Bob Nardelli, a lightning rod for criticism of The Home Depot’s stock performance during his six-year tenure, has resigned as chairman, president, and chief executive officer of the company, effective immediately.
Nardelli has also drawn heat for his huge pay packages and for the way he handled last year’s annual meeting, Under him, Home Depot has lost market share to rival Lowe’s Cos. while its stock has fallen 7.9 percent, according to Bloomberg.
Nardelli has been replaced by Frank Blake, the company’s current vice chairman and executive vice president. The company’s CFO, Carol Tome, who had been viewed by company watchers as a possible successor to Nardelli, will take on responsibility for mergers and acquisitions and credit services and assume some strategic responsibilities. An executive vice president, Joe DeAngelo, will also take on more responsibilities.
Nardelli will get a severance package valued at roughly $210 million, including a cash payment of $20 million, the acceleration of unvested deferred stock awards valued at about $77 million, the payment of previously earned and vested deferred shares valued at about $44 million, and payment of the present value of retirement benefits valued at $32 million.
At the May 25 annual meeting, at which eight shareholder proposals were considered, Nardelli was the only one of the company’s 11 directors to attend. Just over a half-hour long, the meeting contained no management presentation on operations and sharply curbed shareholder comment before votes were taken to elect directors, ratify the appointment of the company’s auditor, and consider shareholder measures.
Press coverage before the meeting had predicted a “showdown” over stockholder objections to Nardelli’s rich pay package, which provided him with more than $115 million in salary, bonus and stock during his five years as CEO. At the meeting, the CEO refused to answer questions about his pay.
In a later interview with CFO.com, Tome said The Home Depot plan was “simply to address the shareholder proposals,” adding that for an annual meeting “that’s the only legal requirement.”
Tomé said that she had taken part in planning for the 2006 annual meeting and that the plans reflected the reality that shareholders communicate more with management by mail, before the annual meeting rather than at the session itself. Tomé, who observed the meeting from a seat next to Nardelli in Wilmington, Del., also was involved in discussions leading the company to reject the new format for 2007, although she was restrained in her description of that review.
“We tried a new approach, and clearly, based on the feedback we got from shareholders, they prefer our prior format,” she said. In 2007, Tomé said, shareholders will again hear a business presentation from management, will get management’s answers to their questions, and will have directors present.
Directors’ dealings with Tomé had been featured in a CFO magazine cover story in January 2005, in which she said her role was “to communicate from independence and authority.” In the article, she said she and Nardelli took an “open kimono” approach with the board that involved “talking about the bad stuff as well as the good stuff.”
In a press release concerning Nardelli’s departure, The Home Depot’s board said: “Under Bob’s tenure, the company made significant and necessary investments that greatly improved the company’s infrastructure and operations, expanded our markets to include wholesale distribution and new geographies, and undertook key strategic initiatives to strengthen the company’s foundation for the future. The Home Depot has delivered strong and consistent growth and gained market share under Bob’s leadership, and we believe that the company is well positioned to continue to do so.”