Diageo investors urged to reject £8.5m share award for interim CEO

Proxy adviser Glass Lewis has told shareholders to vote against Diageo’s pay report at next month’s AGM, citing concerns over an £8.5m share award to interim chief executive Nik Jhangiani. The advisory firm says the award lacks sufficient performance-based conditions.

Diageo shareholders are being recommended to reject the board’s pay report at the annual general meeting on November 6. The source of discontent is the almost £8.5m worth of shares to be allocated to Nik Jhangiani, the interim chief executive.

Jhangiani, a graduate of Rutgers Business School in New York, joined Diageo as financial director in November 2023 from Coca-Cola Europacific Partners, where he had held a similar role since 2016.

It would be a considerable surprise if Jhangiani was not confirmed as the permanent CEO of Diageo in the near future following the ousting of Debra Crew in July. It was reported at the time that she felt unable to work alongside him. Unconfirmed rumours suggested he had been lobbying heavily for the role.

Glass Lewis raises performance concerns

Since joining Jhangiani has been awarded a package of more than £12m, and Glass Lewis, a leading proxy adviser which makes recommendations to institutional shareholders on voting decisions, has advised against ratifying that.

In particular, the objection is to more than £8m of shares to be awarded to Jhangiani without being linked to performance.

“Given the significant quantum of the awards, approximately £8.48m, we believe that shareholders may reasonably have expected greater clarification as to the determination of the conditions associated with such awards,” Glass Lewis told Sky News.

“In the absence of a cogent rationale as to the non-performance-based nature of the majority of awards, we believe this issue precludes shareholder support for this proposal at this time.”

Company defends recruitment package

Since Jhangiani joined Diageo the shares have lost 35% of their value but have largely stabilised since he became interim CEO and introduced a programme of cost-cutting designed to save the group $625m over the next three years.

Diageo said: “The recruitment arrangement was predominantly made in shares and was to compensate Nik for what he forfeited from his previous employer upon joining Diageo.

“When determining the structure and value of a recruitment arrangement, the Remuneration Committee looks to ensure that any such compensation has a fair value, no higher than that of the awards forfeited.

“As an executive director, Nik is subject to a shareholding requirement both during his tenure and on a post-employment basis.”

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