Mega-Payday for Gillette Boss as Thousands Lose Jobs

01 February 2005

Following last Friday's announcement that Procter & Gamble is to acquire the Gillette Company in a $57 billion (€43.74bn; £30.21bn) deal, comes news that James Kilts, the latter's chairman/ceo, will shave a personal fortune of some $153 million for his efforts in helping engineer the takeover.

But no way did the selfless Kilts ease the passage of the deal for reasons of personal gain. As he explained to the Wall Street Journal in an interview, he wanted "to do what is right for shareholders and employees in the long term."

And while shareholders may indeed feel that Christmas has come round for the second time in little more than a month, over six thousand employees of P&G and Gilette worldwide are less euphoric after learning that their jobs are to be axed.

Kilts, meantime, is happy to take the money, although he's not running yet. He'll remain for one year with the merged company as vice chairman of P&G, with a likely annual paycheck of about $8 million.

But he thinks it poor taste to talk about his $153m handout. "[I don't] think it's productive to talk about my pay. I'll let the record speak for itself," Kilts told the WSJ. Such delicacy is unlikely to impress the thousands doomed by the merger to welfare checks.

For the record, however, Kilts' $153m killing is made up from gains on his Gillette stock options and stock rights, plus a sweetener from P&G valued at an estimated $23.9 million, plus a "change in control" payment of $12.6 million. Plus an eventual $1.2m annual pension.

Even the WSJ, usually a passionate worshipper at the Temple of Mammon, questions the morality of such deals. "Are top executives sometimes motivated to do mergers, at least in part, by personal gain?" asks today's edition.

Continues the newspaper: "And is it right for the top people to walk away with megamillions while thousands lose their jobs in post-merger downsizing?

The newspaper also quotes San Francisco merger management specialist Mitchell Marks: "People see M&A as a game and as a way to buttress their own wealth and their own portfolio." Marks is not in favour of this trend, not least because it demoralizes employees.

"People think they are joining a company for the long haul and boom, the rug is pulled out from under them because the ceo wants a quick payday," he says.

Data sourced from Wall Street Journal Online; additional content by WARC staff