Yesterday, Home Depot, the world’s third-largest retailer by sales, announced a big change: Mr. Nardelli was leaving the company, taking an exit package valued at about $210 million, including $20 million in cash severance.
Lublin, Joann S., Ann Zimmerman, and Chad Terhune. Behind Nardelli’s Abrupt Exit [$]. The Wall Street Journal 2007 Jan 4: A1.
Home Depot’s share price fell 8% during Mr. Nardelli['s] tenure, which began in December 2000. The company is locked in a fierce battle with Lowe’s, which boasts newer, brighter stores and a better image with many shoppers. Lowe’s stock has risen 188% in the past six years.
Ibid.
Mr. Nardelli moved to cut back on higher-paid full-time employees with experience as plumbers or handymen, and to rely more on part-time workers with less experience answering home-improvement questions from customers. Frequently, Mr. Nardelli found himself fending off questions about deteriorating customer service and about whether cost-cutting was the cause of that.
Ibid.
[As part of his exit package negotiation,] Mr. Nardelli submitted a one-page list of perks he was willing to drop, including personal use of the six corporate jets…
Ibid.
…guaranteed $3 million annual bonus… [emphasis mine]
Ibid.
Much of [Mr. Nardelli's compensation] package is due to the rich employment contract he negotiated with the Home Depot board before leaving General Electric Co., where he was one of three finalists to succeed Jack Welch. Mr. Welch convinced his board to give all three finalists large batches of stock options, telling board members they would have to make good on only one man’s options, one director says. Upon leaving GE, the board was told, the two runners-up likely would use those awards to negotiate pay at their next jobs — which is exactly what Mr. Nardelli and James McNerney, who is now CEO of Boeing, did.
Ibid.
“Some defenders of CEO pay argue that CEOs are rewarded for increasing the stock or the overall value of the company, but judging by today’s market reaction, Mr. Nardelli’s contribution to raising Home Depot’s stock value consists of quitting and receiving hundreds of millions of dollars to do so,” [said Barney Frank (D., Mass.), chairman designate of House Financial Services Committee]
Ibid.
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