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NEW YORK - Bob Nardelli, chief executive of American DIY chain Home Depot, agreed to quit after falling victim to a shareholder revolt over his oversized pay packet.
But he ignited one final storm of protest with a severance package valued at US$210 million ($298 million).
The pay-off
nearly doubles the amount of money Nardelli has taken out of the company since being appointed six years ago, over which time the shares fell 8 per cent, and it roused Democrat politicians to promise new laws on pay.
Home Depot said Nardelli agreed to quit at a board meeting on Tuesday and had already left. Dissident shareholders were promising a showdown at the company's annual meeting in the spring, and were demanding an investigation into pay, management controls and strategy.
"The departure package is an outrage," said Nell Minow, editor at the Corporate Library, an independent research firm in Portland, Maine. "He should be giving money back to the company, not taking anything more."
US Representative Barney Frank, a Massachusetts Democrat who is the new chairman of the House Financial Services Committee, said yesterday he would hold hearings on executive pay and may push for legislation to give shareholders greater say over what CEOs make.
"The justification for these really very, very large amounts of money being given has been that they are performance-driven," Frank said of Nardelli's package after a speech at the National Press Club in Washington. "When it's given as a consolation prize for bad performance, then the whole justification is called into question."
The departure was cheered on Wall Street and by company employees. Workers have been furious at the scale of their boss' pay, outrage that has been further fuelled by criticism of company strategy.
Shares in Home Depot shot up more than 3 per cent in early trading. The company now looks more vulnerable to a takeover. It has been said to be in the sights of private equity groups mulling what, at approaching US$90 billion, would be the most ambitious leveraged buy-out of all time.
Nardelli was one of the most sought-after executives in the US when he joined Home Depot from General Electric in December 2000. By the end of 2006, though, he was a poster boy for executive greed.
Investor anger over his pay, which totalled US$256 million over six years, boiled over at the company's annual shareholder meeting last May, which was attended by no board members apart from Nardelli.
At least 30 per cent of shareholders withheld support for the re-election of 10 of the 11 directors, including Nardelli. As recently as September, the board was defending its pay policies.
"He has been there six years and the company has not returned even a T-bill rate to shareholders," said Ralph Whitworth, head of Relational Investors, a Home Depot shareholder. "He has taken out US$1 million every three days with no return."
Home Depot said Nardelli's decision to resign was "by mutual agreement". A statement by the 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."
Frank Blake has been promoted to chief executive, and Carol Tome, the chief financial officer, will assume responsibility for mergers and acquisitions, although UK analysts were sceptical that she would reopen the possibility of a takeover of Kingfisher.
- INDEPENDENT, BLOOMBERG