Well, at least Frank Blake "gets it." He "gets" that investors in Home Depot
Unfortunately, it looks as though the measure the board passed earlier this month, requiring a two-thirds vote by its independent directors to approve CEO compensation, was little more than window-dressing in advance of the upcoming annual shareholders' meeting. Activist investor Ralph Whitworth will still be seeking a seat on the company's board; rather than seeing the light, perhaps directors approved the measure for fear that concerned shareholders would oust them all.
Any newfound change in attitude certainly wasn't present in the first pay package they offered to Blake: The freshman CEO rejected the proffer as simply too rich. Apparently, excessively compensating senior executives is still de rigeur in board members' minds.
According to a report in today's Wall Street Journal, the board initially offered Blake a package that included, among other things, shares of restricted stock. While such shares are often viewed as a better alternative to stock options, they're still considered valuable, since they can hold their value even if the stock price were to drop.
According to SEC filings, what the board finally offered -- and Blake accepted -- is not a miserly sum, either. He'll get an annual salary of $975,000, with the possibility of earning as much as $8.9 million in total compensation. On top of the salary, Blake can earn a management incentive plan award equal to twice his base salary, as well as a long-term compensation award also equal to the base. On top of that, the new CEO could receive as much as $5 million in Home Depot equity, based upon total shareholder return relative to the S&P 500 index.
Notably, the board did not guarantee Blake a severance package should he leave the company. Undoubtedly, it's still smarting over the shareholder scolding it received for giving its former CEO a $210 million going-away present.
Blake's new salary, a 14% increase from the pay he got as the home-improvement retailer's business development president, is less than -- but more in line with -- the pay received by Robert Niblock, the CEO of steel-cage death-match rival Lowe's
While this is indeed an improvement over the kid-in-a-candy-store package Home Depot lavished on Bob Nardelli, a few aspects of it bear watching. Blake gets use of the corporate jet, and his family can fly on it, too. Blake will be responsible for the tax implications of those flights, unless Home Depot requires the family to fly with him, at which time they'll pay for the gross-ups.
The company also is paying for the usual perks associated with management, like life and health insurance and a company car, along with personal and home security for the new CEO. While that's not unreasonable, the company didn't disclose how much it would all cost. Some executives believe they need abundant security, at shareholders' expense. It cost Oracle
Overall, it seems the board came up with a reasonable package for its new CEO, though not without some prodding on Blake's part. Board members have also passed a so-called "clawback" policy, allowing them the right to seek repayment from an executive who knowingly got compensation based on fraudulent or illegal conduct. These are indeed steps in the right direction from a board that all but abdicated its sense of fiduciary responsibility to shareholders under Nardelli.
Who knows? If Home Depot keeps it up, it just might actually earn a spot as Retail Stock of the Year.
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