Reckitt Benckiser Likely to Reduce CEO Kapoor’s Pay After Lapses

  • RB’s chairman meets with investors after Australia, Korea woes
  • May pushes for curbs on executive pay in governance overhaul

Reckitt Benckiser Group Plc Chief Executive Officer Rakesh Kapoor’s industry-leading pay is set to fall after safety and marketing failings at the maker of Dettol cleaners, as the company embarks on a campaign to allay investor concerns over the lapses.

Compensation for Kapoor, the third-highest-paid CEO at a U.K. public company in 2015 with a 23.2 million-pound ($28 million) package, will be determined over the next few weeks, an executive said. Chairman Adrian Bellamy, a member of the board’s remuneration committee, has meanwhile met with shareholders to discuss a fine for misleading consumers in Australia and a scandal over the sale of toxic household disinfectants in South Korea.

Rakesh Kapoor

Photographer: Simon Dawson/Bloomberg

“We have a culture of pay by performance and that means when performance hasn’t been met, there’s an implication,” said Patty O’Hayer, the company’s director of external relations and government affairs.

The Strepsils maker’s push to restore investor confidence comes after its shares trailed the FTSE100 Index for the the first time in five years in 2016. It’s also happening amid a drive by Prime Minister Theresa May to overhaul corporate governance, including measures to rein in executive pay that she outlined in November. Kapoor’s 2015 compensation trailed only that of WPP Plc CEO Martin Sorrell and Berkeley Group Holdings Plc chief Tony Pidgley among U.K. listed companies, according to the High Pay Centre, a U.K. researcher.

Korea, Australia

Last week, a former executive at Reckitt Benckiser’s South Korean subsidiary was sentenced to seven years in prison over the sale of a disinfectant used to clean humidifiers, which was linked to lung injuries and deaths. The tragedy -- for which Kapoor has publicly apologized -- came to light in 2011, the same year that Kapoor succeeded Bart Becht as CEO. The company took a 300 million-pound charge last year for costs associated with its business there, which represents about 1.5 percent of total revenue.

Last month, Reckitt Benckiser was fined A$6 million ($4.5 million) by an Australian court after a regulator ruled that the company deceived consumers by marketing what appeared to be different versions of its best-selling Nurofen painkiller for specific medical complaints, such as migraine or back pain, when they were effectively identical products.

The incidents have unnerved some shareholders in Reckitt Benckiser, a perennial investor favorite since the 1999 merger that brought together Britain’s Reckitt & Colman Plc and Germany’s Benckiser NV. Numis analyst Charles Pick has questioned whether Reckitt Benckiser’s hard-charging culture is too “gung-ho,” and said there was a case for favoring Dove maker Unilever because it appeared to have fewer “operational issues.”

In its meetings with investors, Bellamy is saying the company has learned from the problems in South Korea and Australia and will implement changes, O’Hayer said. One gathering took place in London in December and included several U.K. institutional investors. The company has established a corporate sustainability, ethics and compliance committee and appointed a chief safety officer who reports directly to Kapoor.

“The company we are becoming is different from what we were in 1999 and our governance has to alter as a result,” O’Hayer said by phone. “Part of that is due to natural evolution. Part of it is due to the tragedy.”

— With assistance by Thomas Buckley

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