Floyd Norris has added a heretofore unexplored slant on Home Depot’s bungling of its expensive parting with former CEO Robert Nardelli by suggesting it was Lowe’s, HD’s chief competitor, and not Home Depot’s investors (and certainly not its employees), who benefited most from Nardelli’s tenure. And for that privilege, they will now pay out $210 million more, on top of the tens of millions paid to this icon of CEO excess over the past five years. It is a strange commentary on the quality of corporate governance in America, and the directors of Home Depot in particular, when you consider that the board has done more for its rival than for its own stakeholders. And, as I revealed in my posting here, this is a board that pays itself very well indeed with other people’s money.I added the following comment to the posting on Floyd’s New York Times blog.
Home Depot’s board offered a compensation package of more than $245 million to CEO Bob Nardelli over five years, according to the Times, during which period the company’s share value continued to plummet. His $210 million severance comes on top of this. It was a failed strategy one presumes from the changes announced this week. Is it just me or does that seem like a lot of money for the privilege of failing? I say this fully acknowledging that the Home Depot pay fiasco is symptomatic of the wider disease of excessive CEO pay abuse, which I long ago dubbed the “mad cow disease of the North American boardroom”.
Nardelli’s autocratic domination of the company’s annual general meeting, where he routinely cut off shareholders’ questions after one minute and ended the meeting after half an hour, and which not a single member of the board bothered to attend, was an event that would bring a smile to Kim Jong-il.
This was the clearest illustration of a CEO and a board who forgot to whom and for what they are accountable. Add to this the low marks the company receives for customer service and recent revelations that it routinely backdated stock option dates for the past 19 years, and the only reasonable conclusion is that Home Depot and its board are indeed in need of serious renovation. Nardelli’s exit is only part of the solution.
The second shoe in the form of board resignations is what investors need to hear next.