Executive Remuneration at Reckitt Benckiser Plc

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For the exclusive use of Y. Li 9-104-062 REV: JULY 10, 2006 JAY W. LORSCH V. G. NARAYANAN KRISHNA PALEPU Executive Remuneration at Reckitt Benckiser plc “The U.S. is about the size of the pie. The U.K. is about the slice of the pie.” - Bart Becht, CEO of Reckitt Benckiser Reckitt Benckiser management believed that the company fostered an innovative and entrepreneurial culture through a remuneration system that relied strongly on performance-oriented pay. In fact, as stated in the 2001 Annual Report, “this [remuneration] system drives both in year performance, through the annual bonus system, and long-term alignment to shareholder value through the long-term incentive system. . . . Our compensation system is absolutely integral to our future success.”1 Nevertheless, with a recent trend in the United Kingdom toward more shareholder involvement in decision-making, especially executive compensation, and incidents of shareholder protest at other multi-national companies, senior managers and directors at Reckitt Benckiser were faced with the challenge of balancing executive and shareholder concerns. The History of Reckitt Benckiser Reckitt Benckiser plc. was formed in December 1999 by the merger of Benckiser N.V., a Netherlands-based household products company, and Reckitt & Colman plc., a United Kingdombased consumer products company. Founded in Germany by Johann A. Benckiser in 1823 as an industrial chemical firm, Benckiser eventually branched into consumer products, launching Calgon water softener and Calgonit Automatic Dishwashing Detergent in the middle of the 20th century. Reckitt & Colman, which began in 1804 as a flour mill, prospered by manufacturing spices, most notably mustard. The company eventually divested most of its food lines in favor of household cleaning, health and personal care products. During the 1980s and 1990s it acquired several
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