The world's largest spirits maker Diageo Plc has proposed an annual pay package of up to 10.9 million British pound (about Rs 105 crore) for its newly appointed, Indian-origin CEO Ivan Menezes.
Menezes, who has been with UK-headquartered Diageo for about 13 years, was paid total remuneration of 7.8 million pounds (Rs 75 crore) in the last financial year ended June 30, 2013 when he served as Chief Operating Officer.
Upon his promotion as CEO with effect from July 1, he has been given an 8.6% hike in base salary to one million pounds (about Rs 9.6 crore) and would be entitled to further benefits totalling up to 9.9 million pounds (Rs 95 crore) a year, Diageo said in its latest annual regulatory filing.Diageo, which owns brands like Johnnie Walker, Smirnoff, Baileys and Guinness, recently acquired a significant stake in India's leading liquor firm United Spirits from Vijay Mallya-led UB group in a deal worth over USD 2 billion.
53-year-old Menezes, who studied at premier Indian educational institutions like St Stephen's College and IIM-Ahmedabad besides Kellogg School of Management in the US, is said to have been instrumental in the United Spirits deal.
Prior to joining Diageo, Menezes held senior positions with giants like Nestle, Booz Allen Hamilton and Whirlpool.
While Diageo said that "Menezes' salary has been positioned below median to reflect the fact that he is new to the Chief Executive role", his total package is much higher than the average salary earned by CEOs in India and abroad.
As per a latest managerial remuneration report by the Institutional Investors Advisory Services (IIAS) last month, the average CEO salary for India's biggest 500 companies in the last fiscal stood at Rs 3.6 crore, while the sale for the biggest 500 companies in the US was Rs 28 crore.
As Diageo CEO, Menezes would get a base salary of one million pound, and would be eligible for awards under the company's Annual Incentive Plan (AIP), Performance Share Plan (PSP), Senior Executive Share Option Plan (SESOP) and Pension payments.
Under the AIP, he can get up to 100% of salary for "on-target performance" and a maximum of 200% of salary payable for outstanding performance -- which could take this component to up to two million British pounds.
The maximum annual award under PSP can be 375% of the base salary (up to 3.75 million pounds), while Menezes would also be eligible for a maximum annual award of 375 of base salary under SESOP (up to USD 3.75 million).
Besides, Diageo would make an annual contribution of 40% of his base salary to an executive retirement plan, taking his total package to up to 10.9 million Pounds.
Menezes would also be eligible to a host of other benefits as the CEO of Diageo, which commands an annual sales of over 11 billion pounds and has a market value of about USD 80 billion (close to Rs 5 lakh crore).
Diageo further said that Menezes' first salary review is expected to take place in October 2014.
As per Diageo's filing, 72 per cent of Menezes' total remuneration in the last fiscal was linked to the company's share price performance and came through various long term incentive plans.
Listed in the US and the UK, Diageo employs approximately 28,000 people worldwide with offices in around 80 countries.
Its products are sold in about 180 countries.
Diageo said that the fast-growing Asia Pacific and Latin America markets now contribute more than 40 per cent of its net sales, up from a fifth in 2005.
Going forward, these markets are expected to contribute 50 per cent of Diageo's net sales by the end of 2015 through double digit organic growth and with selective acquisitions.
In new high growth markets, the company said, it expects to make acquisitions of companies with both strong local routes to market and with brands that can be premiumised and appeal to the growing number of middle class consumers.
The acquisition of a major shareholding in United Spirits in India was part of this strategy.