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Is Diageo plc's (LON:DGE) CEO Pay Fair?

Simply Wall St

Ivan Menezes has been the CEO of Diageo plc (LON:DGE) since 2013. First, this article will compare CEO compensation with compensation at other large companies. Next, we'll consider growth that the business demonstrates. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Diageo

How Does Ivan Menezes's Compensation Compare With Similar Sized Companies?

Our data indicates that Diageo plc is worth UK£75b, and total annual CEO compensation was reported as UK£12m for the year to June 2019. We think total compensation is more important but we note that the CEO salary is lower, at UK£1.2m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations over UK£6.1b and the median CEO total compensation was UK£3.4m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.

As you can see, Ivan Menezes is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Diageo plc is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see, below, how CEO compensation at Diageo has changed over time.

LSE:DGE CEO Compensation, January 9th 2020

Is Diageo plc Growing?

On average over the last three years, Diageo plc has grown earnings per share (EPS) by 12% each year (using a line of best fit). In the last year, its revenue is up 5.8%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's nice to see a little revenue growth, as this is consistent with healthy business conditions. It could be important to check this free visual depiction of what analysts expect for the future.

Has Diageo plc Been A Good Investment?

Most shareholders would probably be pleased with Diageo plc for providing a total return of 59% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

We compared total CEO remuneration at Diageo plc with the amount paid at other large companies. We found that it pays well over the median amount paid in the benchmark group.

However, the earnings per share growth over three years is certainly impressive. Even better, returns to shareholders have been plentiful, over the same time period. As a result of this good performance, the CEO remuneration may well be quite reasonable. Shareholders may want to check for free if Diageo insiders are buying or selling shares.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.