Diageo Plc Corporate Governance Structure

Introduction

Business operations and affairs are managed and directed through a structure and process which calls for co-operating governance and leadership. Corporate governance and leadership, therefore, enhance accountability as well as the performance of the company while at the same time accounting for the interests of other stakeholders in the business. Diageo Plc is managed under the same corporation and leadership making up of CEO and other top executives such as CFO, a chief executive officer of united spirit limited, and president of global supply and procurement (Bloomberg).

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CEO compensation is one of the governance mechanism employed by Diageo plc in aligning the interest of its board of managers through salaries, short and long-term incentives such as options and stock awards (Bloomberg). The CEO compensation, as well as the top 3 executive bodies in Diageo plc, receive the following compensation.

• Chief Executive Officer (Ivan Menezes) 3,399,000 GBP
• Chief Finance Officer (Kathryn A. Mikells) (2,128,000 GDP
• Chief Executive Officer of United Spirits Limited, Diageo plc (Anand Kripalu)
• President of Global Supply & Procurement, Diageo plc (David Cutter)

Corporate governance structure

Diageo corporate governance structure consists of a board and chief executives. The board consists of three governing bodies such as nomination committee, remuneration committee, and audit committee. The chief executives consist of the executive committee, finance committee, audit and risk committee, as well as fillings assurance committee (Diageo plc). The chief executive committee has the authority to delegate duties to the relevant committee for the betterment of Diageo Plc. The governance structure of Diageo plc consists of a variety of departmental directors and committees. Despite this diversity and confusion on chairman and CEO, there is a distinction between the chairman of the board and the CEO to avoid any form of cross-linking of functions. Dr. Franz B. Humer, the chairman of the board, helps in board running as well as ensuring information flow to all directors on matters of decision making and informed judgments. Ivan Menezes, the CEO, on the other hand, had a different function from the chairman. Supported by the executive committee, the Menezes is responsible for implementation of strategy discussed and agreed on by the board of directors as well as overall management of Diageo plc and its groups (Diageo plc).

There is a relationship between different directors which might interfere with company's objectivity. Diageo plc auditing calls for independence and objectivity internal auditing which entails assurance of services as well as consultation. The relationship between directors depicted in the governance structure might hinder objectivity thereby resulting in bias auditing (Diageo). The board of directors of Diageo plc delegate duties to audit committee thereby this might hinder objectivity of the company. The over the influence of the board on audit committee might interfere with their auditing information towards achieving the best for Diageo plc as their findings are directors-influenced. If the director's delegate duties to audit committee, how can they come up with a contradicting audit of what directors want?

Diageo plc Compensation plan

Diageo plc offers compensation on a set compensation plan. Compensation undertaken by Diageo plc contains a mix of short as well as long-term incentives given on a condition of excelling in performance (Diageo plc). The compensation plan, therefore, is performance related. The performance-related factors such as profit growth, organic net sales, relative total shareholder return, and cash efficiency among others. The company offers both financial and non-financial incentives based on employees overall performance. The calculation of compensation, therefore, entails the summation of total fixed pay and annual incentives (Kota). Total fixed pay entails such as thins as salary, benefits, and pension. The compensation plan, therefore, follows the below-described structure;

Total remuneration = (total fixed pay+ annual incentive)

Total fixed pay= (salary+ benefits+ pensions)

For example, the compensation plan for Diageo plc CEO Ivan Menezes

Salary (1,215 000GBP), benefits (92, 000GBP), pensions (432, 000 GBP), and annual incentive (1,660, 000 GBP).

The total compensation therefore equals to

Total fixed pay= (1,215, 000+ 92, 000+ 432, 000) GBP

= 1,739, 000 GBP

Total compensation = (1,739, 000+ 1,660, 000) GBP

= 3, 339, 000 GBP

Leadership styles of CEO and top executives

Ivan Menezes, the CEO of Diageo plc has had some leadership positions in top-notch global companies like Nestle, whirlpool, and finally landed in Diageo plc in 1997. His good leadership style has helped him in managing Diageo plc (Chairman of the Remuneration Committee Diageo plc). The leadership style practiced in Diageo plc is the collaborative type of leadership. There is a close relationship between various leaders in Diageo plc such as the board of directors and CEO for better governance of the company. The collaborative leadership style of CEO and other top executives involves employees concerns and views in making a strategic decision. Besides collaborative leadership style, Diageo plc leadership follows a procedure where individuals had to follow. To avoid any inconvenience in the leadership of the company, there is a set procedure on the flow of information and advice to all governing bodies. There is also support for the diversity of board of directors promoting gender equality. According to the corporate governance report (58), gender diversity among the board of directors is of high priority for Diageo plc to ensure good leadership style.

Works Cited

Bloomberg. "Diageo Plc: CEO and Executives - Bloomberg." Bloomberg.com, 2018, www.bloomberg.com/research/stocks/private/people.asp?privcapId=375780.

Chairman of the Remuneration Committee Diageo Plc. "Directors' remuneration report." Discover Diageo, 2017, www.diageo.com/pr1346/aws/media/3959/diageo-2017-directors-remuneration-report.pdf.

Diageo Plc. "The Diageo Long Term Incentive Plan | Diageo Shares." Home | Diageo Shares, 2017, www.mydiageoshares.com/plan/discretionary-plans/deltipdacsip.

---. "coroporate governance report." Discover Diageo, 2017, www.diageo.com/pr1346/aws/media/1436/diageo_ar15_corporate_governance_report.pdf.

Diageo. "Corporate Governance." Diageo, 4 Apr. 2018, www.diageo.com/en/our-business/corporate-governance/.

Kota, Amar. "DIAGEO PLC (DEO) 10-K and 10-Q SEC Filings :: Last10K.com." Company SEC Filings for 10-K Annual Reports and 10-Q Quarterly Reports :: Last10K.com, www.last10k.com/Search?q=835403.