The chief executive of Reckitt Benckiser saw his pay package almost double last year to more than £23m.
Rakesh Kapoor’s pay soared thanks to a share-based bonus linked to the performance of the company behind brands such as Nurofen and Durex.
The bumper package catapults Kapoor, who has been with Reckitt Benckiser for almost three decades, close to the top of the league table of Britain’s highest paid chief executives.
But he still lags behind the boss of the advertising firm WPP, Sir Martin Sorrell, who was given a deal worth £63m last year thanks to a share award.
Kapoor’s pay is also dwarfed by the sums enjoyed by his predecessor at Reckitt, Bart Becht, who infamously pocketed a deal worth some £90m in 2010. But the scale of Kapoor’s award drew criticism from a thinktank that monitors pay packages on offer in the upper echelons of British firms.
High Pay Centre spokesman Stefan Stern singled out an £18m share-based long term incentive payment (LTIP) to Kapoor for performance over three years to end of 2015.
“We think these LTIPs are hopelessly flawed instruments. They’re for three years, which isn’t really long term, so they’re badly named.They are clearly skewed if they can generate results like this, with a near 100% increase in package.
“Is the company 100% better than it was? Are employees 100% better off than they were? There’s clearly a gross distortion of one individual, who seems to be extracting extraordinary rewards.”
According to Reckitt Benckiser’s annual report, published on Monday, Kapoor was paid 80% of the total LTIP available to him, compared with 40% last year. This had the effect of increasing his share-based payment from £8.9m to £18.17m, on top of a basic salary of £891,000, bonus of £3.8m and pension payments and benefits worth £300.000.
The LTIP share bonus is determined by earnings per share, which increased by more than 8% a year over the three years to the end of 2015, when adjusted for currency movements. That compares with an increase of 6.1% a year during the previous LTIP period, which triggered just 40% of Kapoor’s potential payout under the scheme.
Reckitt said he had only enjoyed such an increase in pay because the company’s performance has improved, delivering returns for investors.
It said investors’ returns over the three-year period amounted to £21bn in share price increase, dividends and value created by the demerger of Reckitt’s pharmaceutical division, now known as Indivior.
The company said £100 invested in Reckitt on 1 January 2013 was worth £179 by the end of 2015, compared with £118 if the investment had been spread across the rest of the FTSE 100index. The Reckitt share price has increased from just under £33 when Kapoor took over in September 2011 to £67.50.
But investors have previously criticised the company over its pay policy, with 43% of them failing to back the 2013 remuneration report, which led to Kapoor being paid £6.6m. The company has since consulted investors on how to link pay and performance more closely together. Kapoor has also sought to show off his cost-cutting credentials by giving up business class flights on journeys of less than six hours.
In 2012, Reckitt admitted it had failed to disclose that he pledged more than £6m of his shares in the company against a loan from Bank of America Merrill Lynch.
