Diageo chief’s salary doubles to £11m as shares soar

Diageo chief executive Paul Walsh’s salary more than doubled last year to £11.2m (€13.9m), after an 88% rise in the drinks company’s shares over the last three years boosted his rewards from long-term incentive schemes.

Executive pay has become a hot political topic but Diageo, the world’s biggest spirits group and the maker of Guinness, Baileys, and Bushmills, justified Mr Walsh’s salary by saying 72% of it was linked to the group’s share price performance over the past three years.

In the same timeframe, Britain’s blue-chip FTSE 100 index managed a far more modest rise of about 30%.

Diageo stock outperformed as investors bought into its steady earnings growth and increasing sales, particularly in emerging markets.

Lucrative executive pay schemes have sparked controversy at a time of economic austerity and pressure on average salaries. In June, the UK government said it would legislate to give shareholders power to reject director pay deals, in a response to public anger over soaring executive earnings.

Mr Walsh’s fixed pay of £1.3m and annual bonus of £1.8m for its year through Jun 2012 were both marginally down from the previous year, but he gained as two option incentive schemes vested for the first time since 2008.

The two schemes rewarded Mr Walsh £8.1m compared with £1.3m in the previous year, pushing up his total salary to £11.2m from £4.4m, according to the annual report from Diageo whose brands include Smirnoff vodka and Johnnie Walker whiskey.

The chairman of Diageo’s remuneration committee, Mervyn Davies, defended the big rise in the context of Diageo’s share performance and its payment of dividends totalling 117p a share over three years.

“I am comfortable, therefore, that these incentive plan outcomes fairly reflect the strong performance delivered for our shareholders,” he said in the annual report.

Finance director Deirdre Mahlan also gained from the schemes, with her total salary rising to £3.2m from £1.9m in the previous year.

London-based Diageo said that over the three-year period on which the incentive schemes were based, its market capitalisation had increased by over £19bn to £42bn.

Reuters