Sunday, January 07, 2007

Home Depot's Page 36 Thing

Home Depot’s David B. Sandor Vice President, Public Relations sent me an email saying “Please review the company’s 2006 Proxy Statement, along with each Proxy Statement from the previous four years. There you will find on Page 36 (2006 Proxy) the details of Mr. Nardelli’s employment agreement. It spells out the contractual obligations should he leave the company.”

It’s not about Page 36 in the proxy statement. It is definitely about the $210 million. Yes the proxy provides the arithmetic and mechanics. Somehow the mechanics of the proxy did not lead me to conclude that the exit package was going to be $210 million. Judging by the commentary in the financial press and marketplace the actual size of the settlement did knock quite a few heads back. The proxy also pointed out that Mr. Nardelli’s contract always had an extension clause that ensured there was always three year remaining.

The question becomes given the size of the actual settlement should it have been accentuated more or was page 36 in the proxy statement sufficient. Many other transactions of lesser financial impact would have been given a higher profile, announced separately, discussed on conference calls etc. etc. The page 36 approach may be a case where the circumstances are regulatory correct but investor toxic. $210 million for these results is tough to swallow.

Speaking of disclosure Home Depot’s investor relation’s page as at Sunday Jan 7, 2000 ET still had not posted any of the management changes. While we are at it what will the compensation arrangements be for the new guy? (Mr. Frank Blake) Will investors be directed to a soon to be released proxy statement issued well after the fact? Will the new guy have the same huge exit package? God help the Board if they do it again.

So far we know several things for sure. Mr. Blake does not have a retail background, which was also a major problem for Mr. Nardelli. They both came from GE and are therefore shaped by similar corporate cultures. They both have been appointed Chairman and CEO, which many governance experts view as inappropriate.