Now this is just lovely. Robert Nardelli, CEO of Home Depot, has a compensation clause that calculates his long-term incentive pay based on total return to shareholders over a three-year period and comparisons to leading competitors. Unfortunately for him, over the last three years, Home Depot has performed poorly, seeing their stock decline and rival Lowe's outperform them. And so the system worked like it should, punishing Nardelli for his poor results and cutting his long-term pay. Syke!
But in last year's proxy, the footnote changed. Mr. Nardelli now gets his incentive pay if the company "achieves specified levels of average diluted earnings per share" -- a measure by which Home Depot looks far more successful. Shareholders may not be better off, but Mr. Nardelli is.
As reward for his performance, last year he took home $27 million. For presiding over declines in stock price and lost market share against rivals. Remember that next time you hear corporate boards talking up their incentive packages as the only way to attract qualified, high-performing CEO's. When you can fail so magnificently upward, what threat, exactly, should lazy CEO's be fearing?
