 56) equity compensation practices, and noting the 50^th, 60^th and 75^th percentiles to gain an understanding of the range of competitive pay. There is no specific target within the ranges for any individual. The actual value of long-term equity compensation within the range awarded to each employee, including Named Executive Officers, is individually determined after considering:

 

 

After a value is determined using this process, a review is conducted by comparing the recommended amount to a reference point. The reference point is typically the midpoint of the range for the job grade and job position. This reference point is used by the Compensation Committee to see where in the range the recommended long-term equity value falls and to validate the market competitiveness of long-term equity compensation. The value awarded to a particular senior executive may be higher or lower than this reference point. For 2009 long-term equity compensation, actual awards to Named Executive Officers were higher than the reference point due to strong Company and individual performance.

 

In recent years, we had awarded long-term equity compensation to senior executives through a combination of 60% stock options and 40% performance share units. In 2009, due to the volatility and uncertainty in the world economy, it was exceptionally difficult to set reliable three-year economic profit targets. We therefore decided not to award performance share units as part of the annual long-term equity compensation awards. Stock options comprised 100% of the long-term equity award to all eligible employees in 2009. For 2010, because it is possible to set three-year economic profit targets, the Company has returned to using a mix of 60% stock options and 40% performance share units. The Compensation Committee believes that a mix of different equity vehicles is appropriate. The value of both types of equity is tied to the Company’s stock price. The value of options is tied directly to any increase in value recognized by shareowners while performance share units also focus executives on the sustained long-term performance of the Company.

 

The threshold, target and maximum economic profit growth targets for the 2010–2012 performance share units are 5.7%, 8.7% and 10.7%, respectively, and were set after taking into consideration the Company’s three-year business plan. Economic profit growth was chosen as the performance measure because it is an important measure of the Company’s long-term health and is historically correlated with stock price over time. Economic profit is our net operating profit after tax less the cost of our capital used in our business. A three-year performance period was selected to mirror our long-term business planning cycle. Additional details concerning our long-term equity compensation plans can be found beginning on page 91.

 

Long-term equity awards play no role in the calculation of retirement benefits.

 

Stock Options.  We believe stock options are performance-based because the exercise price is no less than the fair market value of the Common Stock on the date the option is granted. Therefore, the employee will recognize value only if the market value of the Common Stock and the investment

of our shareowners appreciate over time. When the stock price does not increase, the stock options do not have value.

 

In 2009, we granted stock options to approximately 4,700 employees, including all Named Executive Officers. There is no relationship between the timing of our equity award grants and our release of material, non-public information. The options are granted with an exercise price no less than the average of the high and low prices of the Common Stock on the date of grant. The Company believes that the methodology used in its plans, the average of the high and low prices of the Common Stock on the grant date, is more representative of the fair market value than the closing market price. This methodology has been used by the Company for over 20 years. The laws of certain foreign jurisdictions require additional restrictions on the calculation of the option price. Except to comply with foreign regulations, including tax regulations, the grant date is the date the Compensation Committee takes action. We do not, and have not, backdated or repriced options.

 

Performance Share Units for Prior Years.  Performance share units provide an opportunity for employees to receive restricted stock if a performance criterion is met for a three-year performance period. The stock is generally restricted for one or two additional years. Dividends are paid only once the performance criterion is met, except in the case of retirement for awards prior to 2008. The following describes the status of all outstanding performance share units.

 

¹ Participants receive 50% (for the 2008–2010 and 2007–2009 periods) or 60% (for the 2006–2008 period) of the award at the threshold level, 100% of the award at the target level, and 150% of the

award at the maximum level. Results are rounded and the number of shares is extrapolated on a linear basis between performance levels.

 

Restricted Stock.  Awards of restricted stock are generally limited to our senior executives. The awards may be performance-based or time-based. No Named Executive Officer was awarded restricted stock in 2009.

 

How We Make Compensation Decisions

 

Decision-Making Process and Role of Executive Officers

 

The following describes how compensation decisions are made for the Named Executive Officers, including the role of Executive Officers:

 

 

 

 

The Chairman and Chief Executive Officer considers performance and makes individual recommendations to the Compensation Committee for other senior executives on base salary, annual incentive, and long-term equity compensation. The Compensation Committee reviews, discusses and modifies as appropriate these compensation recommendations.

 

 

The Compensation Committee also approves recommendations for other senior executives.

 

 

Peer Group

 

We use a peer group of companies as a reference for determining competitive total compensation packages. For 2009 compensation, our peer group consisted of the following companies:

 

 

¹ Schering-Plough merged with Merck & Co., Inc. in 2009

 

² Wyeth was acquired by Pfizer Inc. in 2009

 

The Compensation Committee established this peer group in 2003, and reviewed it regularly thereafter. These companies were selected because we shared many distinguishing criteria, including, but not limited to, market capitalization, global operations, significant brand equity, similar distribution system challenges, and/or certain financial similarities. We also compete with these companies for executive talent in some cases. This peer group was used for compensation decisions made in 2009 and for long-term equity compensation awards made in February 2010.

 

In December 2009, the Compensation Committee reexamined the peer group and in February 2010 approved a new peer group to be used beginning with the next annual awards cycle (February 2011). The Compensation Committee also sought to reduce the number of peer group companies in line with best practices. The new peer group was selected based on the following criteria:

 

 

Each company selected met at least three of the four criteria. The new peer group companies are:

 

 

Role of the Compensation Consultant

 

Pursuant to its charter, the Compensation Committee is authorized to retain and terminate any consultant, as well as approve the consultant’s fees and other terms of retention. During 2009, the Compensation Committee engaged a representative of Towers Perrin (known as Towers Watson after merging with Watson Wyatt Worldwide effective January 1, 2010) as its independent compensation consultant to provide research, market data, survey information and design expertise in developing compensation programs for executives and equity programs for eligible employees. Towers Perrin also provided market data and recommendations around changes to the peer group of companies. In addition, this representative keeps the Compensation Committee apprised of regulatory developments and competitive practices related to executive compensation practices. This representative does not determine or recommend the exact amount or form of executive compensation for any of the Named Executive Officers. This representative generally attends meetings of the Compensation Committee, is available to participate in executive sessions and communicates directly with the Compensation Committee Chair or its members outside of meetings. The total fees paid to Towers Perrin for these services for 2009 were $107,509.

 

The Compensation Committee has a written engagement letter with Towers Perrin. Under the terms of this engagement letter:

 

 

The Compensation Committee adopted an Independence Policy for the Compensation Committee consultant in February 2008 that establishes independence requirements, including that Towers Perrin and its affiliates do not derive more than 1% of their consolidated gross revenues from the Company. The Independence Policy also requires an annual certification from Towers Perrin confirming compliance with the Compensation Committee’s Independence Policy. During 2009, Towers Perrin and its affiliates received substantially less than 1% of their consolidated gross revenues from the Company for consulting and actuarial fees. In addition, the representative

provides no other consulting services to the Company. Towers Perrin has established a firewall between the representative and other services provided by Towers Perrin to the Company.

 

Towers Perrin and Watson Wyatt, now merged as Towers Watson, provided other services to the Company in 2009. These services included benefit consulting services, employee survey support, and actuarial services. The total amount paid for services (excluding the services of the Compensation Committee consultant disclosed above) globally to Towers Perrin in 2009 was $4,173,657 and the total amount paid for services globally to Watson Wyatt was $3,346,331. Management decided to retain these firms to provide these other services. The Compensation Committee reviewed the other services provided by Towers Perrin and Watson Wyatt but did not formally approve them. These services provided in 2009 were in compliance with the Committee’s Independence Policy.

 

Additional Information

 

Contracts and Agreements

 

Generally, we have no employment contracts with our executives or employees, unless required or customary based on local law or practice. We do not have a contract with Mr. Kent, and of the other Named Executive Officers, we have a contract only with Mr. Reyes since all of our employees in Mexico have employment contracts in accordance with Mexican law.

 

Clawback Provisions

 

Most of our compensation plans and programs contain provisions that allow the Company to recapture amounts paid to employees under certain circumstances. The annual Performance Incentive Plan allows the Company to recapture any award from a participant if the amount of the award was based on achieving certain financial results that were later required to be restated due to the participant’s misconduct. In addition, all equity awards since 2004 contain provisions under which employees may be required to forfeit equity awards or profits from equity awards if they engage in certain conduct including but not limited to violating Company policies, such as the Code of Business Conduct, or competing against the Company.

 

Benefits

 

In the United States, the Named Executive Officers participate in the same benefit plans as the general employee population. International plans vary, but each Named Executive Officer receives only the benefits offered in the relevant broad-based plan. In general, benefits are designed to provide a safety net of protection against the financial catastrophes that can result from illness, disability or death, and to provide a reasonable level of retirement income based on years of service with the Company. Benefits help keep employees focused on serving the Company and not distracted by matters related to paying for health care, saving for retirement or similar issues.

 

Perquisites

 

The Company provides those perquisites that it feels are necessary to enable the Named Executive Officers to perform their responsibilities efficiently and to minimize distractions. We believe the benefit the Company receives from providing these perquisites significantly outweighs the cost to provide them.

 

The Board requires Mr. Kent to fly on the Company aircraft for business and personal use. This requirement provides security given the high visibility of the Company and its brands, maximizes his

productive time, and ensures his quick availability. Mr. Kent is personally responsible for all taxes associated with personal use. Mr. Kent’s use of a Company car and driver enhances security and productivity. Mr. Kent also is provided with a Company car and driver when in Turkey for security purposes. Mr. Reyes and his spouse each have the use of a Company car and driver for security purposes in Mexico City. Messrs. Cummings, Fayard and Finan are not provided with a Company car or driver.

 

The Company reimburses its senior executives, including the Named Executive Officers, for financial and tax planning up to $13,000 per year for Mr. Kent and up to $10,000 per year for other Named Executive Officers. This benefit is available only as a reimbursement, not as a guaranteed amount, and if not used in a year, is forfeited. The Company provides this reimbursement for three reasons. First, a significant percentage of our senior executives have dual nationalities and work or have worked outside their home country, which complicates their tax and financial situations. Second, this benefit helps to ensure they are compliant with local country laws. Third, it allows the executive to stay focused on business matters. The complexities of being a global executive were considered in offering this benefit to senior executives.

 

Mr. Finan, who is not a U.S. citizen, participates in the Company’s International Service Program. Mr. Cummings participated in the International Service Program for a portion of 2008 when he was on assignment in South Africa. Mr. Cummings, who is a U.S. citizen, ceased participating in the International Service Program upon his relocation to Atlanta in October 2008. Mr. Cummings and Mr. Finan were provided only the benefits offered to all employees eligible to participate in the International Service Program.

 

The Company does not consider security to be a perquisite. It is a necessary, sound procedure and a business necessity to protect our employees given the global visibility of our brands and the extensive locations where we operate. As described further on page 70, the Company provides personal security when circumstances warrant.

 

For a more detailed discussion of these perquisites and their value, see the discussion of All Other Compensation beginning on page 68.

 

Post-Termination Compensation

 

Retirement and Savings Plans

 

We do not have special retirement or savings plans for any Named Executive Officer. Messrs. Kent, Cummings and Fayard are eligible to participate in the Employee Retirement Plan of The Coca-Cola Company, which has been renamed The Coca-Cola Company Pension Plan as of January 1, 2010 (the “Pension Plan”) and The Coca-Cola Company Supplemental Pension Plan (the “Supplemental Pension Plan”). Substantially all of our non-union U.S. employees participate in the Pension Plan. The Pension Plan and the Supplemental Pension Plan have been redesigned effective January 1, 2010 to include a cash balance formula for future benefit accruals, with certain grandfathering and transition provisions for current employees. These changes, described in more detail beginning on page 87, apply on the same basis to all employees in these plans, including the Named Executive Officers.

 

Mr. Finan, as a non-U.S. citizen and a participant in the International Service Program, participates in The Coca-Cola Export Corporation Overseas Retirement Plan (the “Overseas Plan”). Mr. Reyes also accrues benefits under the Overseas Plan related to his prior international service.

These plans prohibit duplication of benefits and are designed to provide a career-based retirement benefit, regardless of the country where the employee worked. We have these plans as an additional means to attract and retain employees, many of whom accept international mobility as a basic precept of their employment with the Company. The retirement plans provide employees, including the Named Executive Officers, the opportunity to plan for future financial needs during retirement.

 

Mr. Reyes participates in the Coca-Cola Mexico Pension Plan (the “Mexico Plan”) along with all other Mexico-based employees and his benefit is calculated in the same manner as all other participants in the Mexico Plan.

 

These plans generally determine benefits solely on base pay and cash incentive compensation. For a more detailed discussion on the retirement plans and the accumulated benefits under these plans, see the 2009 Pension Benefits table and the accompanying narrative beginning on page 77.

 

In addition to the retirement plans, the Company provides savings plans, including a Company matching contribution, to encourage all employees to save additional funds for their retirement. The Company matching contribution is provided on the same basis to Named Executive Officers as all other participants in the plans. Messrs. Kent, Cummings and Fayard participate in the Thrift Plan and the Supplemental Thrift Plan. Mr. Finan participates in the International Thrift Plan. Mr. Reyes participates in a Mexico-based thrift plan.

 

Deferred Compensation Plan

 

We adopted The Coca-Cola Company Deferred Compensation Plan (the “Deferred Compensation Plan”) in 2002. We offer this program because it provides an opportunity for the U.S. based participants, including the eligible Named Executive Officers, to save for future financial needs at little cost to the Company. The Deferred Compensation Plan essentially operates as an uninsured, tax-advantaged personal savings account of the employee, administered by the Company, and contributes to the Company’s attractiveness as an employer. The Company may hedge the liability, invest the cash retained and/or use the cash in its business. The Deferred Compensation Plan offers a range of deemed investment options, including various equity funds, a bond fund, and a money market fund. The categories of investment options are similar to those in the Thrift & Investment Plan, although fewer choices are allowed in the Deferred Compensation Plan. The Deferred Compensation Plan does not guarantee a return or provide for above-market preferential earnings.

 

For a more detailed discussion of the Deferred Compensation Plan, see the 2009 Nonqualified Deferred Compensation table and accompanying narrative beginning on page 79.

 

Severance Plan

 

The Coca-Cola Company Severance Pay Plan (the “Severance Plan”) for its U.S. based employees and participants in the International Service Program pays benefits in specific circumstances such as when an employee’s position is eliminated. All non-union, non-manufacturing U.S. employees, including the U.S. based Named Executive Officers, are covered by the Severance Plan. Payments are based on job grade level and/or length of service. For the U.S. based Named Executive Officers, the maximum payment under the Severance Plan is two times base salary. This amount was determined to be appropriate for senior employees, including the Named Executive Officers, to assist in transition to new employment, as it may take a longer period of time for a more

senior executive to find comparable employment. Mr. Reyes’ separation arrangements are governed by Mexican law. The Company has no separate termination arrangements with any of the Named Executive Officers. For a more detailed discussion of the Severance Plan, see page 92 and Payments on Termination or Change in Control beginning on page 80.

 

Change in Control

 

The Company has change in control provisions in its annual Performance Incentive Plan, its equity compensation plans and its retirement plans. These provisions apply equally to all plan participants, including the Named Executive Officers. The provisions require that the event that triggers the change in control, such as an acquisition, actually be completed. The Board can determine prior to the potential change in control that no change in control will be deemed to have occurred.

 

We do not provide a tax gross-up for any change in control situation. We have no additional change in control agreements or arrangements with any of the Named Executive Officers.

 

The change in control provisions were adopted to ensure that, in the event the Company is considering a change in control transaction, the employees involved in considering the transaction will not be tempted to act in their own interests rather than the interests of the shareowners in general. Thus, the provisions are designed to make any transaction neutral to the employees’ economic interests. Employees likely would not be in a position to influence the Company’s performance after a change in control and might not be in a position to earn their incentive awards or vest in their equity awards. Therefore, the Company believes that the change in control provisions are fair and protect shareowner value.

 

The annual incentive plan provides that the annual incentive be paid at target (and in no event above target) upon a change in control, prorated for the actual number of months worked in the year.

 

Generally, our equity compensation plans provide that restricted stock and stock options vest in full upon a change in control. Beginning in 2008, the performance share units contain a provision that provides that participants are entitled to receive the target number of shares upon a change in control. However, if restricted stock has been awarded after the performance goals have been met, any additional service-based restrictions will lapse upon a change in control.

 

The Company’s retirement plans also contain change in control provisions that affect all participants equally, including the Named Executive Officers. The employee must actually leave the Company within two years of a change in control in order to receive this benefit. There are no additional credited years of service. Under the Pension Plan and the Supplemental Pension Plan, for benefits accrued under the defined benefit formula, upon a change in control, the earliest retirement age is reduced from age 55 with ten years of service to age 50 with ten years of service. In addition, employees terminating prior to earliest retirement age will receive an early retirement subsidy calculated as if they had reached earliest retirement age. A change in control has no effect on the cash balance portion of the Pension Plan.

 

The Overseas Plan contains the same provision as the Pension Plan and, in addition, normal retirement age is reduced to age 60, resulting in a larger retirement benefit. The Company believes these provisions provide some security with respect to pension benefits in the event of a change in control.

For a more detailed discussion of change in control arrangements, see Payments on Termination or Change in Control beginning on page 80.

 

Tax Compliance Policy

 

Section 162(m) of the Tax Code limits deductibility of certain compensation for the chief executive officer and the three other executive officers (other than the chief financial officer) who are highest paid and employed at year-end (“Covered Employees”) to $1 million per year. If certain conditions are met, performance-based compensation may be excluded from this limitation. While we do not design our compensation programs solely for tax purposes, we do design our plans to be tax efficient for the Company where possible and where the design does not add a layer of complexity to the plans or their administration. Our shareowner-approved incentive plans, stock option plans and certain awards under The Coca-Cola Company 1989 Restricted Stock Award Plan (the “1989 Restricted Stock Plan”) meet the conditions necessary for deductibility. However, if following the requirements of Section 162(m) would not be in the interests of shareowners, the Compensation Committee may exercise discretion to pay nondeductible compensation.

 

Tax and Accounting Implications of Each Form of Compensation

 

 

Ownership Guidelines

 

For many years, the Company has had share ownership guidelines for senior executives, including the Named Executive Officers. The ownership guidelines are:

 

 

The Chairman of the Board and Chief Executive Officer and the Compensation Committee monitor compliance annually. Each executive has five years from the date he or she becomes a senior executive to meet his or her target. If an executive is promoted and the target is increased, an additional two-year period is provided to meet the target. Messrs. Cummings, Fayard, Finan and Reyes have met or exceeded their share ownership targets. Mr. Kent’s share ownership target was increased from 5 to 8 times base salary in 2008 when he became Chief Executive Officer of the Company. Mr. Kent has achieved 79% of his current share ownership target. Per program guidelines, he has until 2014 to achieve his share ownership objective. Shares counted toward the guidelines include: