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Shareholders Call for CEO Pay Cut

32 million- that was the salary of Reckitt Benckiser CEO Rakesh Kapoor at the end of 2015, according to a March 31st article in the Financial Times. This startling figure has raised concerns regarding the fairness of executive compensation and the potential influence of company shareholders and the board of directors that represents them in limiting the scope of such salaries.

Kapoor’s household goods company led him to become the third highest paid executive in 2015. After 18% of shareholders voted against Reckitt’s pay policy, the company’s remuneration committee was able to push for a pay cut that reduced Kapoor’s salary to 18.3 million dollars, a number that still seems daunting for some.

Despite success in reducing Kapoor’s pay and voting against a proposed almost $900,000 bonus last year, some argue that corporate governance reforms in the UK have not gone far enough, and that executive compensation remains overly generous in relation to the duties these individuals carry out.

Further adding to pay frustrations, many feel that long-term incentive plans for executives (which include additional shares and stock options) should also face reform. These calls for action have led Reckitt’s committees and board of directors to decide to halve the number of these incentives.

While I believe, like many others, that the compensation for company executives seems grossly over generous, I believe that in regards to this particular case, shareholders were fairly represented and able to make meaningful change in salary and long term incentive plans. As a result of their success, I personally feel as though no further reform is needed at this time, though I think that company financial statements should continue to be monitored and transparently presented to the public.

As for those reading this article, I have a few questions.

First, do you believe that executive salaries are justified and that the work done by these individuals is deserving of the compensation they receive?

Second, do you feel as though shareholders were successful enough in altering Reckitt’s pay policy? If not, what types of corporate governance reforms would you like to see take place in order to ensure a fair workplace? (i.e. salary caps?)

Link to original article: https://www.ft.com/content/cc5ac758-1533-11e7-b0c1-37e417ee6c76

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