Home Depot CEO Robert Nardelli Severance Pay - Case Study Example

On a closer look many factors are behind Robert Nardelli's huge severance package that cannot be traced to Nardelli alone; but there are measures that could be used to done to reign over-the-top CEO compensations such as Nardelli's. According to Alan Sloan, business analyst of Washington Post (Sloan, p. D01), Nardelli is not receiving a severance pay more than he was actually entitled to under the employment contract he signed in 2000 with the board of Home Depot. Ken Langone, one of the founders of Home Depot, continued Sloan was in fact was one of those of people who was involved in negotiating for Nardelli, one of the two GE executives who was one-time candidate to replace famous Jack Welch when he left GE.

In the same article, Paul Hodgson, a senior research associate at the Corporate Library which investigates corporate governance said that the trouble started in 2000, and that everything was in Nardelli's contract. . One of the issues raised by Nardelli's case was how shareholders who are the owners-at-large of a company could be relegated to the sidelines in deciding executive pay packages. This was borne out when Nardelli with an absent board presided alone over the annual stockholders held on May 28, 2006 in which he was criticized for cutting off stockholders' questions over his compensation (NPR, January 6, 2007; Grow par. 8-9). On December 2006, Relational Investors rebuked Home Depot's management and called on a review of the firm's direction and even a possibility of a sale.

What came to pass with Nardelli's resignation a month later, with him leaving with a fat severance package even highlighted the need for more power granted to shareholders in deciding what and how much to pay company CEOs. In a report by CNNMoney.com, a proposal filed by one of Home Depot's investors and endorsed by long-time shareholders Laborers' International Union of America (LIUNA) would require the board to get shareholder approval for what was termed as "extraordinary retirement benefits".

In other companies such as Sprint, GE, Qwest, Delta and Verizon, investors have filed similar proposals to scale down severance packages according Hodgson in an interview with CNNMoney.com. Home Depot CEO Robert Nardelli Severance Pay Another reason for reducing huge pay packages of huge CEOs is in the interest of wealth equality. National Public Radio reported in an article by Uri Berliner that one of the reasons that the very rich or the top-earning one percent continue to increase their share of the country's wealth (from 8 percent to 16 percent in 2004) was that affluent people own more in stocks. CEOs like