ATLANTA – Home Depot Inc. (HD) investors on Wednesday asked a Georgia state court to issue an injunction blocking the retailer from paying former Chief Executive Robert Nardelli a $210-million severance package.
"Nardelli's severance package is a final, indefensible step by the board of directors in wrongly over-compensating an unsuccessful chief executive," plaintiffs said in papers asking for a temporary restraining order.
Darren Robbins of San Diego law firm Lerach Coughlin Stoia Geller Rudman & Robbins LLP, a lead attorney in the case, told Reuters in a phone interview that the papers requesting an injunction were filed in the Superior Court of Fulton County in Atlanta.
Shareholders seeking to halt the severance had filed a previous lawsuit alleging former Home Depot executives and board members had awarded back-dated stock options and approved excessive pay.
Nardelli, who resigned from Atlanta-based Home Depot last week by mutual agreement with the board, received severance of $210 million under his employment contract. The sum included cash severance of $20 million, unvested deferred stock awards of about $77 million and other payments.
"It's our understanding that the full payments have not been made yet," Robbins said. The lead plaintiff in the case was the Pontiac, Michigan, retirement system for public employees, he added.
Home Depot spokesman Jerry Shields said the company had not seen the motion and therefore was not able to comment.
News of the severance further enraged shareholders who had long argued that Nardelli was overpaid during his six years at the helm of Home Depot, whose stock underperformed smaller rival Lowe's Cos. (LOW) and the Standard & Poor's 500.
U.S. Rep. Barney Frank, chairman of the House Financial Services Committee, said the severance pact was "further confirmation of the need to deal with a pattern of CEO pay that appears to be out of control."
DIRECTORS UNDER PRESSURE
The home improvement industry leader, which named Frank Blake as its new chairman and CEO, faces more scrutiny from activist shareholders who are pressing the board for corporate governance changes.
Last month, Ralph Whitworth, head of San Diego-based Relational Investors, said he planned to nominate at least two directors for election at Home Depot's annual meeting this year.
Other shareholders have said they filed proposals for the 2007 annual meeting seeking to split the roles of chairman and CEO and require investor approval of "extraordinary" retirement benefits for officers.
Home Depot said this week its directors had approved a change in company bylaws to require that two-thirds of independent directors approve CEO pay. Previously, the bylaws required that a majority of independent board members approve CEO compensation.
Home Depot shares rose 46 cents, or 1.2 percent, to $39.78 on the New York Stock Exchange on Wednesday.