Home Depot CEO Rewarded as Stock Price Sinks

Full article: http://blog.aflcio.org/2006/08/07/home-depot-ceo-rewarded-as-stock-price-sinks/

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Corporate Greed

Aug 7

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Home Depot CEO Rewarded as Stock Price Sinks

In today’s world of “do-it-yourself” repairs, HGTV and Extreme Home Makeovers, millions of us are painting rooms, building shelves and redecorating family rooms. And we are buying millions of dollars worth of supplies from the big-box dealers like Home Depot.

But it seems that Home Depot’s megagrowth machine that took off in the 1990s is slowing down. Today’s Wall Street Journal (subscription required) reports that Home Depot’s stock price has dropped 20 percent since 2000, even though the company reported $81.5 billion in retail sales last year, the third-highest amount by any company in the world. Home Depot’s chief competitor, Lowe’s, has seen its stock rise 173 percent.

What’s going on—sales strong, stocks down? According to The Journal, the troubles began just before Robert Nardelli took over as CEO in late 2000. Under his watch, the situation only has gotten worse. Overall sales growth has slowed from an annual 19 percent to about 12 percent.

For his success at slowing sales and lowering stock prices, Nardelli has pocketed nearly $245 million over the past five years—$37.9 million in salary and stock options last year alone. As we point out at the AFL-CIO Executive Pay Watch site, Nardelli’s employment agreement guarantees him a defined-benefit pension equal to 50 percent of his salary and bonus at age 62. The retirement package is worth an estimated $4.6 million. Even if Nardelli’s performance does not entitle him to a bonus, his pension benefit will be calculated as if he had earned a $4.5 million bonus.

Home Depot is less generous when it comes to retirement benefits for its other employees. Like many retailers, Home Depot does not offer a defined-benefit pension plan. Instead, workers are offered a “FutureBuilder” 401(k) plan as well as an Employee Stock Purchase Plan. These plans do not provide a guaranteed annual pension benefit.