WASHINGTON – Embattled Home Depot Chief Executive Robert Nardelli, under fire from stockholders for earning hundreds of millions at the same time the company’s stock fell and market share dropped, resigned suddenly Wednesday and will walk away with a severance package of $210 million, the company announced.
Home Depot Inc. said in a statement that Nardelli, 58, will end his six-year tenure as the company’s president, chairman and chief executive effective immediately “by mutual agreement.” Vice Chairman Frank Blake, 58, will replace Nardelli as head of the world’s largest home-improvement chain, which is based in Atlanta.
Analysts said Nardelli’s surprise resignation was almost certainly because he had become a lightning rod for critics of hefty corporate executive pay. They said the Home Depot board was under great pressure to make a change.
At a disastrous Home Depot annual meeting last May, Nardelli, the only director present, refused to answer questions or respond to criticism from shareholders about the hundreds of millions in pay, benefits and stock options he had pulled down since he took over leadership of the chain in 2000. During his tenure, Nardelli earned $240 million in salary, bonuses and stock options.
During his leadership of the nation’s second largest retail chain after Wal-Mart, Home Depot lost market share to home-improvement rival Lowe’s Cos. and its stock price declined almost 8 percent. Although Home Depot, the behemoth of home-improvement stores, posted big profits over Nardelli’s tenure, the company is headed for its smallest annual gain in profit in at least nine years.
Home Depot shares rose on news of Nardelli’s departure.
Stephanie Hoff, senior retail analyst for investment firm Edward Jones, said Nardelli had been unfairly criticized for his hefty pay packages. “I seriously doubt that anybody would be critical of his compensation package if the stock price had been doing well,” she said.
“This is not the board’s response relative to the need for a strategic change in the company,” Hoff said. “It’s more about him.”
Nardelli, a former top executive at General Electric who was passed over to replace Jack Welch, shook up Home Depot when he took over the company six years ago.
He reined in store managers, who ran each location as they saw fit; consolidated divisions; and centralized decisions. In the face of a slowing residential housing market, Nardelli invested heavily in wholesale supply to attract professional contractors.
Hoff discounted speculation that Home Depot might possibly be sold to a private equity group.
Nardelli’s departure was all the more surprising since he insisted in an interview with The Associated Press in September that he had no intention of leaving the company despite the criticism. He said in the interview that he still saw himself “selling hammers” for the do-it-yourself store a decade hence.
“We are very grateful to Bob for his strong leadership of the Home Depot over the past six years,” the company’s board said in the statement. “Under Bob’s tenure, the company made significant and necessary investments that greatly improved the company’s infrastructure and operations, expanded our markets to include wholesale distribution and new geographies, and undertook key strategic initiatives to strengthen the company’s foundation for the future.”
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