Here's one lawsuit you have to root for: A group of stockholders have filed a restraining-order request to stop Home Depot from paying a $210 million golden parachute to reward exiting CEO Bob Nardelli for not working there anymore. If more shareholders did more to curb cushy compensation packages, the American public would have more faith in the marketplace.
The American dream used to be: Work hard, make good and get rich. In this economy, make that: Work hard, make good, then don't make good, get richer. Nardelli's example shows that the real money comes when you're so underwhelming as a CEO (at least in relationship to your pay grade) that the company will pay big bucks to have you leave.
The story shows the rot behind excessive executive pay: Board members tend to be executives who think that paying other executives top dollar is the key to success in business. Hence a compensation package on steroids for Nardelli -- even as Home Depot moved to get rid of skilled, experienced employees and replace them with cheaper, less-skilled part-timers.
MarketWatch reported that Nardelli's severance deal -- the parting purse for one man -- was seven times the $30 million that Home Depot set aside last June to reward productive stores and employees for good customer service.
As The Wall Street Journal reported, Nardelli's excessive pay led to his excessive exit pay. In the six years he worked at Home Depot, Nardelli was compensated about $240 million, including stock options. Last year, the "You can do it, we can help" board awarded Nardelli with a $7 million bonus and $14.7 million in stock -- when his contract didn't require it.
That's an odd reward for a CEO, considering the company stock price declined 8 percent during his tenure, while the stock for its big, bad competitor, Lowe's, the Journal reported, rose by 188 percent. As Rep. Barney Frank, D-Mass., new chair for the House Financial Services Committee, noted, the argument used to be that CEOs enjoyed mega-pay for boosting their stock sales.
In this case, Nardelli's compensation doesn't even make market sense.
Which is why the Do-It-Yourself giant's board members had begun to bristle, and Nardelli's gravy train was heading toward its final destination. Home Depot hired a consultant that found Nardelli was making more than his industry peers. As the Journal reported, the board asked Nardelli to give up some perks. He was willing to give up use of six corporate jets, but reportedly didn't want a reduction in bonuses, so he relinquished his orange apron.