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Home Depot CEO steps down

By MARK ALBRIGHT
Published January 4, 2007

Home Depot Inc. stock rose as much as 4 percent Wednesday after autocratic chief executive Robert Nardelli was ousted and walked away with a $210-million golden parachute after six years on the job.

Described as a mutual agreement, Nardelli's departure probably averted a contentious proxy fight with some big shareholders over his performance running the nation's second largest retailer. But one dissident shareholder group that amassed a 1.2 percent stake in the company says it will follow through with a campaign to get two fresh faces elected to the board. Other activists pledged to replace directors blasted as "serial abusers of shareholder assets" after the board revealed plans Wednesday to extend three current directors' terms by raising the mandatory retirement age to 72.

Home Depot for years has been joined at the hip with Central Florida, which became the chain's first big growth market after its founding in Atlanta. The 11-state Southern Division for years was headquartered in Tampa. The birthplace of Home Depot At Home Services is Brandon. Home Depot Supply, which has been on an acquisition spree, is headquartered temporarily in Orlando. About two-thirds of all Tampa Bay shoppers were in a Home Depot in the past month, according to Scarborough Reports.

Home Depot stock, moribund until a recent rally spurred by speculation the company might go private, jumped $1.86 a share on news Nardelli was gone. Then it settled down to close Wednesday at $41.07, up 91 cents.

Under Nardelli, the home improvement giant doubled in size and its earnings rose 20 percent annually. But sales and earnings growth slowed since the recent housing slowdown, Nardelli's cost-cutting triggered a sharp decline in customer service ratings and shareholder rights groups railed about his lavish compensation.

Home Depot poured about $20-billion into dividends and stock buybacks, but its shares remain priced about where they were six years ago. About $20-billion invested in buying construction suppliers like Orlando's Hughes Supply and St. Petersburg's Cox Lumber moved the company into a lower margin industry than do-it-yourself home fix-up retailing.

After an internal review, the company last week cleared Nardelli and other managers of blame for $200-million worth of unrecorded stock option grant expenses passed out to executives over the past 20 years. The SEC has its own probe.

Nardelli rankled many investors at last year's annual meeting, which all of the company's directors decided to miss. He limited questions, including any about his $115-million compensation package over five years, to one minute each and one per person. When a question about the board's independence and corporate governance surfaced Nardelli replied: "This is not a forum in which to address these comments."

Nardelli later apologized. But shareholders were angered. They served notice his performance would be center ring at this year's annual meeting in May.

Frank Blake, like Nardelli a former star executive under Jack Welch at General Electric Co., was promoted from vice chairman to take the 58-year-old Nardelli's place. A former deputy secretary of the U.S. Department of Energy, Blake, 57, trained as an attorney, worked at the EPA and then rose quickly under Nardelli in GE's Power Systems unit. Neither had any retailing experience before Home Depot, a corporate culture shock that helped prompt half the top executives at Home Depot to leave since Nardelli arrived.

"Blake will be more of a consensus builder than Nardelli, so he will probably have a honeymoon beyond the annual meeting," said Stephanie Hoff, an analyst with Edward Jones, which has a buy recommendation on Home Depot shares. "But he shares the same long-term vision for the company which is a sound strategy."

Meanwhile, Joe DeAngelo, who runs Home Depot Supply, was named chief operating officer of the parent company.

Mark Albright can be reached at albright@sptimes.com or 727 893-8252.

[Last modified January 3, 2007, 23:13:51]