Stock Analysis

Most Shareholders Will Probably Agree With Diageo plc's (LON:DGE) CEO Compensation

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Performance at Diageo plc (LON:DGE) has been reasonably good and CEO Ivan Menezes has done a decent job of steering the company in the right direction. In light of this performance, CEO compensation will probably not be the main focus for shareholders as they go into the AGM on 06 October 2022. Here is our take on why we think the CEO compensation looks appropriate.

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Comparing Diageo plc's CEO Compensation With The Industry

Our data indicates that Diageo plc has a market capitalization of UK£86b, and total annual CEO compensation was reported as UK£7.9m for the year to June 2022. That's a notable increase of 31% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at UK£1.3m.

In comparison with other companies in the industry with market capitalizations over UK£7.3b, the reported median total CEO compensation was UK£6.5m. So it looks like Diageo compensates Ivan Menezes in line with the median for the industry. Moreover, Ivan Menezes also holds UK£43m worth of Diageo stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20222021Proportion (2022)
Salary UK£1.3m UK£1.2m 16%
Other UK£6.6m UK£4.8m 84%
Total CompensationUK£7.9m UK£6.0m100%

Talking in terms of the industry, salary represented approximately 43% of total compensation out of all the companies we analyzed, while other remuneration made up 57% of the pie. In Diageo's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

LSE:DGE CEO Compensation September 30th 2022

Diageo plc's Growth

Over the past three years, Diageo plc has seen its earnings per share (EPS) grow by 3.0% per year. It achieved revenue growth of 21% over the last year.

We would argue that the modest growth in revenue is a notable positive. And the modest growth in EPS isn't bad, either. So while we'd stop just short of calling this a top performer, but we think it is well worth watching. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Diageo plc Been A Good Investment?

With a total shareholder return of 23% over three years, Diageo plc shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary...

Seeing that the company has put up a decent performance, only a few shareholders, if any at all, might have questions about the CEO pay in the upcoming AGM. Despite the pleasing results, we still think that any proposed increases to CEO compensation will be examined based on a case by case basis and linked to performance outcomes.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Diageo that you should be aware of before investing.

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

Valuation is complex, but we're helping make it simple.

Find out whether Diageo is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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Diageo plc, together with its subsidiaries, produces, markets, and sells alcoholic beverages.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Future Growth3
Past Performance4
Financial Health3

Read more about these checks in the individual report sections or in our analysis model.

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