Posted on 01/04/2007 4:11:41 PM PST by Anti-Bubba182
Most CEOs favor market solutions over regulatory ones and laissez-faire economics over other kinds. Little wonder: When you're the most powerful guy in the market–or the company–things tend to go your way.
Even when they don't go your way, which is the happy conundrum Home Depot CEO Robert Nardelli has found himself in. Under pressure from shareholders, Home Depot's board has dumped Nardelli after six years, deciding he's not the right guy to lead the home improvement chain out of a slump. But to make his departure less painful, Home Depot is handing Nardelli a parting gift worth $210 million in cash, stock, and options. That's about 25 times what the average Fortune 500 CEO earns per year. It's more than the total payroll of the New York Yankees.
Commence bellyaching. Nardelli has been a lightning rod for inflated CEO pay for a while, and the rich exit package will intensify protests. Home Depot has paid Nardelli almost $250 million over the past six years, to reward him for boosting the stock price by ... a lofty 3 percent. Firing him turned out to be more cost-effective; in the three hours following the announcement of his departure, Home Depot's stock rose another 3 percent.
Meanwhile, at rival Lowe's, which has been causing Nardelli grief (pesky competition!), the stock has risen nearly 180 percent since 2001. Lowe's CEO, Robert Niblock, earned about $9.5 million last year–handsome pay for sure, but that followed a 20 percent run-up in his company's share price in 2005....."
(Excerpt) Read more at usnews.com ...
The same big shareholder who seated himself on the board and forced Nardelli's ouster should now weigh in on the severance package.
Lowe's has been a worthy competitor. And Nardelli is by all accounts an overpaid and arrogant man with internal employees and a tin ear for shareholder concerns. However, I think that he did a good job business-wise during his tenure. Its not his fault that Home Depot got so big the market decided to price it as a big-cap, modest growth stock instead of a highflyer with huge but unknown future prospects (i.e., PE > 30, dropping to about 13).
Home Depot as a business had done a lot of good things. Its grown steadily, it has revamped its appliance business, and it has made a big push into the contractor market, adding to its previous concentration on home owners. I think its a good business with good prospects going forward (I like Lowes also).
Warning before you flame... I own this stock, and as noted above I think Nardelli was overpaid several-fold. In fact, I'm still shaking my head over the way the board negotiated a non-compete for a period of .... one year!
The pay of the CEO should be the concern of shareholders and by nobody else.
Awhile after I complained about the self checkout things and after this guy called me they took the self checkout equipment out. Recently they put new stuff in and this times it works pretty good.
Say what you want about Home Depot but in my case I complained and the co-founder of the company called me on the telephone. It turns out that at the time I was right and he was wrong but what can I say? Langone is a billionaire and a genius. And it looks like he finally got the equipment working right.
Hah! I just found a clip of Langone here and he looks like a guy some people here would like.
I agree. Customer service at Home Depot is non-existent. I just go to Lowes.
Wow, a $210 million parachute for declining performance. How can I get a deal like that!!??
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