Money Winners of 2007: Bob Nardelli takes the cake and eats it too
Posted by: in Companies Competitive StrategyFiled under: Products and services, Management, Competitive strategy, Home Depot (HD), Lowe’s Cos (LOW), Bargain stocks
Dateline, January 3, 2007: Bob Nardelli steps down as CEO at Home Depot (NYSE: HD). In leaving, Nardelli, who had been at the head of Home Depot for six years, scooped up a severance package valued at about $210 million, kindly tipped his hat, and slid his resume across the desks of Chrysler. Does this make the man an opportunistic corporate blood sucker, an overcompensated leadership figurehead, or just plain shrewd? My answer to that question would be, none of the above.
When trying to judge the departure of Robert Nardelli relative to his compensation and performance, two things need to be considered right on the front end. First, our jealousy factor must be removed from the equation. Second, we need to remember that compensation packages at this level are negotiated on the front end. Bob Nardelli didn’t “get away” with anything. He executed the terms of an employment contract, plain and simple. How many of the ambitious persons reading this blog wouldn’t have done exactly the same when given the same circumstances?
Most of the negative sentiment surrounding Nardelli’s well-heeled departure emanated from shareholders who were hurt by a slow yet significant decline in HD’s share value. But the fact is that within the past four years of Nardelli’s tenure, HD’s shares provided more consistent performance than the four years prior. Granted, investor’s haven’t seen Home Depot shares approach the past high of almost $70, but in light of today’s economy they probably won’t see anything like that in the near future, and that’s certainly not Nardelli’s fault.
Some analysts express the need to benchmark Home Depot performance against that of Lowes (NYSE: LOW). It would seem to me that in this scenario, its only analyst spin that puts Home Depot in a bad light. Even though they’re in the same field, they’re significantly different operations and only worthy of comparison as retail competitors. Once again, I state that’s certainly not Nardelli’s fault.
As money winners go, Bob Nardelli certainly was one for 2007. His departure from Home Depot raised many eyebrows, and also raised some important questions in regard to executive compensation. Through the year, top executive pay came under serious scrutiny, and it shall remain a matter of hot debate and adjustment for years to come due in part to the Nardelli effect. Perhaps we all won just a little bit when you take into account all the noise about executive pay packages that Nardelli’s Home Depot departure raised. Now we shall simply have to wait to see what the man does with Chrysler.
Be sure to check out more Money Winners of 2007.
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