Diageo bonus plan heads for fresh row

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The Independent Online
DIAGEO, the drinks group, is heading for a further showdown with shareholders over executive bonus schemes after fresh details emerged of lavish share options packages being made available to its American executives.

Tony Greener, the executive chairman, is already under pressure to tone down the proposed share bonuses for up to 200 senior executives or face an open attack from angry investors at the company's annual meeting on 11 August . Around 50 top American managers stand to receive even greater option windfalls of up to five times their annual salaries.

The major beneficiaries include Paul Walsh, the head of Pilsbury bakery division, who could get up to pounds 2.65m worth of shares; Dennis Malamatinas, who runs Burger King and is in line for up to pounds 2.1m worth of shares; and Jack Keenan, head of United Distillers, whose potential windfalls would be worth pounds 2.3m.

Executives will have to pay for their options, and the incentives will only be triggered if Diageo shares rank in the top 10 of a peer group of 20 US companies, including Gillette, Coca-Cola and Pepsi.

The maximum rewards will only be attained if Diageo finishes in the top three, the spokesman said.

Both Grand Metropolitan and Guinness, which merged to form Diageo, have been in the bottom quartile prior to their deal last year. But institutional shareholders fear that US standards could become the norm in the UK, widening still further the gulf between executive remuneration and the wages of their employees.

The bonuses are dependent on the Diageo share price and dividends outperforming rivals, but the performance criteria are too low, according to dissident shareholders who include Hermes, the UK fund manager.

Standard Life and Norwich Union have also expressed opposition to the scheme which will give Tony Greener shares worth up to 2.5 times his pounds 750,000 salary and chief executive John McGrath similar rewards on top of a salary of pounds 550,000. More than 100 other executives stand to get similar percentage bonuses.