Since the recent news broke that Coca-Cola's (NYSE:KO) chairman and CEO, Douglas Daft, plans to retire later this year, Coke's board has been served the role of filling Daft's shoes.
Perhaps more interesting than the task facing the board, though, is the composition of it. While few would be surprised to hear of the -- gasp! --clubby nature of corporate boards, Coca-Cola's shows just how incestuous the relationships at some boards can be.
As the Atlanta Journal-Constitution recently observed, Coke's 16-member board is dominated by three directors: Berkshire Hathaway's (NYSE:BRK.A) chairman and CEO Warren Buffett (Berkshire is Coke's largest shareholder); investment banking firm Allen & Co.'s president and CEO, Herbert Allen; and Donald Keough, a legendary Coke exec who returned to the board upon news of Daft's departure.
Among Coke's other directors is InterActiveCorp's (NASDAQ:IACI) chairman and CEO, Barry Diller. In addition to being a director at Coke, Diller is a director at the Washington Post Co. (NYSE:WPO), another company that counts Berkshire Hathaway as its largest shareholder. Fellow Coke director Donald Keough joins Diller on the Post's board also.
Keough also happens to be a director at Diller's InterActiveCorp and sits on the board of Buffett's Berkshire Hathaway. As if Keough isn't busy enough, he serves as chairman of Coke director Herbert Allen's Allen & Co. (Whew. Still following along?)
The fun doesn't end there. Keough was formerly a director of HomeDepot (NYSE:HD), whose current president and CEO, Bob Nardelli, also serves on the Coke board. Nardelli hails from General Electric (NYSE:GE), whose board includes former Georgia senator and Coke board member, Sam Nunn. Nunn happens to be co-chairman and CEO of the Nuclear Threat Initiative, a group Warren Buffett personally pledged $2.5 million to in 2002 to reduce the risk of weapons of mass destruction.
James Robinson is also fortunate enough to call himself a Coke director. Prior to founding a venture capital firm, Robinson served as American Express' (NYSE:AXP) chairman and CEO. During that time, he persuaded Buffett to become its largest shareholder, and today, Berkshire holds close to 12% of American Express's stock.
Finally, SunTrust Banks' (NYSE:STI) (which is Coca-Cola's second-largest shareholder) former CEO James Williams has a seat on Coke's board as well. Likewise, Coke's Doug Daft sits on SunTrust's board. SunTrust's sixth-largest shareholder is -- surprise, surprise -- Berkshire Hathaway. (It all comes back to Buffett, doesn't it?)
This is not to say there is anything wrong or deceptive happening at the Coke board. Quite the contrary. Any board would be privileged to call Warren Buffett -- a paragon of ethical behavior -- a director. As for the web of relationships, they're all detailed in SEC filings and on Coke's website.
Instead, it goes to show that even top-notch boards might raise a few eyebrows when it comes to "independence," and that's ok. As Warren Buffett said, "It is certainly true that it is desirable to have directors who think and speak independently -- but they must also be business-savvy, interested and shareholder-oriented." With directors like Buffett and Keough, Coca-Cola shareholders can rest assured their board is the real thing.
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Matt Logan is a Motley Fool contributor. He owns shares in Berkshire Hathaway.
