all-encompassingly

4 Responses to “Home Depot CEO Steps Down”

1. January 4th, 2007 at 1:59 am
   Brad

   I think people are starting to realize that there aren’t very many individuals who add as much value to a firm as a lot of CEOs today are receiving in bonuses, etc. As that realization comes, there are some weird by-products like stories like this.

2. January 5th, 2007 at 12:10 pm
   Brad

   From the editorial board of the Wall Street Journal today:

   The truth is that nearly all of that $210 million isn’t severance at all but was part of Mr. Nardelli’s original employment contract. In other words, it was part of the package that the Home Depot board offered to lure him in the first place. Keep in mind that when he was hired in 2000 Mr. Nardelli had been a star at General Electric, one of the three executives competing to succeed Jack Welch as that company’s CEO. When he lost out to Jeff Immelt, Mr. Nardelli was a hot executive property in a world that isn’t exactly full of them.

   At the time, too, Home Depot was considered fortunate to get him. The retailer had been growing fast, and in 2000 its shares were near the stratosphere like just about everyone else’s at the top of the bubble. The board wanted a CEO who could keep les bon temps rolling, and so it offered Mr. Nardelli a big chunk of shareholder wealth to take the job. And, by the way, the terms were disclosed in the annual Home Depot proxy.

   That contract can’t be abrogated now simply because the board has concluded it made a mistake. Of that $210 million figure, more than $180 million is owed to Mr. Nardelli as part of his original job offer. That includes $77 million in unvested deferred stock awards, another $44 million in vested deferred shares, $32 million in retirement benefits and $9 million in earned bonuses. Even a $20 million cash payment upon termination was part of his original contract.

   The bulk of what could fairly be called “severance” is $18 million in “miscellaneous benefits” that the company plans to disclose in more detail in its 8-K filing with the Securities and Exchange Commission next week. But even that was negotiated in return for Mr. Nardelli signing a non-compete agreement and a four-year pledge not to solicit Home Depot employees or customers. In other words, this is a fairly standard termination deal to protect the company’s competitive interests.

   …It also didn’t help Mr. Nardelli that one of the Home Depot directors who hired him is Ken Langone, who also helped to set Dick Grasso’s pay at the New York Stock Exchange. This makes the executive “greed” theme music even more fun to play. We’re not sure where this latest populist campaign is headed, but the beginning of wisdom would be for the tub-thumpers to stop confusing “severance” with hiring pay.

3. January 5th, 2007 at 12:19 pm
   doug

   Brad, you’re making my ears bleed!

   This is why I can’t regularly read the Wall Street Journal, they shill too much for big business.

   In other words, this is a fairly standard termination deal to protect the company’s competitive interests.

   Well, duh, editorial staff of the WSJ! If Home Depot could fire their CEO for malfeasance like they do peon employees then they probably would. But that’s the point, they can’t.

   Even a $20 million cash payment upon termination was part of his original contract.

   The bulk of what could fairly be called “severance” is $18 million in “miscellaneous benefits” that the company plans to disclose in more detail in its 8-K filing with the Securities and Exchange Commission next week.

   $20 million here, $18 million there…pretty soon we’re talking about real money!

   This makes the executive “greed” theme music even more fun to play.

   Indeed it does.

   We’re not sure where this latest populist campaign is headed, but the beginning of wisdom would be for the tub-thumpers to stop confusing “severance” with hiring pay.

   True.

   Which makes the headline even funnier…Shareholders upset at bloated pay for CEO, who resigns with $210 million package, most of which the board promised him at the beginning. Only in America. Only in big busines.

4. January 5th, 2007 at 12:42 pm
   Brad

   Ridiculous, yes…but surprisingly enough it’s not the public companies where the biggest executive compensation comes from these days. From that same article:

   This may be unpleasant for reporters and other egalitarians to hear, but it’s a fact of the marketplace. Public-company CEOs face the harshest scrutiny because their pay packages are disclosed, but some of the largest compensation deals these days are being offered by private-equity recruiters. We doubt Henry Kravis or the Carlyle Group are parting with big chunks of their equity because they don’t think their CEO hires are worth it.

   In other words, there are smart, entrepreneurial individuals who head up closely-held businesses who are willing to pay this kind of money. That’s got to mean something, doesn’t it Doug? Why would these people give up their own equity if they didn’t think it was worth it. I’m not saying all executives are worth it (as we can obviously see in this case). I’m saying some people think some executives are worth it.