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Chapter 4. Jets, Parachutes, and Stealth... > Red Flag 5: If a Company Rewards Fai...

Red Flag 5: If a Company Rewards Failure by Lowering Compensation-Linked Targets

It isn’t only options that can be a moving target. In April 2001, Coca-Cola Co.’s board gave its boss a break—the kind that makes some shareholders steam. It lowered CEO Douglas Daft’s performance targets for earnings growth that had been set only about six months earlier. The shifting of the goalposts followed the company’s admission that it wouldn’t reach its original targets. That meant Daft would get one million shares even if earnings growth didn’t reach the earlier goals. Coca-Cola’s compensation committee said in the company’s annual proxy statement that the change was merely a realignment with the company’s new targets, and while heaping praise on Daft, it said that he will still only achieve significant wealth from the incentive program “in the presence of significant performance.”


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