Coca-Cola Co. has changed the way it rewards its directors, with board members only being paid if the company's meets performance targets.

The US soft drinks giant said yesterday (5 April) that it had adopted a scheme where directors would get paid a flat fee of US$175,000 if the company met its three-year target of 8% annual growth in earnings per share.

Should the performance target not be met, Coke has said that all share units and hypothetical dividends would be forfeited in their entirety.

Under the previous compensation plan, Coke's board of directors received an annual retainer fee of $125,000 and additional fees for chairing board committees and attending board and committee meetings. All these fees have been eliminated under the new plan but there is an option to make a one-time cash award to any new director.
"This all-or-nothing approach to board compensation aligns the interests of our directors with those of shareowners more closely than any other compensation formula I have seen," said Neville Isdell, Coke's chairman and CEO.

The company will use its 2005 earnings per share of US$2.17 as the base for this percentage growth calculation over the three-year period.
"Shareowners understand that they are only rewarded when the company performs," said James Robinson, chairman of the company's committee on directors and corporate governance.

"The Coca-Cola Company board will hold itself to the same standard. As the company performs well, directors will be appropriately compensated."