Diageo bosses take pay cuts as sales decline

Diageo’s CEO Ivan Menezes and other executives at the UK drinks group have undertaken significant pay cuts over the past year amid tumbling sales.

Top executives at Diageo, including the group’s CEO Ivan Menezes, have experienced significant pay cuts due to a difficult financial year

The company – the largest drinks group in the world – released its Annual Report 2014 at the end of last week, revealing that Menezes earned a total of £7.8 million in 2013/14.

This was a fall compared to the £8.3m he earned in the previous financial year, despite a promotion from chief operating officer to CEO.

While Menezes’ basic salary increased by £400,000, his “long-term” incentives almost halved from £6.1m to £3.1m due to a reduction in bonuses and benefits.

Diageo’s chief financial officer Dierdre Mahlan also experienced a pay cut of £3.3m, from £7m to £3.8m. While Menezes will not receive an automatic pay increase next year, Mahlan will be granted a small raise.

However, Diageo’s previous CEO Paul Walsh, who left the company in June 2013 but stayed on as an advisor, received £6.4m during 2013/14.

According to The Telegraph, the bonuses paid out to Diageo executives were just 10% of the maximum amount available at the beginning of the year as sales targets were missed.

“Diageo’s remuneration principles clearly link reward with performance outcomes and so the business performance achieved in this last year has resulted in a significantly lower level of total remuneration for the executive directors than in 2013,” Diageo’s report read.

Diageo revealed in its recent 2013/14 financial results that its net sales had declined by £1.1bn due largely to the “severe impact” of China’s on-going anti-extravagance measures.

The country’s campaign of austerity particularly affected sales of Diageo’s Shui Jing Fang baijiu, which declined a massive 78%. The group therefore revealed that it was to write-down the value of the brand by £264m.

In its full-year report, Diageo also revealed that it had made its biggest savings through redundancies and other reduced staffing costs.