Diageo plc (LON:DGE) CEO pay is likely to be approved by most shareholders

performance at Diageo plc (LON:DGE) has been pretty good and CEO Ivan Menezes has done a good job of steering the company in the right direction. Given that performance, CEO pay likely won’t be the primary focus of shareholders heading into the October 6, 2022 AGM. Here’s our take on why we think CEO pay is fair.

Check out our latest analysis for Diageo

How Diageo plc CEO pay compares to the industry

Our data shows that Diageo plc has a market capitalization of £86bn and reported total annual CEO pay for the year to June 2022 at £7.9m. That’s a remarkable 31% year-over-year increase. Whilst we always look at total pay first, our analysis shows that the salary component is lower at £1.3m.

Compared to other companies in the industry with a market capitalization of over £7.3bn, the reported average total CEO pay was £6.5m. So it looks like Diageo is compensating Ivan Menezes in line with the industry median. In addition, Ivan Menezes holds £43m of Diageo shares directly under his own name, which shows us that they have a significant personal stake in the company.

component 2022 2021 Share (2022)
salary UK £1.3m UK £1.2m 16%
Miscellaneous UK £6.6m UK £4.8m 84%
Total Compensation UK £7.9m UK £6.0m 100%

In terms of industry, salary made up about 43% of total compensation across all the companies we analyzed, while other compensation made up 57% of the pie. In Diageo’s case, non-salary compensation represents a larger portion of total compensation compared to the broader industry. It’s important to note that a bias towards non-salary compensation suggests that total compensation is tied to company performance.

LSE:DGE CEO Compensation September 30, 2022

The growth of Diageo plc

For the past three years, Diageo plc’s earnings per share (EPS) have grown 3.0% per year. It achieved sales growth of 21% last year.

We’d argue that the modest revenue growth is a notable plus. And the modest growth in EPS isn’t bad either. While we’d stop short of calling this a top performer, we think it’s worth checking out. If you find yourself stepping away from current form for a second, it might be worth checking out this free visual of what analysts expect for the future.

Was Diageo plc a good investment?

Diageo plc shareholders would generally be quite happy with a 23% total shareholder return over three years. But they’d probably prefer to see CEO pay not far above the median.

In summary…

In view of the company’s decent performance, few if any shareholders are likely to have questions about executive compensation at the upcoming annual general meeting. Despite the encouraging results, we remain confident that any proposed CEO pay increases will be considered on a case-by-case basis and linked to performance outcomes.

CEO pay can have a massive impact on performance, but it’s only one element. So we did some digging and identified 1 warning label for Diageo you should know before you invest.

Important NOTE: Diageo is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster yields. You might find something better in this list of interesting companies with high ROE and low debt.

This Simply Wall St article is of a general nature. We provide comments based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your goals or financial situation. Our goal is to offer you long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.

The assessment is complex, but we help to simplify it.

find out if Diageo may be over or under priced by reviewing our comprehensive analysis which includes the following Fair Value Estimates, Risks and Warnings, Dividends, Insider Trading and Financial Health.

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