Executive Remuneration at Reckitt Benckiser plc.

Habiburachman Muhamad Ibnu Fauzi Rangga Tri Raeros

Reckitt Benckiser
Formed in 1999 by the merger of:
Benckiser N.V (a Netherlands-based household product company) Reckitt & Colman plc. (a U.K-based consumer product company)

Company Strategy and Performance

Grow by acquisition and organic growth through line extensions and new products. Target to hold the market-leading position Leverage out net revenue growth into even stronger net income growth and strong cash generation through improving operating margins and cash flow management

Remuneration Philosophy
Global Nature of Remuneration Plan
A Plan to motivate and retain top manager while adhering to a global remuneration policy

Fundamentals of the Remuneration Plan

Base pay is mandatory, if the employee performance is hits her/his target to be getting better than the competition, then he/she may earn a maximum bonus of 3 times the target bonus

Remuneration
3 Major Parts ; Salary, Short-term incentives, and Long-term incentives Salary and Short-term incentives were paid in cash

Long-term incentives were paid in options and restricted stock

Short-term incentives
A manager compensation was depend on the performance A performance of double the targets would be required to get this If none of goals met, the variable compensation would be zero Example:
If the executives met all target which generally set at average of a peer group performance, he/she would receive 40% of salary as bonus However if individual substantially exceed all targets, he/she could earn 140% of base salary

For the employee, incentives were based on factors within the managers control For the manager within business units, the factors are from the revenue growth, profit growth, and net working capital reduction.

Long-term incentives
Long-term pay was based on targets related to corporate growth over three years The indicator was EPS (Earning Per Share) By holding the companys stock would make employees to behave like owners

Compensation Decision Makers at Reckitt Benckiser

The role of Human Resources
To formulate and maintain remuneration policy Change design, ensure the effective administration of compensation plan

The role of Board of Directors (BOD)

Ensure the policy was aligned with the company culture and business strategy Any changes must be approved by BOD

Shareholder Involvement
The policy also need to be blessed by the shareholders As advisory

The Problem
The performance oriented compensation system need high quality people with passionate commitment The shareholder didnt want the company paying executives large amount of compensation if their action dont have a result How to sustain the incentive program?

Recommendation
Recruit on both competency and cultural fit
Cultural fit : determined based on a propensity for achievement, commitment, entrepreneurship, and teamwork. Compensation policy used as attrative points on pick up people who motivated and excited by the remuneration system and believe in themselves and in the system