What's "Reasonable"? What's "Fair"?

I wrote a post a few years ago asking a "simple" question: What's a "fair price"? As I wrote:

The starting point of business ethics is contractual: I agree to provide a fair product (or service), and you agree to pay me a fair price.

After that, the arguments start.

What's a "fair" price?....And what's a "fair" product?

Here's another simple question for you: What's "reasonable reward"?

In many companies, in addition to the stated compensation, senior managers are rewarded with bonuses and/or stock options for excellent performance. Usually these are tied to some standard metrics (the company's stock price has reached this new high; sales are increasing by that percentage; etc.).

Today's "DealBook" in the New York Times carries a column by Andrew Ross Sorkin that asks the question about what's "reasonable". It doesn't give any solid answers, but maybe some shareholders will speak up.

A money manager was reviewing the Coca-Cola annual report and proxy statement (his fund controls more than 2 million shares of the stock) when he came across some surprising (to him) numbers:

Doing a little quick math, the analyst determined that the company planned to award stock worth about $13 billion to its senior managers over the next four years, based on the company’s current stock price. Getting out his calculator, the analyst estimated that between the proposed compensation plan and a previous plan, the company had allocated as much as $24 billion toward stock-based rewards for its senior people.

He was so surprised by the numbers that he sent a letter, released publicly, to Coca-Cola's board and shareholders. In it, he wrote:

We can find no reasonable basis for gifting management 14.2 percent of the share capital of Coca-Cola, worth $24 billion at today’s share price. No matter how well a management team performs, it is unfathomable that they would require such astronomical sums of money to provide motivation. This compensation plan appears to place the economic well-being of management far ahead of the interests of the company’s owners.

Coke's response was that this analysis was "misinformed and does not reflect the facts." Moreover, the company said, the proposed program "is not limited to senior executives, but extends to a large group of employees and is important for incentive and retention. Approximately 6,400 were eligible in 2013. The amount of long-term equity compensation awards granted each year are within industry norms."

To this claim, Mr. Sorkin notes wryly, "If that is the case, each of Coca-Cola’s managers eligible would be entitled to, on average, a little more than $2 million each. Of course, the bonus money won’t be doled out equally."

It's almost certain that the numbers are at least somewhat exaggerated. And there are specific performance targets that must be met, or the shares are not distributed. 

So, Mr. Sorkin asked the analyst, how much should Coke's senior management be paid? His reply: "I don’t know the answer. But I know $24 billion is excessive."

What's your definition of "reasonable reward"?