Coca-Cola Co. is overhauling its executive-compensation plan before it goes into effect next year, scaling back stock options and shifting to more cash-based performance awards.

The reversal by the world's largest beverage company--which championed the original plan at its April shareholder meeting--follows criticism from billionaire investor Warren Buffett and other Coke shareholders who called the equity plan excessive.

It also coincides with growing efforts by Chairman and Chief Executive Muhtar Kent and other board members to mollify investors impatient with Atlanta-based Coke's recent performance. Coke failed to meet its revenue growth targets last year, pulled down by weak soda sales in the U.S. and elsewhere, and could fall short again this year.

Coke said Wednesday it isn't altering long-term incentive targets for 6,500 managers and that compensation could remain similar in dollar terms, depending on the company's performance. But it will issue fewer shares to management, replacing equity awards with cash awards for all but about 1,000 managers, or a bit less than 1% of Coke's global staff.

Annual share dilution will stay below 1% under the new plan, similar to other companies, according to Coke. Executives who receive long-term equity awards will get mostly performance-based share awards, not stock options, it added. Performance-share units are a form of stock in which individuals earn shares based on performance measures.

The shift from options to performance shares has been a growing trend in recent years, according to Mark Reilly, head of the executive compensation practice for Verisight Inc., a human-resources consultancy. Coke directors, he said, "are late to the party.'' Narrowing the number of executives who qualify for equity awards also makes sense because lower-level managers have less impact on share performance, he added.

Coke's equity-compensation plan passed easily at the annual shareholder meeting in April, with 83% of votes cast in favor. But "yes'' votes represented just under half of shares outstanding, after including abstentions and non-votes. Two of the top five shareholders, State Street Global Advisors and Capital Group, voted against the plan.

Mr. Buffett, whose Berkshire Hathaway Inc. is Coke's largest shareholder, with a 9% stake, abstained from voting in April but called the plan "excessive'' afterward. Mr. Buffett has frequently criticized pay plans that rely heavily on stock options as "lottery tickets'' that often generate outsize rewards.

Mr. Buffett went public with his concerns after a smaller shareholder, David Winters, chief executive at Wintergreen Advisers LLC, began a public campaign against Coke's equity plan in March. Mr. Winters argued the plan, including issuing 340 million new shares and options over four years, could dilute shareholders by up to 16.6% and was more generous than the expiring plan approved in 2008.

Coke director Maria Elena Lagomasino, chair of the compensation committee, said in a statement Wednesday that shareholder input "has directly led'' to the revised guidelines, which she said "are in line with the long-term interests of shareowners.''

Coke said equity grants will have an annual "burn rate'' of no more than 0.8% in 2015 and an average of 0.4% for the remainder of the 10-year plan. That compares with 1.7% so far in 2014. Burn rates refer to the number of shares granted as a percentage of shares outstanding. Two thirds of equity awards will be performance shares by 2016, up from 40% currently.

Under the revised plan, Coke would potentially issue about 200 million shares to managers over 10 years, compared with as many as 340 million over as few as four years under the April version. The company says the reworked plan translates into a potential dilution of less than 5% over the life of the plan for shareholders.

Mr. Buffett didn't respond Wednesday to requests for comment. He was pleased with the altered plan after Coke briefed him on the changes, according to a person familiar with the situation.

State Street and Capital Group declined to comment. Each of the investment firms owns between 3% and 4% of Coke's shares outstanding, according to regulatory filings.

Mr. Winters criticized Coke for moving slowly and said he still wants to see more details about changes to the plan and how they will be implemented. "At this point it's vague and it's just promises. We view this as just more red glitter in the air,'' said Mr. Winters. His Wintergreen fund owns 2.5 million Coke shares, or 0.06% of shares outstanding.

He said the board and management "haven't done a great job'' running Coke and that Mr. Kent should personally apologize to shareholders for the original equity plan and "probably announce his retirement.''

The State Board of Administration of Florida, which voted against the equity plan in April, praised the changes. "The changes to Coke's plan are very responsive to investors' prior concerns,'' said Michael McCauley, who oversees corporate governance issues at the fund, which owns 5.9 million Coke shares, according to regulatory filings.

There are no signs that Mr. Kent has lost the support of Coke's board. He also hasn't signaled any plans to step down anytime soon.

Mr. Kent said Coke "will continue to provide long-term incentive awards to a broad-based group of employees with performance metrics that drive line-of-sight accountability directly to business results."

Theo Francis contributed to this article.

Credit: By Mike Esterl and Joann S. Lublin

1. What is the rationale behind granting stock options?

2. Why are some investors pushing Coca-Cola to scale back stock options and shift to more cash-based performance awards?

3.Do you agree that narrowing the number of executives who qualify for equity based awards makes sense? Why or why not?