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Diageo Ditches ESG for Executive Bonuses
3 Sep
Summary
- Diageo executives' bonuses will now solely depend on financial performance.
- Responsible drinking and diversity targets removed from executive pay.
- This shift reflects a broader corporate trend away from ESG metrics.
Diageo, the maker of Guinness, has revised its executive remuneration policy, removing Environmental, Social, and Governance (ESG) targets from bonus considerations. As of November awards, executive pay will be exclusively tied to financial metrics. This includes weighting earnings per share growth at 40%, free cash flow at 40%, and return on invested capital at 20%.
This strategic shift occurs as Diageo navigates a period of underperformance, with a 2% fall in organic sales for the year ending June. CEO Sir Dave Lewis is spearheading a restructuring program, aiming for $1 billion in annual savings by concentrating on core spirits brands and ready-to-drink products.
Despite removing these metrics from executive pay, Diageo affirms its commitment to its responsible drinking initiatives and overall diversity goals. The company's decision mirrors a broader corporate retreat from ESG in executive compensation, with other major companies also scaling back or removing such targets from bonus schemes.
