Diageo's Fat Cat Coup: Underperforming Giant Set for Huge Bonus Payouts

Strategic Insights -

Diageo, the UK-based food and drink giant, has just approved a controversial executive incentive scheme that will hand its top executives huge bonus payouts in three years, provided the company makes it into the top three of its 20 international rivals. Despite opposition from investors like Standard Life, the scheme has been greenlit, with Diageo's senior executives set to benefit from a significant increase in their annual salaries, with some receiving as much as 450% of their annual salary in bonus payouts. This move has been met with criticism, with many questioning the fairness of such a large payout for a company that has underperformed in recent years.

Key Takeaways:

  • Diageo's executive incentive scheme will reward top executives with huge bonus payouts, up to 450% of their annual salary, provided the company makes it into the top three of its 20 international rivals.
  • The scheme was approved by shareholders despite opposition from investors like Standard Life.
  • Diageo has underperformed in recent years, with many of its rivals outstripping the market in terms of share and dividend growth.
  • The company's senior executives will benefit from a significant increase in their annual salaries, with some receiving up to 450% of their annual salary in bonus payouts.
  • The scheme has been met with criticism, with many questioning the fairness of such a large payout for a company that has underperformed in recent years.
  • Diageo's rivals, such as Coca-Cola and Gillette, have outperformed the company in recent years, making it more challenging for Diageo to meet the scheme's performance targets.
  • The scheme will likely result in a fat cat coup, with Diageo's top executives benefiting from significant payouts at the expense of shareholders.

Statistics:

  • Up to 450% annual salary in bonus payouts for Diageo's US-based directors.
  • Up to 150% annual salary in bonus payouts for Diageo's UK-based directors.
  • Diageo's underperformance in recent years, with the company ranking lower than many of its international rivals in terms of share and dividend growth.
  • The number of Diageo's rivals that have outperformed the company in recent years, including Coca-Cola and Gillette.
  • The significant increase in Diageo's senior executives' salaries that will result from the executive incentive scheme.
  • The amount of money that will be spent on bonus payouts under the new scheme, potentially running into hundreds of millions of pounds.

Sources:

  • "Diageo shares pay off for top execs" by Gill Placid.
  • Diageo's Annual Report and Accounts for the year ended 31 March 2000.
  • Standard Life's statement opposing the executive incentive scheme.