3 January 2007

CEO Nardelli Leaves Home Depot

Bob Nardelli resigned as CEO of Home Depot this morning. Profits at the hardware superstore chain have been all right in the 6 years Mr. Nardelli has been at the helm. The stock price hasn’t kept up, and that led to the “mutual agreement” between Mr. Nardelli and the board that it was time for him to move on. His pay packet may have been the deal breaker.

According to MSNBC, Mr. Nardelli’s compensation for his early departure is hefty. “The package includes a cash severance payment of $20 million, the acceleration of unvested deferred stock awards currently valued at approximately $77 million and unvested options with an intrinsic value of approximately $7 million. It also includes payments of earned bonuses and long-term incentive awards of approximately $9 million, account balances under the Company’s 401(k) plan and other benefit programs currently valued at approximately $2 million, previously earned and vested deferred shares with an approximate value of $44 million, the present value of retirement benefits currently valued at approximately $32 million and $18 million for other entitlements under his contract which will be paid over a four-year period and will be forfeited if he does not honor his contractual obligations.”

In addition, Mr. Nardelli has also agreed to a one-year non-compete clause, and he has agreed not to solicit employees or customers of Home Depot for four years. Neither side has said what it is he will be doing next, but if he has a brain in his head, it will consist largely of lounging around while others get on with the heavy lifting.

The 2006 shareholder meeting was a rocky one, and may have contributed to his resignation, or merely been a sign of its imminent arrival. Mr. Nardelli took no questions, and the board was absent. He had earned $119.2 million during his tenure, excluding options and some other compensation, but the stock was off 15%.

When a CEO leaves, under any circumstances, the stock of his former company tends to react. In the case of Home Depot, the departure of Mr. Nardelli appears to have pleased the Street. The price of a share rose 3% in pre-market trading today, and analysts expect a follow through on the open. Apparently, investors feel the company is better off without him.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.


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