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UPDATE 2-Reckitt cuts CEO pay after scandal as shareholder pressure mounts
March 31, 2017 / 9:13 AM / 8 months ago

UPDATE 2-Reckitt cuts CEO pay after scandal as shareholder pressure mounts

* CEO paid 14.6 mln stg for 2016 vs about 23 mln stg in 2015

* Reduction follows fallout from South Korean safety scandal

* Company faced investor revolt on pay last year (Adds comments, background, bullet points; changes headline)

By Martinne Geller

LONDON, March 31 (Reuters) - Reckitt Benckiser boss Rakesh Kapoor, one of Britain’s highest-earning CEOs, saw his 2016 pay package fall by more than a third following a safety scandal in South Korea that dented the consumer goods maker’s performance.

The cut, outlined in the company’s annual report on Friday, could head off a repeat of last year’s shareholder revolt at its annual meeting in May, at a time when concerns over executive pay are gathering steam among investors and politicians.

The maker of Durex condoms, Scholl footcare products and Strepsils throat lozenges said Kapoor’s total pay package for 2016 would be 14.6 million pounds ($18.2 million), down from around 23 million pounds in 2015.

Last year, Prime Minister Theresa May promised to overhaul corporate governance to try and close a huge wealth gap between bosses and staff. That followed several high-profile revolts including at Reckitt, where nearly 18 percent of voting shareholders rejected the 2015 remuneration plan that made Kapoor Britain’s third-highest paid boss.

Since then, the company has continued to grapple with fallout over its handling of a safety scandal in South Korea that was linked to the deaths of dozens of people.

“Avoiding a public face-off (with investors) ... is probably in the best interest of the company and shareholders,” said Laith Khalaf, senior analyst at Hargreaves Lansdown, which has a UK fund of which 4.3 percent is in Reckitt shares.

Reckitt said on Friday Kapoor would receive no annual bonus for 2016 and the share awards for his long-term incentive plan would be halved. It said that would reduce his package by 14 million pounds from what it would have been.

The company also said it would strip out the impact of earnings growth from the impending takeover of Mead Johnson from calculations for Kapoor’s incentive plan for 2017, and that future share awards for the incentive plan would also be reduced by more than half.

Reckitt’s South Korean business has collapsed since the government there said in 2015 that 92 people were believed to have died from causes related to humidifier sterilizer products sold by several companies including Reckitt.

In January, the former head of Reckitt’s business there was sentenced to seven years in prison.

Still, Kapoor’s 2016 pay package is likely to keep him at the upper end of the scale in Britain, according to Stefan Stern, director of the High Pay Centre think tank. He said the average pay package for a CEO at a blue-chip FTSE-100 company was 5.5 million pounds in 2015, up 10 percent from 2014.

$1 = 0.8027 pounds Reporting by Martinne Geller; Editing by Susan Fenton and Mark Potter

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