Home Depot draws line on CEO pay
The Home Depot Inc. is paying new Chief Executive Frank Blake a fraction of what it paid his predecessor, Bob Nardelli, and has taken the unusual step of promising Blake no severance package if he leaves.
But experts in executive compensation don’t expect Wednesday’s decision by the giant home improvement store chain to set a trend in corporate America, despite the ire that hefty compensation packages have drawn among investors.
“I wish it were a trend,” said Lowell Peterson, a New York labor attorney who is familiar with executive compensation issues. “I suspect it’s unique to Home Depot because the pay and severance package given to Nardelli was so out of line.”
Atlanta-based Home Depot said in a regulatory filing that Blake could earn as much as $8.9 million in total compensation this year.
That’s a fraction of the $25.7 million a year on average that Nardelli received, excluding stock options.
Nardelli resigned earlier this month after six years at the helm of Home Depot amid a furor over his hefty compensation and Home Depot’s lagging stock price. He was replaced by Blake, who was the company’s vice chairman.
Nardelli left with a severance package worth about $210 million. Home Depot said Wednesday that Blake’s compensation arrangement does not provide for payment of severance upon termination.
There are examples in recent years of other major companies reducing the amount they pay their top official.
General Electric Co. granted Chief Executive Jeffrey Immelt $3.4 million in total annual compensation in 2005, far less than the $16.25 million his predecessor, Jack Welch, earned in 2001, the year Immelt replaced Welch. Immelt earned about $8.5 million in total annual compensation at GE in 2004 and $7.6 million in 2003, according to regulatory filings.
According to Wednesday’s filing with the Securities and Exchange Commission, Blake will earn a base salary at Home Depot this year of $975,000.
He also could be entitled to an incentive plan award equal to double his base salary and a long-term incentive award equal to his base salary. Blake and the company must meet certain performance targets for Blake to get those awards.
The filing says Blake’s compensation for 2007 also includes up to $5 million in equity in the company based on how Home Depot’s share price performs and the amount of total shareholder return.
A judge denied Monday a request by a group of shareholders of Home Depot to temporarily block the company from paying Nardelli any more of his severance package.
Shares of Home Depot rose 26 cents Wednesday to $40.69.
