Thursday, January 25, 2007

The pigs at the trough

Robert Nardelli, the CEO of Home Depot, has been fired. To ease his fall from grace, his employer has 'compensated' him with a $210 million severance package. Home Depot said Nardelli resigned effective Tuesday 2nd Jan and that vice chairman Frank Blake would succeed him in a "mutually agreed decision."

Nardelli had faced growing criticism from shareholders for what some of them called a very "generous" compensation package (and others called 'obscene') relative to the stock's weak performance, slowing profits and a regulatory probe about its options practices.

Home Depot was co-founded by Marcus and Arthur Blank in 1978 and was run by the duo until Nardelli was brought in as CEO in 2000. During his tenure, the share price actually fell over the six year period, despite coinciding with one of the strongest upturns in the US housing market of all time. His zero 'value' to the company was confirmed by the stock market as the shares actually jumped 3% on the announcement of his departure.

In 2005 the average pay of an S&P 500 CEO was $13.5 million, an increase of 16% over 2004. The average CEO to worker pay ratio has soared from 42x in 1980 to an incredible 411x in 2005 says the Union movement, AFL.

For a system to survive, it does not need to be popular, but it must not be despised. Socialism died because those exposed to it could see the dire effects it produced. Capitalism is not yet hated, but CEO pay is a propaganda gift that the anti-globalisation Luddites can only dream of.

The Home Depot Board should hang their crooked heads in shame.