Flat stock price, high payout

03Jan07

In light of our post last week on the latest trend in executive compensation, the “golden hello” we felt compelled to note the news of a high-profile executive departure. In it one can clearly see the high price companies are paying to sign so-called executive “talent.” From a piece by Mary Ellen Lloyd in the Wall Street Journal one can see the effect of the golden hello turning into a golden goodbye:

Home Depot Inc.’s board and Chairman and Chief Executive Bob Nardelli agreed to part ways after six years capped by controversy over his pay, management style and Home Depot’s share performance. Under his 2000 employment contract, Mr. Nardelli will take a $210 million severance package with him as he is succeeded by Vice Chairman and Executive Vice President Frank Blake.

…The stock was recently at $41.22, compared with Friday’s closing price of $40.16 and compared with $40.75 the day before Mr. Nardelli was appointed in December 2000.

One should also note that this does not include the ample pay Nardelli received on an annual basis during this time. Despite the large payout investors seem pleased that the Nardelli Era is over at Home Depot (HD). Given the fact that the stock price was essentially flat over his six year tenure at the home-improvement giant, one wonders whether paying him coming (and going) was in the long-term, best interest of shareholders?

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