It has been a fairly swift turnaround at Gillette since James Kilts arrived four years ago. He has transformed a languishing consumer-products...

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BOSTON — It has been a fairly swift turnaround at Gillette since James Kilts arrived four years ago. He has transformed a languishing consumer-products maker into a business that Procter & Gamble is willing to pay $57 billion for.

Kilts, the first outsider recruited to lead the century-old company best known for its shaving products, attacked Gillette’s problems from within, demanding greater executive accountability, and also in the marketplace, pushing the company to launch new products such as its M3Power razor to help fend off its rivals.

“He unlocked potential in the company that had really been suppressed under the previous management,” said Rosabeth Moss Kanter, a Harvard Business School professor and author of a book on leadership that profiles Kilts and others.

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But while Kilts is being lauded as a corporate hero for a deal that’s giving investors an 18 percent premium on Gillette stock, he’s also running into criticism for the compensation, estimated as high as $185 million, that he’s to get from the deal.

Food-industry background

Kilts was a longtime food-industry executive with a knack for rebuilding troubled companies before coming to Gillette in 2001. When he arrived at the Boston-based company, he had an agenda that dealt with problems throughout the business — revitalizing the Duracell battery line, revamping grooming products and increasing advertising to support the M3Power, a high-tech, vibrating men’s razor that competes with Schick’s Quattro razor.

The formula worked, and Gillette’s stock has risen about 50 percent under Kilts. The company has had double-digit percentage earnings gains in 12 of the past 13 quarters, frequently surpassing the 15 percent to 20 percent growth Gillette enjoyed in the early 1990s, before its profits dwindled.

So Kilts and Gillette were in a position of strength when he approached P&G late last year about reviving merger talks that had failed five years earlier. It was an interesting turn: Gillette had turned down a takeover bid from P&G five years earlier.

Kilts, 56, typically declines requests for interviews — including one for this story — and rarely makes public appearances outside of trips to New England Patriots games at the stadium that bears the Gillette name. Since arriving at Gillette, Kilts has lived in a company-paid city apartment while maintaining a home in Rye, N.Y.

“Not a public figure”

“Jim Kilts is very tall and distinguished looking but he is not a public figure,” Kanter said. “He was not looking to become the famous person he is now. He’s doing a job, and he’s very good at it.”

Kilts got his start at food companies including General Foods and Kraft, then spent three years leading Nabisco, where he turned the company’s fortunes around before selling it in December 2000 to Phillip Morris.

After Gillette CEO Michael Hawley was forced out, Kilts was selected as the new chairman and chief executive over then-acting CEO Edward DeGraan, who had spent nearly three decades at Gillette.

Kilts found that the company that grew out of King Gillette’s 1895 invention of the safety razor had lost its edge with a corporate culture that failed to reward innovation and promoted staff mostly from within, Kanter said.

With Gillette’s largest shareholder, Warren Buffett, watching closely, Kilts “hired people to lead and innovate. … He did change people at the top, but very gradually,” Kanter said.

Kilts’ reputation grew. Last spring he was among the candidates to become Coca-Cola’s chief executive before he took himself out of the running.

Huge payout

The huge payout he’s due to receive from the P&G deal is tied to the four-year rise in the value of his Gillette stock and options, the premium P&G is paying in the deal and sweeteners such as a $12.6 million one-time “change-in-control” payment and special pension benefits.

The actual total depends on P&G’s stock performance, but initial estimates of Kilts’ gain came in at $153 million. The Wall Street Journal last week reported a new estimate of at least $185 million, accounting for details in Kilts’ complex package that the newspaper reviewed with assistance from an executive pay expert.

Company spokesman Eric Kraus declined to comment on Kilts’ compensation, but said of his performance, “In four years, he took a chronic underperforming company and made it into one of the best-performing consumer-products companies in our sector.”

Deal under review

Massachusetts Secretary of State William Galvin is reviewing the Gillette-P&G deal and has asked Gillette for information about executive payouts and the 6,000 jobs expected to be cut from the combined companies’ work force of 140,000.

W. Michael Hoffman, executive director of the Center for Business Ethics at Bentley College in Waltham, Mass., said Kilts probably secured a good deal for Gillette shareholders.

“But when you look at it from a common sense point of view, for a CEO to walk away after a sale with a compensation package this big after being there for just four years, it’s got to raise people’s eyebrows,” Hoffman said. “How else can shareholders look at it?”

Kilts is expected to stay for a year to help oversee the transition and serve as vice chairman of P&G’s board. A noncompete clause prevents him from landing a position with P&G rivals.

Harvard’s Kanter said Kilts may face a difficult decision: whether to take a job relatively soon outside the industry he knows best, or wait out the three-year noncompete period and stick with his specialty.

“He has never wandered tremendously far from the general set of things he knows how to do well,” Kanter said. “He really understands consumer products, whether they’re food or packaged goods.”