Are you a CEO? Have you had your salary wings clipped?

Are you a CEO? Have you had your salary wings clipped?

In this month's visit to our pages, just-drinks' in-house analyst, Ian Shackleton, settles the company ownership debate, finds flickering embers of SABMiller and offers sympathies to CEOs dealing with rejected salary requests.

Public v private - what's the best model in spirits?

Every few weeks, I read media stories that the IPO market remains sluggish. Certainly, my discussions with the management at many companies confirm there are fewer and fewer attractions of being a public listed company; your results are subject to increasing scrutiny from both analysts and media; the corporate governance requirements continue to grow, and there is a particularly strong focus now on executive remuneration.

If you're a private company, you can sidestep most of this and stay below the radar. Sure, you may have to put up with a large single shareholder, such as a family or private equity, which can be quite demanding, but perhaps it is better to have one or two well-informed, relatively long-term shareholders rather than have to seek investment from a larger number of investors as a public company. Remember, in addition, that the old business model in public equity markets is being substantially disrupted by the MiFID ll regulations, whilst also probably increasing the costs of being a PLC.

Against this backdrop, it's timely that the Worshipful Company of Distillers annual debate in London this month had as its theme: "This house believes that family companies think about the long-term, publicly-owned companies focus on the now". The debate pitched two executives from private family companies - Berry Bros & Rudd and William Grant - against a former-IDV (now Diageo) executive and a City analyst.

Given the longevity of its brands, the spirits category has often been described as being a "Slow-Moving Consumer Goods" business rather than a traditional FMCG business. I have always thought that spirits requires a longer-term strategy on brand investment than you would see in other consumer goods industries.

Perhaps, this explains why so many spirits companies have at least a family shareholder in an influential or controlling position, be it either as a public company - hello, Pernod Ricard, Remy Cointreau, Campari Group, Brown-Forman - or as a privately-owned group - yes, you William Grant & Sons, Bacardi and Beam Suntory.

The debaters for the motion pointed to the benefits that a family company, particularly a private one, has in terms of investing for the long-term rather then be obliged to report quarterly results, which inevitably leads to a shorter-term time horizon. The debaters against, meanwhile, pointed to the advantages of being a public company, for example, the access to capital, and the wider opportunity to build a wider business mix both in portfolio and in geography.

What strikes me is that we can all come up with different examples that prove why different corporate models work. For a private, family-controlled business, there's Tito's Handmade Vodka; for a public company controlled by a family, there's Brown-Forman or Campari; for a proper public company, it's Diageo.

Equally, we can all think of models that don't work so well. Certainly, as I highlighted a few months back, in the case of Bacardi, disagreements within the family appear to have had an adverse impact on the business momentum for several years.

That said, there is no doubt in my mind that being a private company, or at least a public company with large family influence, can be beneficial in building a business for the long-term, particularly in the SMCG business of spirits.

That's also what the attendees of the this month's debate thought: They voted by two to one in favour of the motion.

Remembering the SABMiller culture

Every year, I help host a get-together called the Beverages Analyst Reunion (BAR, naturally), bringing together executives who have worked in drinks with investment professionals that have been closely connected with the industry. It's usually the executives who have worked in the industry and who have left that are the keenest to attend; several have commented to me over the years that life isn't as fun in their new industry, and they have a great nostalgia for their previous existence.

One thing that struck me this year was we had a much greater attendance of ex-SABMiller executives, which is perhaps not surprising as there are few current SAB executives left in the greatly-enlarged Anheuser-Busch InBev.

There is no doubt that SAB had a very strong corporate culture, particularly in the years following the relisting in London in 1999. It's also clear that this culture is what many ex-employees miss. This was a company that emerged from post-apartheid South Africa, with the mission of becoming a major consolidator in the then-fragmented world of global brewing. With its roots in tough markets in Africa, SAB believed it had the skillset to operate successfully in any country in the world, and it set out on the Great Trek globally, like the Voortrekkers did across 19th-Century South Africa.

The group's progress was rapid, moving into Eastern Europe, then the US, then Latin America. At the same time, SAB widened its skillset into other areas, such as brand marketing and portfolio management.

In retrospect, there were a few moves that probably were a step too far. There was the acquisition in 2011 of Fosters in Australia, where the company bought into a market with superprofits that soon came under pressure. The real changing point for the business, however, occurred with the premature passing of Graham Mackay in 2013. As CEO, Graham was instrumental in building the business to become an international powerhouse. He died soon after moving into the chairman role, leaving a management team with less clear direction.

The SAB culture lives on, though, no longer under one banner but increasingly across many companies. There are many executives who have moved on to other roles in the drinks industry: Britvic has a CFO and a non-exec director; FeverTree also has a non-exec director, Asahi has its Europe CEO (who was interviewed by just-drinks earlier this month).

It's always sad when a large, successful company is acquired and many of the management team leave. However, it's good to see the SAB alumni still proving influential in the world of beverages.

Navigating the AGM season -shouldn't be a worry for Diageo

The main 2018 AGM season is coming to an end, and many of the companies with December year-ends for their reporting period will be breathing a sigh of relief. What was once a cosy meeting with a few investors, who turned up for the lunch (in the old days) or tea and biscuits (today) has now become a more corporate event where large investors can signal their displeasure by voting against the AGM resolutions.

In the last year or so, this has become particularly focused on executive pay, where several companies this time have had shareholders vote against their proposals. Indeed, from last year, the Investment Association, the trade body for fund managers in the UK, has implemented a public register to record all votes of more than 20% against AGM resolutions for companies in the FTSE All-share. You certainly don't want to be on their naughty list. As mentioned above, this is another example of why being a public company has become less attractive.

There is a certain irony here, as the escalation in executive remuneration has followed the need for more significant disclosure in annual reports. This has had the opposite effect from what was intended. It has made it much easier for the CEO of ABC plc to look at the remuneration of his mate at XYZ plc, and conclude that he deserves to be paid just as well, if not better.

Nobody wants to be below the median, and this has contributed to the escalation in executive pay in recent years.

So far, the UK drinks companies have come through this process relatively unscathed, with none of the companies making the IA's list. Some big quoted companies have, though - HSBC, AstraZeneca and Imperial Brands are on it.

As for Diageo, they won't have their AGM until September, so we'll keep an eye on that. The group's share price, however - currently at over 2700p - continues to hit new highs.

Against that background, Diageo's board is unlikely to be suffering too many sleepless nights.