The Association of U S West Retirees



Home Depot logic has screw loose 
By Al Lewis, Staff Columnist 
Denver Post
Sunday, January 7, 2007

When my son was 4 years old, he went to Home Depot with some neighbors and learned to build a squirrel feeder.

The home improvement store chain can feed the humblest of creatures.  And despite its low prices, it also can feed the least humble, including the CEO.

That's because one of the company's founders is Kenneth Langone, a 70-year-old investment banker who will pay just about anything for a top executive, as long as it's the shareholders' money he's spending.

Langone was on the compensation committee responsible for former New York Stock Exchange chief Dick Grasso's scandalous $190 million compensation package.  So the announcement last week that Home Depot would pay CEO Bob Nardelli $210 million just to quit his job should not be a surprise.

Nor should it tax the imagination that Home Depot spent nearly a half a billion dollars over six years for a CEO who took a regular hammering from its main competitor, Lowe's, and who did nothing to improve his company's stock price.

This is business as usual for Langone, who has served on the compensation committee of General Electric, which spares no expense for top executives.

Many people in charge of big businesses seem to believe that GE executives can run anything, no matter how dissimilar from GE.  This is just some of the thinking that maintains the artificially high compensation of the professional executive guild.

Don't bother promoting in-house middle managers who've spent their careers getting intimate with particular operations.  Better to pay a premium for some guy from GE.

Nardelli, 58, was one of three finalists to replace GE's iconic CEO Jack Welch.  He didn't get the job, but GE lavished him with incentives to stay.

For Home Depot to lure a guy like Nardelli from GE, it had to provide an attractive compensation package, including an outrageous golden parachute.

Why would a guy with Nardelli's alleged management talents leave a sure thing like GE unless there was an even surer thing at Home Depot?

Unfortunately, nobody really realized the kind of money involved until Home Depot actually opened Nardelli's golden parachute last week.

I wonder what it's going to cost when the new CEO, Frank Blake, a Home Depot executive also formerly from GE, gets the boot.

Home Depot's board parted ways with Nardelli, not only because of the company's mediocre stock performance, but because they are under fire from unions and investors, upset about everything from the direction of the company to a stock-options inquiry to executive pay.

"Langone has been associated with executive pay abuses at multiple institutions, most notoriously the Grasso pay scandal at the New York Stock Exchange," said Richard Trumka, secretary-treasurer at the AFL-CIO, which has called for Langone's resignation.

Meanwhile, Ralph Whitworth of San Diego-based Relational Investors is agitating for two director's seats.  He's not as upset about Nardelli's pay as he is about the fact that the company isn't performing.

The board members responded to these challenges by getting rid of Nardelli and entrenching themselves deeper.

The board announced last week that it had temporarily waived the retirement age of 72 for directors so John Clendenin, Claudio Gonzales and Milledge Hart III could stand for re-election at the 2007 annual shareholders meeting.

"This action was taken to retain these directors' experience, and deep knowledge of the company's business and key personnel to help ensure a smooth management transition," the company said in a statement.

As if it's so tricky moving from one overpaid GE guy to another.

Clendenin and Hart were on the board when Home Depot hired Nardelli.  They share responsibility, along with Langone, for Nardelli's absurd compensation.

Does Home Depot really need more of their experience?

Next time my son goes to Home Depot, I may ask him to build a weasel feeder.

Al Lewis' column appears Sundays, Tuesdays and Fridays. Respond to Lewis at, 303-954-1967 or