Nardelli's Money

Home Depot (NYSE:HD) announced the immediate departure of Mr. Robert L. Nardelli, 58 Chairman, Chief Exec. Officer, Pres and Chairman of Exec. Committee. Shareholders are looking at approximately $210 million to wave good-bye. Apparently Mr. Nardelli will not be sitting on the board as a triumphant retired CEO offering sage advice to those that come after him. The remaining officers and more importantly members of the board appear to remain intact. Some of the grey beard directors have even been asked to stand for re-election. So what has changed or is transpiring? Has the problem really been solved? By the way the new boss does not have a retailing background. So that problem definitely has not been resolved.

The negotiated settlement, which is almost certainly based, patterned, rooted or influenced on a pre-existing employment agreement, is huge by any standards. $210 million is approximately 20% of the last quarters reported cash flow. $210 million is approximately 2% of last quarters inventory position. $210 million is approximately $592 per associate (Home Depot web site reports 355,000 associates). $210 million is an incredible amount of money. Most of us would eagerly take the settlement. More than one would have darkly worked to the settlement rather than doing the actual job.

We all understand the management change. What is appalling is the price. Not all CEO's work out. Settlements are a fact of life. New CEO's have de facto pre-negotiated exit arrangements. We currently have a compensation culture for CEO's; particularly star CEO's at large cap well funded organizations. The CEO's know it. The boards know it. The consultants, lawyers, accountants, governance compliance experts, wives and mistresses know it.

Why then does the investor not know what the hit will be if as and when he has to pick up the tab? If Reg FD and Sarbannes Oxley mean anything why not publicly report what the exit arrangement would be in the case of early termination. Therefore when the exorbitant arrangements becomes upfront public knowledge you achieve transparency. When the exit arrangement is equivalent to 20% of a quarter's cash flow the investor needs transparency not confidentiality. If the package were public, anonymous directors and consultants would be held accountable as the deal was being made. Probably would also have avoided the Grasso controversy over at the NYSE.

But hey its only money. It used to be the investors money. Now its Nardelli's money.

Currently the only one who is not properly informed of any details is the investor. That cannot be allowed to stand. (Hint to politicians and legislators: many small investors would welcome adequate disclosure of this nature. Several million investors would be for and only a small handful of executives against. Can you count the votes?)