Diageo cuts chief’s pay packet by €1.2m

Diageo has cut the pay of its two top executives after the drinks group missed performance targets, joining other UK companies in reining in management awards amid political and investor calls for restraint.

The London-based company — which owns the likes of Guinness, Baileys, Gordon’s, and Smirnoff — cut the variable portion of chief executive Ivan Menezes’ compensation by 35%, reducing his total pay for the latest financial year to £3.4m (€3.75m) from £4.5m a year earlier.

That part of chief financial officer Kathy Mikells’ package was reduced by half, the company said in its annual report.

Mr Menezes and Ms Mikells are the latest of a number of UK executives whose pay has been cut after Prime Minister Theresa May decried the “irrational, unhealthy, and growing gap” between compensation of managers and ordinary workers. Bosses of companies in the Ftse 100 made an average of £4.5m last year, down 17% from 2015, according to the High Pay Centre.

Diageo sets variable pay, including some share awards, based on average financial performance over the previous three years, gauged by the shareholder return, profit margin, and sales growth.

While net sales grew 4.3% in the 12 months to the end of June, performance was weaker in the previous two years.

Diageo has stepped up efforts to boost performance by selling assets such as the Gleneagles Hotel in Scotland and some wine brands to focus on its core whiskey and vodka lines. Its shares have risen since the Brexit vote weakened the pound.