When James Kilts became CEO of Gillette Co., the consumer products giant had been a mainstay of the Boston community for a hundred years. But the organization was going through hard times: Its stock was trading at less than half its peak price, and some of its storied brands of razors were wilting under intense competitive pressure. In four short years, Kilts turned Gillette around-strengthening its core brands, cutting jobs, and paying off debt. With the company's stock up 61 percent, Kilts had added $20 billion in shareholder value.
Then Kilts suddenly sold Gillette to Procter & Gamble Co. (P&G) for $57 billion.

So short was Kilts's stay in Boston that he never moved his family from their home in Rye, New York. The deal was sweet for Gillette shareholders-the company's stock price went up 13 percent in one day. And tasty also for Kilts-his payoff was $153 million, including a $23.9 million reward from P&G for having made the deal and for a "change in control" clause in his employment contract that was worth $12.6 million.

In addition, P&G agreed to pay him $8 million a year to serve as vice chairman after the merger. When he retires, his pension will be $1.2 million per year. Moreover, two of his top lieutenants were offered payments totaling $57 million.

Any downside to this deal? Four percent of the Gillette workforce-6,000 employees-were fired. If the payouts to the top three Gillette executives were divided among these 6,000, each unemployed worker would receive $35,000. The loss of this many employees (4,000 of whom lived in New England) had a ripple effect throughout the area's economy.

Although Gillette shareholders certainly benefited in the short run from the sale, their profit would have been even greater without this $210 million payout to the executives. Moreover, about half the increase in Gillette revenues during the time that Kilts was running the show were attributable to currency fluctuations. A cheaper dollar increased revenue overseas. If the dollar had moved in the opposite direction, there might not have been any increase in revenue.

Indeed, for the first two years after Kilts joined Gillette, the stock price declined. It wasn't until the dollar turned down that the stock price improved.

Do CEOs who receive sweeteners have too strong an incentive to sell their companies? Is it unseemly for them to be paid so much when many employees will lose their jobs?