FORTUNE — Over the past three years, Alexis Herman, a Coca-Cola director and a member of the drink company’s executive compensation committee, has received $2.9 million for her board work. Not all of it’s from Coke (KO).
Herman is also on the compensation committees of engine maker Cummins (CMI) and utility Entergy (ETR). She’s also on the board at casino company MGM Resorts International (MGM). During that time, Herman has approved payouts of nearly $61 million for Coke CEO Muhtar Kent for three years of work. That might sound excessive, but not apparently to Herman, who collects around 20 times the annual salary of the average American for her part-time work.
Herman isn’t the only one on Coke’s board doing double-duty. Maria Elena Lagomasino, the chair of Coke’s compensation committee, is also the chair of the comp committee at cosmetics company Avon (AVP). Helene Gayle, another member of Coke’s comp committee, has the same job on the board of Colgate-Palmolive (CL).
Herman, a former U.S. Secretary of Labor under the Clinton Administration, has spent most of her career in politics. Despite her many appointments advising on compensation, Herman has never worked as a pay consultant or even in the human resources industry. Neither has Lagomasino or Gayle.
Coke has recently come under fire for what it pays its top executives. One of the company’s largest shareholders, David Winters, fought to strike down a stock option plan that may greatly increase how much Coke’s top executives are paid. Warren Buffett called the plan excessive, but declined to vote against it. Coke’s plan passed, but yes votes represented less than half of the company’s outstanding shares, after including abstentions and nonvotes.
According to a report in the Wall Street Journal, Coke is considering altering the controversial plan amid pressure from Buffett. A Coke spokesperson says that the plan “already offers maximum flexibility,” but declined to say whether that implied it would not be changed in the end. Over the past few weeks, even after criticism, Coke’s board members, including Lagomasino, have called the stock plan fair. The Coke spokesperson says its current compensation plan reflects changes based on investor feedback. What’s more, he said Coke’s board is regularly in touch with investors both big and small and open to feedback on all issues, including compensation.
Herman did not return requests for comment. Lagomasino referred a Fortune reporter to a Coke spokesperson.
Buffett recently told Fortune that outside shareholders have little hope of changing the culture of excessive pay in corporate America. And he said that most boards rubber stamp what compensation committees decide. So, why haven’t compensation committees stemmed ever-rising CEO pay?
The overlapping roles that board members play on various compensation committees and the lavish paychecks they receive for such work could be part of the answer.
Coke lists a group of companies in its proxy statement that it uses as outside comparisons to determine if its pay is out of line. On the list is Colgate-Palmolive, where Coke board member Gayle is part of the committee that sets pay. Colgate says it compares its executive pay to both Coke and Avon, which has the same compensation committee chair, Lagomasino, as Coke. And Colgate shows up as one of the companies that Avon checks against.
“When the same people are controlling pay at a number of companies, that can cause a direct ratcheting up of pay,” says Eleanor Bloxham, who heads The Value Alliance and Corporate Governance Alliance, a board education and advisory firm, and is a regular contributor to Fortune.com. “This seems like a group of people who will hand out a lot of stock.”
Avon has a stock option plan similar to the one that was approved at Coke. The main beef Winters and others had with the Coke plan was that if all the options authorized by the plan were exercised, that would increase the company’s outstanding shares by 16%. That’s nearly double the average 8.5% dilution of the stock option plans adopted by companies in 2014, according to compensation research firm ISS Corporate Services. Avon’s plan, by the same measure, would dilute existing shareholders by roughly 10%.
Ronald Allen, another member of Coke’s compensation committee, is also CEO of rent-to-own company Aaron’s (AAN). The company and Allen have recently come under attack from an activist shareholder who says Allen has mismanaged the company. Aaron’s has a stock option plan that, if fully exercised, would dole out to Allen and Aaron’s other executives nearly 14.6 million additional shares, diluting current shareholders by 20%.
The problem may be even simpler than intentional acts of corporate cronyism. Compensation committees can be swayed by their own large paychecks, or net worth, into thinking $20 million a year is justified. Allen, for instance, has made $8.2 million over the past two years at Aaron’s, a much smaller company than Coke. Also on the compensation committee is James Robinson III, who is a former CEO of American Express (AXP). During his tenure there in the 1980s, AmEx was regularly criticized for how much it paid Robinson, one of the top-paid executives in corporate America at the time. Robinson did not respond to a request for comment.