Europe’s best CEOs

Pity the poor European chief executive. The superstar cult that turned CEOs into media darlings in the U.S. during the 1990s stock market boom never really took hold in Europe. Nevertheless, European CEOs are now feeling every bit as much of a backlash of public scorn and shareholder scrutiny over corporate scandals and high pay as their American counterparts.

“Fat cat” compensation dominates British business headlines as U.K. institutional investors invoke new legislation to oppose executive pay packages, which tend to be modest by U.S. standards. German investors may not be far behind, following the adoption of a code that encourages companies to publish individual executive salaries. All across Europe, CEOs are grappling with a raft of laws and voluntary codes aimed at tightening corporate governance.

Then there’s the day job. The business climate presents equally daunting challenges. Europe’s CEOs are confronting a third consecutive year of sluggish economic growth and increasing pressure on margins at a time of unrelenting global competition. Economic growth in the 12-nation euro zone will be just 0.7 percent this year, forecasts the European Central Bank. In the first quarter Germany slipped back into a double-dip recession.

Meanwhile, although corporate profits look set for a rebound this year -- after plunging by one third in the past two years -- there is little sign of a sustained recovery. Restructuring efforts, lower interest rates and goodwill charges should boost European corporate profits by about 10 percent this year, predicts Richard Davidson, chief European economist at Morgan Stanley in London. But, he adds, “top-line revenue growth just isn’t happening.”

European stock prices reflect the subdued outlook. Despite a modest bounce after the Iraq war, the Dow Jones Stoxx 50 index was down 20 percent year-on-year in late June.

The situation cries out for strong corporate leaders who can forge strategies for sustaining growth in hard times, motivate employees to meet ambitious goals and rebuild the confidence of investors. “We need people who think a bit more broadly than the performance of their company over the next three to 12 months,” says Derek Abell, president of the European School of Management and Technology, a new Berlin-based management school backed by major German corporations.

Who provides that kind of leadership in corporate Europe today? Institutional Investor asked portfolio managers and securities analysts at major money management and securities firms to identify the best chief executives at companies they follow or invest in. The CEOs they named include well-known bosses of big blue-chip corporations -- Jorma Ollila of Nokia Group, Sir Terry Leahy of Tesco, Lord John Browne of BP. But the size of a CEO’s company doesn’t make him a leader. Other winners include Bart Becht of Reckitt Benckiser, the Anglo-Dutch household products company, and Jean-Martin Folz of French automaker PSA Peugeot Citroën.

Whatever their industry, these men share an ability to inspire employees and communicate strategy to shareholders.

“A CEO must be able to set up a vision for the company -- create a dream -- and then make sure that the environment is such that everybody works to achieve that dream,” says Pasquale Pistorio of STMicroelectronics, cited as the leading CEO in Technology/Semiconductors. Formed by the merger of ailing Italian and French chip makers in the late 1980s, STMicro has been transformed by Pistorio into the fourth-largest player in the global chip industry.

Selling your vision requires trust, however. Investor confidence has been shaken by corporate scandals and accounting irregularities. Much attention has focused on the U.S. because of the collapse of companies like Enron Corp. and WorldCom and new regulations requiring top executives to certify their companies’ results. But events at French entertainment conglomerate Vivendi Universal, which was brought to the verge of collapse by the acquisition binge of former CEO Jean-Marie Messier, and Dutch retailer Royal Ahold, which has admitted overstating its 2002 earnings by at least $500 million, demonstrate that governance is very much an issue for European companies. “The idea that it is an American phenomenon is wrong,” says Hans-Olaf Henkel, former head of IBM Germany and president of Leibniz Association, Germany’s leading government-funded research organization. “We have had our scandals.”

For the most part, European CEOs welcome new regulations to tighten corporate governance as a means of rebuilding investor confidence, although they are concerned that complying with the rules could be distracting.

“The abuses have been terrible,” acknowledges A.J. Scheepbouwer, chief executive of Dutch phone company KPN. “Dutch shares trade at a discount because of the Ahold scandal. We have no problem with Sarbanes-Oxley and tougher regulation. It is right that companies should be on a tight rein.”

Reckitt Benckiser’s Becht endorses strengthening the role of nonexecutive directors, as proposed earlier this year in the so-called Higgs report on reforming corporate governance. The report, commissioned by the British government, urges companies to ensure that nonexecutive directors are truly independent and to seek directors from a broader pool of candidates. Becht balks, however, at appointing a senior nonexecutive to act as a conduit to shareholders. “We don’t want to have multiple points of communication,” he explains.

Many CEOs see the challenge as a broader one than ticking the boxes of the latest code of conduct on governance. “A CEO should first of all give a sense of integrity to the organization,” says STMicro’s Pistorio. “I don’t mean only business integrity. I mean behavioral integrity -- being transparent, being able to communicate, doing what you said you would do and being absolutely consistent in your actions and your words.”

“It comes back to behavior,” agrees BP’s Browne. “It’s very important to proscribe. But it’s equally important to encourage the right behavior. I hope conversations on governance do not detract from what the business actually does.”

Browne is seeking to strengthen accountability and clarify responsibilities at BP. Over the past year his team has drawn up a 130-page booklet -- “How BP Works” -- that spells out the responsibilities of executives and middle managers throughout the group. He calls it “an unbroken chain from the board of directors right down to the bottom.” BP also requires all of its employees to sign a performance contract and regularly measures them against it. “Accountability goes to an individual,” Browne says. “It never goes to a group.”

“Regulations are important, but to my mind the onus must still lie with individual companies to act in a responsible manner and to understand that ultimately this makes good business sense,” says Ollila, chief executive of mobile phone maker Nokia. “Not only does it ensure legal compliance, it also improves risk management and enhances our brand reputation. This in turn builds trust among consumers, our customers, suppliers and the investor community.”

In some respects European CEOs face a tougher climate than their American counterparts. That is certainly the case with executive pay. Institutional investors in the U.K. have flexed their muscles in recent weeks to oppose the compensation policies of a number of familiar companies. Shareholders at GlaxoSmithKline voted against a potential golden parachute severance package worth up to £22 million for CEO Jean-Pierre Garnier. Tesco’s Leahy received a rare rebuke when 40 percent of the food company’s shareholders voted nay or abstained to protest the length of his two-year contract, which earned him £2.84 million in salary and bonus last year. U.K. corporate guidelines call for one-year contracts for top executives so they can be axed quickly if performance suffers.

“Shareholders feel more emboldened than they did,” says Geoff Lindey, head of governance policies at Britain’s National Association of Pension Funds, which helped lead the protests at Glaxo and Tesco. “You’ve got to be vigilant. Companies should want their shareholders to be vigilant.”

Not everyone appreciates such vigilance. The NAPF urged its members to abstain in the vote on Becht’s reelection to the board of Reckitt Benckiser and on the company’s compensation package, which the organization regards as excessive. Becht received a bonus that was nearly twice the size of his salary in 2002 and stands to receive severance pay of 1.5 times salary and two times his average bonus if he is sacked. Becht is entirely unapologetic about his pay package, which was ultimately approved by holders of 84 percent of the company’s shares. “Our compensation is very performance-driven; if we perform, we get paid very well,” he says. “If there is no cash bonus, there is no long-term incentive.”

The controversy over compensation reflects a deeper problem, maintains Paul Myners, the former Gartmore Investment Management chairman who sits on the boards of several British and American companies. For all the knocks taken by CEOs as a result of corporate scandals, many companies, investors and members of the press still lionize chief executives, to the detriment of other senior managers, he contends. “There are not many companies where one immediately thinks of a good leadership team, and yet that is the essence of good management,” he says.

The Leibniz Association’s Henkel worries that public anger over scandals and corporate pay could create an antibusiness climate in Germany and undermine support for the pro-business reforms Chancellor Gerhard Schröder has at long last begun to advance. Henkel advises companies to be pro-active and transparent through such measures as publishing the salaries of individual executives. Some German companies have already begun to do this, following the recommendation of a report last year by ThyssenKrupp chairman Gerhard Cromme in his capacity as head of a government commission on governance.

Ultimately, though, CEOs are judged by their ability to deliver good growth, not just good governance. And here the task is tough. Europe’s torpid economy makes it difficult to generate earnings gains, even as the rise of the euro -- which in the past year has surged 23 percent against the dollar and 15 percent on a trade-weighted basis -- intensifies pressure from abroad. Increasingly, European CEOs must think on a global scale.

“What has changed is the acceleration of the globalization process -- the appearance of more players and the very strong growth of China,” says STMicro’s Pistorio. “For me that means that the CEO must be able to make sure that there is flexibility built into the organization. This means that you must be able to respond quickly and have very few management layers -- such that you’re very close to the market, and the decision process is very rapid.”

At Peugeot, Folz is looking to the East for growth. The automaker is spending E1.1 billion to build two plants, in the Czech Republic and Slovakia. He hopes the strategy will keep costs down and help the company boost sales to 4 million cars in 2006, up from 3.27 million last year. “If we want to reach our growth objective in 2006, we have to expand now,” Folz says.

BP’s Browne suffered a rare setback last year when he was obliged to abandon a pledge to grow oil production by 5.5 percent a year. Although he regrets having given such prominence to that target, he hasn’t lost any of his determination to increase production. The company’s bold, $6.75 billion deal in February to merge its stake in Sidanco with TNK, which is controlled by Russian holding companies Alfa Group and Access/Renova Group, to create Russia’s third-largest oil producer is evidence of that determination. Browne is also counting on investments in Angola, the Gulf of Mexico and Indonesia to start paying off. “Underlying growth is now definitely picking up,” he says.

Reckitt Benckiser is seeking to increase development of new products in higher-margin areas, such as dishwasher detergent, to maintain double-digit income growth. “The fundamental challenges of our industry and our company have not changed that much,” chief executive Becht says. “To drive growth in our industry, you have to bring new ideas to consumers.”

For many companies, though, the key to earnings growth in today’s tough economy lies in cost-cutting rather than breakneck expansion. German software producer SAP slashed sales and marketing expenses by nearly 25 percent in the first quarter of this year, reducing costs by E95 million. Such discipline helped the company boost pro forma operating earnings by 28 percent in the quarter despite an 8 percent drop in revenues, which reflected the weak dollar’s impact on the company’s U.S. software sales. “You need operational knowledge of different areas of the company,” says Henning Kagermann, who took over as sole CEO in May. “What I don’t like is people who believe that there’s only one model for a CEO, because it’s different in every company. I cannot remember ever looking to books and studying the style of a CEO.”

Scheepbouwer’s sharp knife has been so successful at KPN that some investors are starting to ask about acquisitions. Since taking the job in 2001, he has slashed 10,000 jobs and cut the group’s debt in half, to E11.2 billion. Scheepbouwer is looking for growth, but he is wary of industry fashions and says KPN will be very prudent in financing any moves.

“Things can change very quickly, and investors that applaud deals and bankers that collect fees from them walk away when things go wrong,” he says. “You have to be master in your own house. That is the most important lesson I have learned.”



This feature was compiled by Senior Editor Jane B. Kenney, Assistant Managing Editor for Research Lewis Knox and Researcher Michele Bickford and written by European Editor Tom Buerkle (who wrote this overview), Senior Editor Andrew Capon, Staff Writer David Lanchner and Contributors Hugh Filman and Rhea Wessel.

The best CEOs by industry
Listed below are the 30 executives, by industry, who scored the highest when we asked portfolio managers and analysts at major institutional investment houses, as well as sell-side analysts, to choose the top-performing chief executive officer in their domains.
Industry Name Company
Aerospace & Defense Keith Butler-Wheelhouse Smiths Group
Autos & Auto Parts Jean-Martin Folz PSA Peugeot Citroën
Banks Fred Goodwin Royal Bank of Scotland Group
Beverages Paul Walsh Diageo
Building & Construction Liam O’Mahony CRH
Business & Employment Services Thomas Berglund Securitas Services
Chemicals Jürgen Strube* BASF
Engineering & Machinery Sune Carlsson** SKF
Food Producers Franck Riboud Groupe Danone
Food Producers Peter Brabeck-Letmathe Nestlé
Health Care Christopher O’Donnell Smith & Nephew
Household & Personal Care Products Bart Becht Reckitt Benckiser
Insurance Mario Greco Riunione Adriatica di Sicurtà
Luxury Goods Domenico De Sole Gucci Group
Media Anthony Ball British Sky Broadcasting Group
Metals & Mining R. Leigh Clifford Rio Tinto
Oil & Gas John Browne BP
Paper & Packaging Juha Niemelä UPM-Kymmene Group
Pharmaceuticals Daniel Vasella Novartis Group
Retailing/Food & Drug Chains Terry Leahy Tesco
Retailing/General José María Castellano Ríos Inditex Group
Specialty & Other Finance Stanley Fink Man Group
Technology/Semiconductors Pasquale Pistorio STMicroelectronics
Technology/Software Henning Kagermann SAP
Telecommunications Equipment Jorma Ollila Nokia Group
Telecommunications/Wireless Services Christopher GentÝ Vodafone Group
Telecommunications/Wireline Services A.J. Scheepbouwer KPN
Tobacco Gareth Davis Imperial Tobacco Group
Transport John Allan Exel
Utilities Ignacio Sánchez Galán Iberdrola
*Stepped down 5/6/03. ** Stepped down 4/15/03. ÝStepping down 7/30/03.

LORD BROWNE BP (U.K.)

Age: 54

Year named CEO: 1995

Number of employees: 115,250

Compensation: £1.28 million ($1.93 million) salary, £1.7 million bonus

Stock options: £17.3 million

Browne: “I talk more about strategy than quarterly results. That, I think, allows us to explain the company in a fair and evenhanded way.”

One voter: “He is highly visionary in the oil and gas industry. He can talk further ahead than most of his peers.”

In his eight years at the helm of BP, John Browne has certainly not lacked vision. The CEO’s daring, $54 billion acquisition of Amoco Corp. in 1998 turned BP into the third-largest oil company in the world and spurred a wave of copycat megamergers in the petroleum industry.

But his most audacious gambit may be his latest: In February, BP agreed to invest $6.75 billion to merge its stake in Sidanco with Alfa GroupAccess/Renova Group’s TNK to create Russia’s third-largest oil company. The move is a bold effort to boost BP’s lagging petroleum output. But it is also risky, say fund managers, because it comes amid continuing doubts about the investment climate in Russia. BP bought an initial 10 percent stake in Sidanco in 1998, only to go to court to stop what it considered an attempt by none other than TNK to strip Sidanco of some of its best assets. The two sides settled their differences last year and BP raised its stake in Sidanco to 25 percent.

“Browne dared to go where no one else had dared to contemplate going,” says David Allen, oil analyst and fund manager at Pioneer Investment Management in Dublin. But he cautions, “I don’t think we’ll know with any clarity how good a deal it’s been for five or ten years.”

For his part, the BP chief insists that he learned a lesson on Sidanco the first time around and made sure the new deal creates a “mutuality of interest” between BP and its Russian partners, Alfa Group (the holding company controlled by Mikhail Fridman) and Access/Renova Group. “We have equality with our co-investors,” Browne told Institutional Investor.

Browne is betting on strong increases in Russian oil production to fuel BP’s growth ambitions. The CEO suffered a rare embarrassment last year when the group was able to increase its oil and gas output by only 2.9 percent, against a target of 5.5 percent. Browne says he regrets having put so much emphasis on production targets, but he is still counting on new production in Azerbaijan, the Gulf of Mexico and Russia to boost output growth 5 to 6 percent in 2005. “Underlying growth is now definitely picking up,” he asserts.



JORMA OLLILA Nokia Group (Finland)

Age: 53

Year named CEO: 1992

Number of employees: 52,000

Compensation: E1.4 million salary ($1.6 million), E1.4 million bonus

Stock options awarded in 2002: E17.9 million

Ollila: “We lead the industry in reshaping people’s understanding of what a mobile device should look like.”

One voter: “Ollila has shown a consistency of vision unmatched by other chief executives. He has kept risks low, but he is also making the kind of investments that will help preserve Nokia’s high margins long term.”

If Nokia Group seems to defy gravity, that has a lot to do with chief executive Jorma Ollila. In 11 years he has turned a troubled, unfocused Finnish conglomerate -- Nokia once made rubber boots as well as computers -- into the world’s largest and most profitable mobile phone manufacturer. Even as its closest competitors have seen their profits plunge, Nokia has more than tripled its earnings over the past six years.

Over that same period the price of a typical Nokia phone has fallen about 15 percent every year. Nevertheless, the company has grown operating margins on handsets from 10 percent to 24 percent.

To be sure, Nokia’s share price has plunged by two thirds since the tech bubble burst three years ago. Yet as of mid-June 2003 the stock had still appreciated a startling 6,336 percent since Ollila took over in 1992. And even with its diminished market capitalization of E73 billion, Nokia ranks today as one of the largest companies in Europe.

Investors hail Ollila for relentlessly improving efficiency and driving down costs while promoting development of new technologies, such as text messaging and color screens. “Among the [mobile phone] industry’s CEOs, Ollila has the deepest understanding of the market, both in terms of cost and innovation,” says one fund manager. “He has consistently developed technology for the mass market more cheaply than anyone else.”

Jorma Ollila responded to questions from Institutional Investor Staff Writer David Lanchner from Nokia’s headquarters in Espoo, Finland.

Institutional Investor: What qualities must a CEO possess to excel?

Ollila: You’ve got to couple a strong desire to win with humbleness in the face of challenges. A good CEO must also have vision with a firm base in reality, along with the ability to inspire people and create winning teams. I see the CEO’s role very much as helping the company prepare for future challenges. This means taking responsibility for steering the company without losing sight of the different needs of shareholders, employees and customers. Being able to build the internal competence necessary to deal with diverse cultures will also be an important part of future competitiveness, given globalization.

Can CEOs keep their companies ahead of the curve indefinitely and avoid commoditization of their products?

In the mobile phone arena, I believe they can. We are seeing evidence of some degree of commoditization, but this is a complex industry and new technologies are constantly evolving. The secret to keeping margins high is successfully identifying and exploiting those new fields. In the past two years, Nokia has systematically increased its sales and marketing investments without sacrificing its strong margins. We intend to increase investments again this year. We’ve clearly demonstrated our efficiency when it comes to delivering new ideas and technologies in the right product form and in the right volumes. Being the leading mobile phone brand also helps us maintain high profits. It means great customer loyalty and helps us attract the best employees and suppliers, boosting productivity.

Are you surprised by the slow development of third-generation mobile networks?

It was initially slower than we anticipated, but the rollout is still progressing more quickly than that of second-generation networks in the early ‘90s. And this is despite the 3G technology being much more complex. Nonetheless, we have undertaken some restructuring measures in Nokia Networks to ensure a sustainable and profitable business.

Nokia has E10.5 billion in cash. You have announced a share buyback of up to E2 billion. How do you intend to use the rest?

Our liquidity reserve allows Nokia to invest in research and development and branding through difficult economic cycles. Basically, it guarantees our ability to capitalize on future business opportunities; if we make the right choices as to how we use it, we should be able to provide growing long-term returns for our shareholders.

Has the wave of global corporate scandals affected the way you approach your job?

It hasn’t really affected it. We have always viewed transparency and openness with our shareholders as requisite to our success and, in addition, taken a disciplined approach internally to our reporting processes. In terms of new U.S. regulations, we are readily complying with Sarbanes-Oxley, not only on the act’s provisions for non-U.S. companies but also, wherever possible, on those provisions applicable to U.S. companies. In this way we feel we are sending an important message to our U.S. investors. We want them to see us on an equal footing with U.S. companies in terms of governance and disclosure.

Do you think enough has been done to reform the capital markets?

That’s a tough one to answer because no matter how much you reform markets, the onus will always lie with individual companies to act in a responsible manner. They must understand that behaving responsibly ultimately makes good business sense.

How large a component of your job is dealing with investors?

I see making myself available to the investor community as a very important part of my role as CEO. I and other senior managers hold conference calls every six weeks, which are timed with our quarterly and midquarterly results announcements. We also take part in two comprehensive strategy updates for analysts each year. As a company we have been moving toward a more continuous financial reporting style. By being involved in a more or less constant dialogue with our investors, we increase our transparency and limit the amount of speculation around our share price.



HENNING KAGERMANN SAP (Germany)

Age: 55

Year named CEO: 1998

Number of employees: 29,000

Compensation: E1.3 million ($1.5 million) split between salary and bonus

Stock options and convertible bonds: E17.9 million

Kagermann: Our “reaction [to PeopleSoft’s and J.D. Edwards’s merger plans] was normal -- the deal was not surprising. It was not a piece of information that we spent hours of strategy looking into.”

One voter: “What the company has succeeded at very well is turning around some of the geographic parts of the business, like the U.S. That’s where Kagermann has had quite a role.”

When M&A fever hit the enterprise-application software market for personnel and other back-office systems last month, Henning Kagermann, CEO of Germany’s SAP, Europe’s largest software company, merely smiled. He saw the market shake-up as a chance for SAP -- which already has greater global market share in corporate-application software than Oracle Corp., PeopleSoft and J.D. Edwards combined -- to gain still more ground against its U.S. rivals as they spend time, money and energy courting one another.

Even before Oracle announced its hostile bid for PeopleSoft on June 6, in response to PeopleSoft’s offer for J.D. Edwards four days before, Kagermann had made it clear that he was not climbing on any merger merry-go-round. SAP, he declared, is not interested in an acquisition right now. Instead it will remain focused on cutting costs and improving the efficiency of its sales process by weeding out nonproducers, doing a better job of qualifying of clients and trimming presales expenses.

The U.S. has preoccupied Kagermann. Two years ago he and former co-CEO Hasso Plattner, who stepped down in May, began engineering the turnaround of a lackluster U.S. operation that critics said had missed the Internet bandwagon and was concentrating too much on multinationals and ignoring midsize companies. Now SAP is offering a host of applications that utilize the Web. And the company has focused on customer relations, shifted more global responsibilities to North America and beefed up its U.S. management team. “We feel that finally we have everything in place in the U.S.,” Kagermann says.

SAP is on target to improve its pro forma operating margin by 1 percentage point in 2003, the CEO says, despite the dire state of companies’ information technology spending. But Kagermann, who prides himself on being reliable, consistent and rigorously fact-based in his communications with shareholders, may be prone to understate SAP’s potential. Some analysts say that, considering the company’s remarkable cost cuts in the first quarter (about E95 million), SAP may actually beat its 2003 target, especially with takeover mania distracting its rivals.



PASQUALE PISTORIO STMicroelectronics (Switzerland)

Age: 67

Year named CEO: 1987

Employees: 43,000

Compensation: $770,000 salary, $654,000 bonus

Stock option awarded in 2002: 410,000 (80,000 at $31.09, 330,000 at $31.11)

Pistorio: “I never ask anybody to do something I’m not prepared to do myself. I never ask anybody to be in the front line more openly and more frequently than I am. The example is better than any word. You train by example more than anything else.”

One voter: “He’s a mix of charm and steel. He seems to have the ability to communicate extremely efficiently with an audience, yet has an independence of view and a willingness to make tough decisions when these are needed.”

As the first CEO of the company that was created as a result of the merger of Italy’s SGS Group and France’s Thomson Semiconducteur in 1987, Pasquale Pistorio has guided the development of STMicroelectronics (as the company was renamed in 1998) into a global semiconductor maker capable of challenging the U.S. and Japanese chip manufacturing giants. Under his leadership the company set about producing semiconductors for high-growth markets, such as wireless telecommunications, computer peripherals and digital consumer products, and forged strategic alliances with leading players in these sectors, including Nokia Group, Hewlett-Packard Co. and Pioneer Corp.

In 16 years STMicroelectronics has vaulted from No. 15 chip maker in the world to No. 4, according to Gartner Dataquest, a market research group. And STMicro is nipping at the heels of third-ranked Toshiba Corp. The Geneva-based company’s revenues have nearly sextupled, from $1.1 billion in 1988 to $6.3 billion in 2002. Even as many semiconductor manufacturers were struggling, STMicro made a profit of $429 million last year -- a 67 percent increase over 2001 -- by turning out high-end products expressly for the leading companies in global electronics, like Nokia, its biggest customer (see page 19).

A very public leader, Pistorio believes that no company can be successful without the CEO’s providing an ethical and strategic center. A onetime general manager of Motorola’s international semiconductors division, he regards providing that clear vision as one of his primary tasks. “A CEO should first of all give a sense of integrity to the organization,” says Pistorio, who joined SGS Group as CEO in 1980. “I don’t mean only business integrity. I mean behavioral integrity -- being transparent, being able to communicate, doing what you said you would do and being absolutely consistent in your actions and your words.”



BART BECHT Reckitt Benckiser (U.K.)

Age: 46

Year named CEO: 1999

Number of employees: 23,000

Compensation: £803,000 ($1.3 million) salary, £1.568 million bonus, £103,000 other benefits, £130,000 pension contributions

Stock options: £58.1 million

Becht: “The fundamental challenges to our industry and our company have not changed. To drive growth you have to bring new ideas to consumers.”

One voter: “He does a very good job of bringing his story to the market and allowing people into their model of the business.”

Focus, innovation and marketing. Bart Becht learned the basics of consumer products as a junior executive at America’s Procter & Gamble Co. Now he’s making them new and improved as the CEO of household products company Reckitt Benckiser in Slough, England.

Since leading the Anglo-Dutch merger that created the company in 1999, Becht has boosted sales by 14 percent and profits by 65 percent. Reckitt’s share price has nearly doubled.

Becht’s formula? Focus on a handful of key brands -- Lysol disinfectant, Total dishwasher detergent and Air Wick air freshener -- that enjoy strong growth and good margins, and sustain the company’s growth through frequent innovations.

Reckitt in fact draws 32 percent of its revenues from brand-new or revamped products that it has introduced, or reintroduced, within the past three years. For example, Calgonit Powerball 3 in 1 Total combines detergent, salt and a rinse agent in a single dishwasher tablet. Becht aims to boost that one-third revenue proportion to 40 percent by 2004.

As every CEO knows well, success brings problems of its own. After using the group’s strong cash flow to pay down £541 million of debt over the past three years and build a modest net cash position, Becht has come under pressure from shareholders to give some money back. He promises to do so this year unless Reckitt finds a suitable acquisition first.

The Dutchman faced rare personal criticism this spring when the U.K.'s National Association of Pension Funds urged members to abstain from voting on Reckitt’s executive remuneration policy and on Becht’s reelection as a director. The NAPF complained that the CEO’s bonus, at roughly two times his salary, and his stock option award, at 19 times, were “quite generous” for having exceeded what the association regards as relatively undemanding performance targets.

Becht is unapologetic. “If there is no cash bonus, there is no long-term incentive,” he says. “The system has a track record of success.”

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