Kilts a savior to some but not to all To supporters, he's a firm-saving knight; to detractors, he's a slash-and-sell CEO
RYE BROOK, N.Y. -- When James M. Kilts presided over the last annual meeting of Gillette Co. here, he stood six miles from the waterfront house he continued to call home as Gillette's chief executive and 188 miles away from the century-old company's Boston headquarters.
Opinion on Kilts's tenure is just as far apart. Fans, including business school professors and fellow executives, praise Kilts's ability to turn around struggling companies, boosting their stock prices along the way.
Kilts has ''put his money where his mouth is" by accepting much of his compensation in stock, said John Bowlin, a former chief executive of Miller Brewing Co. who worked under Kilts at Kraft Foods. ''I look at the mess he inherited at Gillette, and he met or beat every number on the board. He has delivered."
To critics, Kilts, 57, is an absentee CEO who will have sold two companies, Gillette and Nabisco, in less than a decade, and overseen the elimination of 13,200 jobs, while earning more than $260 million for himself, assuming Gillette's proposed sale to Procter & Gamble Co. goes through as planned.
''Kilts is a seller of businesses," said former Gillette executive and board member Joseph Mullaney, who has written a letter to the company's board critical of the P&G deal. ''That was his mission. That's why he never moved to Boston. What he was all about was taking the Gillette job and getting all the stock options" that became so valuable in a sale.
The passionate takes on Kilts contrast with the man himself, whom friends describe as Midwestern in temperament.
''He's got a quiet sternness people understand. He's not a screamer," said Thomas Herskovits, a former colleague who worked with Kilts at Kraft. ''He's very straightforward. You're not going to get a lot of jokes and kidding around."
Indeed, Kilts has to program time for humor. In her book ''Confidence," Harvard Business School professor Rosabeth Moss Kanter devotes a chapter to Kilts and ''Good old Gillette." She said Kilts introduced himself to Gillette executives in his first days on the job saying, ''Jokes were acceptable." Otherwise, as Kanter described his ground rules for company meetings, Kilts is all business.
''Attendance was required, meetings would start on time, there would be no gossip, he wanted full attention and active listening, he strove for consensus and he expected preparation," wrote Kanter, who had served as a business consultant to Gillette.
Born on Chicago's South Side in 1948, Kilts has made his career figuring out better ways to sell more cheese and crackers, prepared meals and snacks, and now razors and batteries. These are highly competitive businesses, with low rates of growth and pressure from Wall Street to find ways to boost results.
He started at General Foods and then served in increasingly higher positions at Kraft Foods and its parent Philip Morris, now Altria Group, before becoming chief executive of Nabisco in 1998. Kilts was always in the middle of combining operations, whether General Foods and Kraft, Kraft and Oscar Mayer, or Nabisco's eventual sale to Philip Morris in 2000 for $15 billion. Kilts joined Gillette a year later.
Whether at Gillette or Nabisco, Kilts has a consistent management style: Analytical, he expects employees to undertake rigorous reviews that produce realistic assessments of their business -- and then stick to them.
Big on discipline and accountability, Kilts broke Gillette executives of bad habits, the most pernicious of which was called ''trade loading." Desperate to make revenue goals, Gillette sales people would offer customers discounts and enticements to buy goods at the end of each quarter.
The practice undercut Gillette's pricing power and put the company at the mercy of its customers.
Kilts pushed Gillette employees to come up with more realistic expectations -- and stick to them. He increased spending on advertising and research and development, which have helped sales and led to the launch of products such as its pink Venus razor for women.
His business insights are hardly the stuff of brilliance -- which is the point. For example, he introduced color to razors, and in particular questioned Gillette staff's reluctance to making a red handle on the grounds it would remind customers of blood.
The result: Mach3Turbo Champion, one of Gillette's hottest recently launched products.
Kilts pushes for small innovations that the company ''does not have to bet the ranch on," said John Manfredi, a longtime aide and now a Gillette senior vice president. ''His strength is realizing the consumer products business is not rocket science. It really is testing what works with consumers."
But many people have lost their jobs under Kilts -- two rounds of restructurings at Nabisco eliminated 6,900 jobs. Gillette also has 6,300 fewer workers since he took over. The P&G acquisition will cut another 6,000 jobs from the combined companies.
The results, though, have been terrific for shareholders -- and Kilts, too. Nabisco was sold for $55 a share, after raider Carl Icahn initially offered $13. Gillette's stock is now up about 76 percent and the company is worth around $18 billion more since he took over Feb. 12, 2001.
But he remained an outsider to Boston, and to some a distant figure inside Gillette. He commutes most weekends to his Rye home and doesn't frequent the downtown business social circuit. When he is in Boston, he isn't often visible in the halls of company headquarters, said several current and former employees.
He has installed a team of about a half-dozen former aides from his previous companies to top-level positions, reinforcing the perception within the Gillette community that the firm is being run by outsiders.
But Kilts also can be found eating one of his favorite foods, a hot dog, at the Gillette cafeteria. Aides said he maintains a packed schedule that keeps him from circulating more.
''The lion's share of his day is dealing with strategic issues, and much of that is in meetings," said company spokesman Eric Kraus, who added that Kilts frequently communicates with employees through companywide electronic postings.
''He has done more employee communications in the four years he has been here than the last three CEOs combined," said Kraus. ''So while he is not walking the halls, he is communicating at a far greater extent."
Kilts would receive a package currently valued at $165 million if the P&G deal goes through, $73 million of which is from the value of Gillette stock and options he received as chief executive over the last four years. Officials said that as a mark of his commitment to the deal, Kilts has pledged not to sell his shares for at least 18 months after the acquisition.
Previously, he received an estimated $77 million from the sale of Nabisco.
Like many top executives, much of Kilts's pay is stock-based compensation, which he only gets if he -- and the company -- meet the goals set out by the board of directors. What's unusual about Kilts's pay package is the large amounts of stock he kept getting each year from Gillette, said Rajesh K. Aggarwal, a finance professor at the University of Virginia, who has analyzed Gillette's figures for Massachusetts Secretary of State William F. Galvin. Galvin is investigating whether the sale of Gillette is good for shareholders.
Kilts received options for 700,000 Gillette shares in 2002 and 2 million shares in each of the last two years. Either Gillette has a ''pretty generous compensation committee, or Kilts has pretty strong control over what they were doing," Aggarwal said. Another explanation is ''every year they had serious concerns about whether Kilts would leave," he added. Last year Kilts was aggressively recruited to head Coca-Cola Co.
Still, ''he's beyond well-paid," said Paul Hodgson, who researches executive compensation for the Corporate Library, a firm that evaluates corporate governance issues. ''Would the same goal have been achieved, with stock options at half that level? I say, yes."
Kilts declined requests for interviews. But a business associate who asked not to be named said the CEO feels he is being unfairly criticized and ''second-guessed" on his compensation, since critics had ample opportunity to comment on his pay because such figures are published annually by Gillette.
''Everything is lined up against him in terms of how people are going to receive" the Gillette sale, said David Luberoff, executive director of the Rappaport Institute for Greater Boston at Harvard University.
''Gillette is one of our icons and it's one of our last," Luberoff said, noting that Kilts hasn't made much of a connection to Boston. ''So it's no surprise the blowback toward him is so great. No one has any particular reason to stand up and defend him."
Andrew Caffrey can be reached at caffrey@globe.com. 