What is a responsible business?

Next time you load your dishwasher at home, ask yourself, what price does society put on the tablets you use?

Does £92million seem like too much? This was the 2009 annual pay of the executive behind the Finish Powerball – a dishwasher tablet brand. At the time Reckitt Benckiser CEO Bart Becht was lambasted as a villain and resigned a year later. How could the leader of a company that makes an array of mundane household products, like Dettol, Air-Wick and Strepsils, be worth so much?

Alex Edmans, Professor of Finance at London Business School, argues Becht’s salary could be justified because he took the company in an innovative and profitable direction. He argues that considering a business's responsible impact only in terms of its activity in obvious areas like carbon emissions, social cohesion and healthcare is a limited and partial view of what it means to be responsible.

What is a responsible business?

In the five years before Becht resigned, Reckitt had been the fourth best performing company in the FTSE 100, generating £22 billion of shareholder value. After he quit, it lost £1.8billion in market value. The reason why Becht had been successful, Professor Edmans argues, is that Benckiser had consistently innovated. In the case of the Finish Powerball it reduced the need for separate salt and rinse aid.