ATLANTA – Dogged by criticism of his hefty pay and his company's poor stock performance, Bob Nardelli abruptly resigned Wednesday as chairman and chief executive of The Home Depot Inc. (HD) after six years at the helm of the world's largest home improvement store chain.
But he didn't leave empty-handed: the Atlanta-based company said Nardelli would receive a severance package worth roughly $210 million, an amount decried by some lawmakers as a golden parachute that sends the wrong message to investors.
"It's a sign of being totally out of touch," said Rep. Barney Frank, D-Mass., the incoming chairman of the House Financial Services Committee. "They don't understand the extent to which they make the American public angry."
Frank said he would push for legislation requiring public companies to allow shareholders to have a say in compensation and severance for senior executives. At Home Depot's annual meeting last May, shareholder proposals to give investors a say on the CEO's pay and to restrict retirement benefits for senior executives were rejected.
Nardelli's severance package includes a cash payment of $20 million and the acceleration of unvested deferred stock awards currently valued at roughly $77 million. A Home Depot spokesman said the timing of the resignation had no bearing on the amount in the package.
The total package is seven times the $30 million Home Depot set aside last June for stores and employees that provide good customer service. Home Depot has 2,127 stores and 355,000 employees in the United States, Canada, Mexico and China.
Home Depot said Nardelli was being replaced by Frank Blake, its vice chairman, effective immediately.
Home Depot co-founder Bernie Marcus, who had a hand in hiring Nardelli, said he supports the board's decision to replace Nardelli with Blake.
"My concern is what happens in the future, and I feel very good about it," said Marcus, who no longer works for Home Depot in any official capacity but remains one of the company's largest individual shareholders.
Asked about the severance payout, Marcus said the amount won't be that big a deal in the long-run if the company's stock price improves.
"It's like the old story, if the stock goes up 10 points, who's going to care?" Marcus said.
Nardelli, a former college football player, became CEO of Home Depot in December 2000 after being passed over for the top job at General Electric Co. (GE), where Nardelli had been a senior executive.
Blake's appointment is permanent, Home Depot spokesman Jerry Shields said. What he will be paid was not immediately disclosed, Shields said. The company declined to make Blake available for comment, and messages left for Nardelli with his secretary and on his wife's cell phone were not immediately returned.
Home Depot shares rose 85 cents, or 2.2 percent, to $41.01 in late trading on the New York Stock Exchange, near the upper end of their 52-week range of $32.85 to $43.95. Before Wednesday's news, Home Depot's stock had been down more than 3 percent on a split-adjusted basis since Nardelli took over.
Nardelli's sudden departure was stunning in that he told The Associated Press as recently as Sept. 1 that he had no intention of leaving, and a key director said that the board was pleased with Nardelli despite the uproar by some investors. That director, Bonnie Hill, did not immediately return messages left Wednesday for her at her office in Los Angeles.
Asked in the earlier AP interview if he had thought of hanging up his orange apron and leaving Home Depot, Nardelli said unequivocally that he hadn't. Asked what he thought he would be doing 10 years from now, Nardelli said, "Selling hammers."
For The Home Depot?
"Absolutely," he said at the time.
Marcus said he had no idea Nardelli's resignation was coming.
"Obviously, something happened over this last period of time that changed their mind and Nardelli's mind about staying," Marcus said.
Home Depot said Nardelli's decision to resign was by mutual agreement with Home Depot.
"We are very grateful to Bob for his strong leadership of The Home Depot over the past six years," Home Depot's board said in a statement.
Nardelli was a nuts-and-bolts leader. He helped increase revenue and profits at Home Depot and increase the number of stores the company operates. Home Depot's earnings per share have increased by approximately 150 percent over the last five years. But the public discussion about his pay and the company's stock price became a distraction.
As of the end of 2005, Nardelli had earned $123.7 million in compensation excluding certain stock option grants since becoming CEO. His compensation for 2006 has not yet been disclosed.
Industry experts and analysts said his departure and Blake's ascent to the top job are a good thing for Home Depot.
"This is not about strategy or vision," said James Senn, director of Robinson College's Center for Global Business Leadership at Georgia State University. "This is coming down to two things. Really the foundation of leadership is credibility. Bob has run into some problems there. The second is execution."
Edward Jones analyst Stephanie Hoff said she views the developments at Home Depot as a sign that there was a need for change at the top, not a change in the company's strategy.
"I think his gruff demeanor, while some people would consider that refreshing, sometimes hurt him," Hoff said, adding that Blake is considered by some as more articulate and polished.
She added, "I think the board basically was looking at this situation and figured Nardelli had become such a lightning rod for criticism of his pay package."
The Home Depot board also announced Wednesday that Carol Tome, its chief financial officer, and Joe DeAngelo, its executive vice president for Home Depot Supply, will be assuming additional responsibilities.
Tome will be assuming responsibility for mergers and acquisitions, credit services and additional strategic responsibilities. DeAngelo was appointed to the newly created position of chief operating officer.
Besides the cash payment and the acceleration of unvested deferred stock awards, Nardelli's severance package includes payments of earned bonuses and long-term incentive awards, account balances under the company's 401(k) plan and other benefit programs and certain retirement benefits.
Home Depot did not say what Nardelli would be doing next.
The board also announced that it had waived the retirement age of 72 and has asked John L. Clendenin, Claudio X. Gonzales and Milledge A. Hart III to stand for re-election at the 2007 annual shareholders meeting.