Wilmington, DL, May 25, 2006--Bob Nardelli, the chairman and chief executive of Home Depot Inc., will be facing an unusually large group of dogged antagonists at his company's annual meeting on Thursday.
In the spotlight will be the estimated $245 million pay package--and that's a conservative estimate--that Nardelli is receiving while shareholders have lost money during his five years with the home-improvement behemoth.
When Nardelli joined Home Depot as its chief in December 2000, the shares were trading at an average of $43.06. On Wednesday, the stock was changing hands at about $37.82, representing a 12% decline since Nardelli put on the familiar orange apron.
That's particularly rank to shareholders who do the math on shares of Home Depot's biggest rival, Lowe's.
During the same period shares of Lowe's have rocketed 187% from an average of $20.89 to $60.66 at Wednesday's close.
"This compensation is egregious in comparison to [Home Depot's] performance," said Brad Pacheco, a spokesman for the California Public Employees' Retirement System, or Calpers. "Their performance has declined, they have fallen behind their competitors and it takes away from the pockets of shareholders."
Calpers, the nation's largest pension fund, will be among other pension funds and shareholder activists protesting outside the Hotel du Pont in Wilmington, Del., ahead of the morning meeting and then gathering inside for a full-fledge discourse on this year's proxy.
Calpers is backing an effort led by the American Federation of State, County and Municipal Employees to single out Nardelli and executives like him who are paid significant amounts of compensation in the form of wages, stock grants and deferred options.
Nardelli has a compensation package that intertwines his salary and bonuses with attractive stock grants and deferred options, loans and perks.
Brian Foley, an independent compensation consultant who has analyzed Nardelli's package, said that a big bulk of it is gleaned from grants and options. By Foley's calculations--which he says represent one-third of the face value of the stocks--Nardelli has been awarded $90 million in grants and $87 million in deferred options.
The rest of Nardelli's pay is made up of his salary, bonuses and a $10 million loan that was forgiven, costing shareholders about $21 million with accrued interest.
"The $245 million is conservative," Foley said. "If the stock were actually performing well over a sustainable period of time, his package could be worth considerably more."
AFSCME thinks that if investors had had a say in that, Nardelli would be compensated more in line with his peers. The government union group's proposal calls for shareholder approval--as an advisory vote--of the board's compensation committee's pay packages for senior executives.
In what amounts to a no-confidence vote, AFSCME said on Monday that it will withhold votes from 10 of the 11 directors on Home Depot's board.
In its proposal, AFSCME said that Home Depot's pay policy does not "give stockholders enough influence over pay practices," according to the proxy. "Such a vote isn't binding but it allows stockholders a clear voice, which could help reduce excessive pay."
Home Depot opposes the measure. Spokesman Jerry Shields said the company has no further comment on that proposal or others in the proxy, nor on Nardelli's pay package, which has become a lightning rod in the days ahead of the meeting.
Richard Ferlauto, AFSCME's director of pension and benefit policy, said that the Home Depot push is part of a broader effort to rein in excessive pay packages for top executives.
"There are different ways to describe who's worst, but Nardelli definitely is the poster child," Ferlauto said.
