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Leading spirits maker Diageo’s Indian-origin chief executive officer (CEO), Ivan Menezes, has seen his pay package decline in his first year on the top post. He would not get any salary raise in the second year as well.
Menezes, promoted as CEO of UK-based Diageo Plc in July last year, was paid total remuneration of £7.77 million (about Rs 80 crore) in the financial year ended June 30.
This was way below his maximum entitlement of £12.67 million for 2013-14, and also lower than his total pay package of £8.26 million in 2012-13 when he served as chief operating officer, shows Diageo’s latest annual report.
Due to sluggish financial performance in some key markets, the top executives of the company, including the CEO, could earn less than 10 per cent of the maximum performance-linked bonus they were entitled to during the last year.
Diageo’s total sales declined eight per cent to £13.98 billion in 2013-14, while profits fell about 15 per cent to £2.18 billion.
Menezes said India would become one of the largest markets for Diageo in the coming year and provide a major platform for future growth. The company, whose major brands include Johnnie Walker whisky and Smirnoff vodka, among others, has acquired majority control in India’s leading spirits maker, United Spirits Ltd the from Vijay Mallya-led UB Group.
Diageo also said its remuneration committee has decided to freeze Menezes’ salary in the current financial year.
“After careful consideration of Ivan Menezes’ total remuneration positioning and the salary budget for all employees in the UK, the Committee decided that no salary increase would be awarded to the chief executive in October 2014,” the company said.
The overall salary increase budget for the current financial year ending June 30, 2015 has been decided to be 2.8 per cent of base salary for the business in the United Kingdom and three per cent in North America.
The Annual Report showed that Menezes’ total fixed pay actually increased in his first year as CEO to £1.8 million, from about £1.34 million in 2012-13 as chief operating officer, but performance-related long-term incentives more than halved from £6.1 million to about £3million.
The company said that its Remuneration Committee assessed the performance of Ivan Menezes, along with other top executives, against their specific objectives and concluded that “the objectives were partially met”.
The overall level of performance achieved resulted in an Annual Incentive Plan (AIP) award equating to 18.2 per cent of base salary for Menezes.
“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...,” the company said.
“The company has delivered 0.4 per cent organic top line growth reflecting growth in North America, stability in Western Europe and weakness in emerging market economies.”
“This overall level of performance resulted in an annual incentive plan award equating to less than 10 per cent of the maximum opportunity for Ivan Menezes, Deirdre Mahlan (chief financial officer) and Paul S Walsh (former CEO and an Executive Director till September 19, 2013),” it added.
In his address to shareholders, Menezes himself said, “In fiscal 2014 top-line growth was affected by a slowdown in the emerging markets and currency weakness. Despite this, our increased focus on cost ensured we delivered our three-year operating margin expansion goal.”
“By acquiring an additional 26 per cent of USL on July 2, 2014, taking our shareholding to a majority holding of 54.78 per cent, we have taken a leadership position in India which will provide a transformational platform for growth in this very attractive spirits market.”
“We will consolidate USL from the start of fiscal 2015, and with our combined strength, the Indian market will become one of Diageo’s largest markets next year and a major contributor to our growth ambitions,” he added.
54-year-old Menezes, who has been with UK-headquartered Diageo for about 14 years, is said to have been instrumental in the USD 2-billion USL deal.
Prior to joining Diageo, Menezes held senior positions with giants like Nestle, Booz Allen Hamilton and Whirlpool and he has studied at premier Indian educational institutions like St Stephen's College and IIM-Ahmedabad, besides
