The Association of U S West Retirees



Home Depot Chief Apologizes to Shareholders
By Michael Barbaro
New York Times
Thursday, May 24, 2007

ATLANTA, May 24 — First, there was an apology.

As he took the stage here for his first Home Depot shareholder meeting as chief executive, Frank Blake confronted the past, saying he regretted last year’s now infamous annual meeting, when members of the board stayed home and his predecessor, Robert L. Nardelli, refused to take questions from investors.

“There is no better way to deal with a mistake than to acknowledge it, fix it and move forward,” Mr. Blake said.  “We apologize for last year’s meeting.  It was a mistake and we won’t do it again.”

Over the next two hours, Mr. Blake strove to make this year’s meeting a model of openness — he used the word several times — by fielding longwinded questions, addressing complaints (from customers and investors) and discussing the retailer’s business problems.

Since Mr. Nardelli did none of those things last year (he concluded the gathering after 37 minutes), investors said that the bar for transparency was set rather low.  Still, they applauded the new tone from the top, repeatedly praising Mr. Blake’s humility and willingness to admit mistakes.

“You have done a remarkable job today,” said Timothy H. Smith, a senior vice president at Walden Asset Management, who offered several shareholder proposals voted down this morning.

Still, several investors complained that Mr. Blake’s style would do little to improve the company’s flagging financial performance or its stagnant share price.  With home sales slumping, Home Depot’s profit and individual stores sales are falling, and the problems are expected to persist for the next year.

Mr. Blake said the solution was to invest heavily in Home Depot’s 2,000 stores, putting the company in a better position when the housing market improves.

“We are at a turning point for our company,” he said.  “We know this is a tough market.  But this is a great market and we need to invest now for the future.”

Though much of the meeting was devoted to the retailer’s future, executives could not help explaining or defending its recent history.

In a rare interview, the company’s lead director, Kenneth Langone, said the board had been “foolish and stupid” to skip the meeting last year and insisted that directors “should take more of a hit from last year’s meeting than Bob.”

Mr. Langone, heavily criticized by investors because he was considered Mr. Nardelli’s strongest ally on the board, said that he “should have known” that directors’ absence would inflame shareholders.

“That was a miscalculation,” he said.  “The shareholders own the company.  We can never forget that.”

But Mr. Langone strongly defended Mr. Nardelli’s pay, which amounted to nearly $260 million during his six-year tenure.  That compensation, and his refusal to take a pay cut, ultimately forced the board to nudge Mr. Nardelli out of the chief executive job.

Mr. Langone said that when the board began looking at Mr. Nardelli as a candidate to run the company, “We needed the best.  We got the best.  Bob saved Home Depot.”

He said Mr. Nardelli was worth “the full value” of his pay, adding, “I am never going back away from it.”