Home Depot’s Nardelli Gets What is Coming

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Well Bob, it worked. This great PR offensive (see these posts about it here and here) worked wonders, the board bought all this stuff, and they rewarded you handsomely. In the last five years, you’ve received some $200 million in salary, bonus, stock, stock options, and other perks. In 2005 alone, you got a stunning $38.1 million in total compensation. Nicely done.

But in case you missed it, the Home Depot board has guaranteed Bob Nardelli a “bonus” of $3million. Read about it in BusinessWeek online.

one lucrative element of the package is not as well-known: Nardelli’s guaranteed minimum annual bonus. Of course, many CEOs are eligible for a bonus each year, usually if they hit certain financial and operating targets. Others have more limited guarantees, such as an assured payout in the first year of service. But Nardelli’s employment contract shows that $3 million of his annual bonus, defined as the “target amount,” is a sure thing. “For each year during the period of employment,” says the agreement, “the executive will receive an annual bonus of no less than the full target amount.” Last year, Nardelli earned a total bonus of $7 million.

Guaranteed bonus? Isn’t that an oxymoron? Aren’t bonuses supposed to be a reward for good work you did, not compensation for work you are going to do?

And as writer Brian Grow notes in that article, it’s not like he’s returned anything to shareholders.

To the ire of many investors, however, Home Depot’s total return to shareholders, a key benchmark of corporate performance, is down 13%, according to Institutional Shareholder Services (ISS).

Gee, Bob, hope you share some of it with the PR team.