Sisters on a Mission at Coke

The Benedictine Sisters at a Texas monastery want more influence over executive compensation at the beverage giant

by Moira Herbst

The Benedictine Sisters of the St. Scholastica Monastery, 30 miles northwest of San Antonio, stay plenty busy. The 18 sisters, ages 50 to 80, follow the teachings of St. Benedict, of course, complete with regular prayer. They also operate a retreat center for church groups, a Head Start program for low-income families, and a health facility where seniors can do water aerobics and tai chi.

In their spare time, they take on the titans of American business. The effort is led by Sister Susan Mika, a soft-spoken, articulate woman in her 50s, who for 25 years has been director of corporate responsibility at St. Scholastica. As the monastery invests its assets in U.S. companies, the nuns act as something of a conscience for corporations. They say the spirit of St. Benedict's legacy of stewardship to the community and the earth drives them to file dozens of shareholder resolutions every year on a wide variety of issues, from workers' wages at Alcoa (AA) to genetically modified crops at DuPont (DD). Sister Susan has traveled several times to the U.S.-Mexican border to see the working conditions at American companies operating in special Mexican economic zones.

This year as proxy season begins, Sister Susan and her order are going after Coca-Cola (KO). They're pressing for shareholders to get a direct vote to ratify the compensation of the company's top executives, including Chief Executive E. Neville Isdell. The vote, which is known as "say on pay," would be nonbinding. But it would give shareholders the chance to vote on an advisory resolution every year to express approval or disapproval of Coke executives' pay.

Unusual Group of Activists

"CEO compensation has in many cases been excessive," says Sister Susan. "We stepped up to file this resolution with Coke so that the board of directors and compensation committee will understand the importance of this issue both in terms of social responsibility and good business practice." Coke's shareholders will vote on the nuns' proposal on Apr. 18, at the company's annual meeting in Wilmington, Del.

Coca-Cola's board opposes the proposal. "We believe that more effective mechanisms are already available for the company's shareowners to communicate concerns to the board about compensation or other matters," the board wrote in the proxy statement. It highlighted, for example, the ability to influence pay issues through the election of directors.

Getting scolded by nuns can't be pleasant. But Coke isn't the only company facing shareholder resolutions for "say on pay" provisions. This year, a total of 60 such shareholder measures have been filed at public companies—up from seven a year ago. The proposals have been pushed by an unusual group of activists, from the Benedictine Sisters to the American Federation of State, County & Municipal Employees (AFSCME) to Walden Asset Management, a socially responsible investing firm. This week, at least three other companies face "say on pay" votes: Citigroup (C), U.S. Bancorp (USB), and Wachovia (WB).

Congress Getting Into the Act

The idea is gaining some support in Washington: Representative Barney Frank (D-Mass.), chair of the House Financial Services Committee, has introduced "say on pay" legislation that would require every public U.S. company to give shareholders a nonbinding vote on executive compensation each year. The bill is expected to go to the House for a vote this month. "Excessive executive pay has been proven to have a significant impact on company profits and shareholder returns, and now the owners of the company will be given a voice on executive compensation plans," said Frank in a statement.