This post is written as part of AOL Money & Finance's Best & Worst 2006. Vote for Bob Nardelli or check out the other overpaid CEOs.
Former General Electric Company (NYSE: GE) executive Bob Nardelli lost out to Jeff Immelt in the race to succeed Jack Welch as CEO. And The Home Depot Inc. (NYSE: HD) shareholders would have been better off if Nardelli had repotted himself elsewhere.
Since Nardelli joined Home Depot as CEO in December 2000, HD is down 40% compared to a 120% increase for competitor Lowe's Companies Inc. (NYSE: LOW). In the last five years, Home Depot's revenue grew at a 12.3% compound annual growth rate to $90.1 billion and its net income increased at a 17.7% annual rate to $6.1 billion -- not bad, but a far cry from Lowe's 18.2% revenue growth and 27.8% profit growth during the same period.
And all this inferior performance at Home Depot would not be so bad if Nardelli weren't so egregiously overpaid. He received roughly $30 million in 2005, almost six times the $5.5 million that Robert Niblock, Lowe's CEO, took home in 2005.
Investors in the market for bargain CEOs should stay away from Home Depot.
Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm, and a Professor of Management at Babson College. He owns GE stock and has no financial interest in Home Depot or Lowe's.
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Reader Comments (Page 2 of 2)
1-04-2007 @ 10:22AM
Robert Rosenfeld said...
I know it might sound crazy but bring back Bernie and Arthur to fix Home Depot.
Having the new ceo a Bob Nardelli pick won't fix the problem, you need people who know the DIY business
and know how to treat people.
Bernie and Arthur please help.
1-04-2007 @ 11:12AM
Anna Maria Bacher said...
Reading about the decadent payout the CEO of Home Depot received......is just another example of this administrations' plan to eliminate the middle class......I know of a hardworking.....dedicated young husband and father.....As I'm sure you all do...... who is trying desperately to make a home for his wife and children here on Long Island and cannot make ends meet on the capped salary he earns at Home Depot...no overtime ever....and he's at the company's beck and call....and the government does nothing about these injusticies......yes....a ceo should make more but not all the company's profits should go into his pocket...the employees should get a share that enables them to support their families....Shameful!!!!! Is everyone in this country asleep?
1-04-2007 @ 2:17PM
Anthony said...
It is sad to see once again how corporations release a CEO of a retail store with a big payday.As an employye of HD for a short time (9 months) I can hear, see and agree that the practice of the "employee" has changed since the arrival of Bob Nardelli.If you first started wih HD in the beginning stages it was known to be a great place to work and as a customer a great opportunity to shop at the HD.Since then, it has declined at a steady place under Nardelli and employees expressed as a greed. Employees were losing the battle to become better, knowledgeable and most of all to become the customers friend. Employees are also on the front lines with the customer and try to give that 110% but not be rewarded for it or maybe receive that .25 cents for a year increase per hour. How can we be effective if HD cannot keep up with the times and lets us enjoy working for the HD. HD has a new life now and should revisit how it did business and valued the employee with incentives for merit. If you do this, old customers will return plus Lowes will have to worry once again.
1-05-2007 @ 1:18AM
Mike said...
I hear you all loud and clear. I left the company almost two years ago. I was a Store Manager who finally had it with the BS. I worked really hard, spending at least 80 hrs a week at the store and way more during the summer. I had always received great reviews and my DM had me in training to move up. They split up our District and we got some idiot DM who followed big Bob to the T. He told me to cut my hours and get rid of my overpaid talent. Hire in new people within the PAY RANGE!!!!! One of my DH overheard him yelling at me to phase out all my DH's. 3 months after receiving a top notch review, 7% pay increase, and put in training to move up!!!! This new DM puts me on a BS 90 Day Improve or Remove and tells me he will make sure that I am removed. I dropped my keys and told him to improve it himself. Within a Month 2 other seasoned Store Managers had resigned and left. The new DM said that his how BOB does it. His excuse for all of this was that we were giving associates too much and following the weekly plans sent out and the monthly books sent out. I tried to run it like we always did, if you do it, you own it. You take pride in it. You push it. I didn't want mindless robots!!!! I wanted people who wanted to be there with me, having fun and driving sales. Making friends with associates and customers. Not the Nardelli Way!!!
1-05-2007 @ 5:54PM
James said...
I was a key carrier and DH for one of the Expo stores in So. California. Everything said above is soooo true. Nardeli cut and cut while piling on the work. We had to make reports on the reports we were reporting on. The last straw for me was when they began the Store Leadership Program of bringing in ex military with no retail experiance and promoting them over the long term staff because Nardeli thought being a trained killer taught them leadership. My store Manager and ASM were all replaced within a couple months and it was clear I was no longer welcome in the store I helped establish. when word of his compensation came out last year it was a huge blow to moral, people strugled to make a living while the top brass grew wealthy. So sad!
1-06-2007 @ 5:28PM
L. Cassidy said...
Home Depot is terrible, I have walked out on a number of occasions due to the lack of customer service. My neighbor works for them but shops at Lowe's. I can understand why the customer service stinks-the employees are treated like dirt and I guess it's just a trickle down to the customers. My big complaint is that although I am a huge Tony Stewart fan I have been disgusted recently that he is dating a PR person from Home Depot. She was married for many months while he hid her at various events and then tried to introduce her like she was someone new. I am sickened that Home Depot would condone the whole thing and can't believe that she supposedly still has a job and that he still drives the Home Depot Chevrolet. I wonder if things will change once a new CEO comes aboard. I doubt it, because the whole company is morally bankrupt.