Diageo directors criticised for ‘excessive’ bonuses

Despite enforcing pay cuts amid mounting financial pressures, Diageo has been criticised for awarding its top directors what have been seen as “excessive” bonuses.

Diageo has said its top directors have taken significant pay cuts amid criticism over bonuses

The Sunday Times reports that governance groups and shareholders have slammed renumeration packages paid to top Diageo executives as “excessive” compared to their basic salary, prompting concerns investors may revolt at its annual general meeting (AGM) later this week.

Robert Talbut, chief investment officer at investment management company Royal London Asset Management, said the company’s pay scheme had been “an area of growing concern for some time”.

Diageo’s CEO Ivan Menezes earned a total of £7.8 million in 2013/14 despite having a basic salary of £933,000, while the group’s chief financial officer Deirdre Mahlan earned £3.8m and its previous CEO Paul Walsh, who left the company in June 2013 but stayed on as an advisor, received £6.4m.

However, Diageo told The Sunday Times that despite criticism, it was “satisfied that the levels of reward are appropriately positioned against those of competitor companies”.

The group’s Annual Report 2014 revealed that Ivan Menezes had earned £900,000 less than in 2012/13 despite a promotion from chief operating officer to CEO due to a reduction in “long-term incentives”.

The Telegraph reported in August this year that 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.

The group 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.