Executive pay

BY: TYLER SCHRODER, ALEXANDER TZENG,

TIM ISKANDAROV, SAMAN TAFTI AND
CHARLES BENSON

Robert Nardelli
One of the top 4 executives at General

Electric.
Home depot won the 3-way battle over

Nardelli and assigned him as their CEO in

2000.
Worked for Home Depot for 7 years.
Invested more than $1 bill in new

technologies and invested $7.6 bill to built

H.D supply.

Performance
Revenues have grown

Cost-cutting programs:

12% per year, to $81.5

billion.
Profits have more than
doubled to $5.8 billion.
Statistics (In Billions)
$90.00
$80.00

$81.50
$7 2.90

$7 0.00
$60.00

Rev enues
profits

$50.00
$40.00
$30.00
$20.00
$10.00
$0.00

$2.90
1999.0

$5.80
2000.0

Gross profit from 30%

to33.8%.

The total return to

shareholders has
decreased by 13%.

Compensation
Employment contract

(Target Amount=Minimum $3 mill in bonuses)

Bonuses
$8,000,000.00
$7 ,000,000.00
$6,000,000.00
$5,000,000.00
$4,000,000.00
$3,000,000.00
$2,000,000.00
$1,000,000.00
$0.00

$7 ,000,000.00

$1,500,000.00

$7 7 0,849.00

Transition
Frank Blake (Home Depot)

Nardelli (Chrysler)

Fired-Up Shareholders
California Public Employees Retirement System

10 million shares
ISS advised shareholders to withhold 10 of 12 Home

Depots votes for reelection of Nardelli

The Corporate Library rates Home Depot and F on

compensation.

Criticism from Shareholders

Board absent during annual shareholder meeting
Angry Shareholders:

Richard Fillano
Richard Ferlauto
Richard Metcalf

Nardelli Resignation
Retailers annual meeting 2006
Nardelli resigns 2007
$210 million retirement package

Home Depots Values

1.
2.
3.
4.
5.
6.
7.
8.

Taking care of our people

Giving back to our communities
Doing the right thing
Excellent customer service
Creating shareholder value
Building strong relationships
Entrepreneurial spirit
Respect for all people

Inverted Pyramid

Transforming Values
Before Nardelli

After Nardelli

Home Depot preached make love to the

customer
Took care of employees
Excellent customer service
Created shareholder value

Implemented plan for Home Depot to

become 2nd largest retailer next to WalMart

Layoffs of full time staff as way of cutting
costs
In 2005 ranked last in University of
Michigan annual American Consumer
Satisfaction Index
Stock price down 13%

Dissatisfied Employees
Downsizing full time staff
Nardelli used an in your face management style

which resulted in high turnover in the upper ranks of

Home Depot.
Since 2001, 98% of 170 executives are in new
positions.
56% of the changes involved bringing in manager
from outside the company.

Alienating Customers
Staffing cuts led to complaints that there wasnt

enough workers to help do-it-yourself customers.

Board of Directors
Primary Responsibilities?
7th Principle of Executive Compensation.
Home Depots Policy.
Shareholder Response.

Duties/Responsibilities of Board of Directors

Ensure that compensation is aligned with the core

values and the strategic plan

Be representative of shareholder interests
Select executives with values that align with those of
the company
Respond to shareholder concerns

Whos Fault?
Board of Directors because they failed Home Depot
Failed

to represent shareholders
Hired a CEO with misaligned values
Failed to oversee control of Nardelli
Failed to uphold their company values
Failed to answer any questions/concerns that
the shareholders had

Our Values