New CEO gets pay reduction
Home Depot's new CEO will earn 8.9 million a year.
ATLANTA (AP) -- The Home Depot Inc. is paying new Chief Executive Frank Blake a fraction of what it paid his predecessor, Bob Nardelli, and has taken the unusual step of promising Blake no severance package if he leaves.
But executive compensation experts don't expect the decision announced Wednesday by the world's largest home improvement store chain to set a trend in corporate America, despite the ire that hefty salaries have drawn among investors.
"I wish it were a trend," said Lowell Peterson, a New York labor attorney who is familiar with executive compensation issues. "I suspect it's unique to Home Depot because the pay and severance package given to Nardelli was so out of line."
Atlanta-based Home Depot said in a regulatory filing that Blake could earn as much as 8.9 million in total compensation this year.
That's a fraction of the 25.7 million a year on average that Nardelli was earning at Home Depot excluding stock options.
Nardelli resigned earlier this month after six years at the helm of Home Depot amid a furor over his hefty pay and Home Depot's lagging stock price. He was replaced by Blake, who was Home Depot's vice chairman.
Nardelli left with a severance package worth about 210 million. Home Depot said Wednesday that Blake's compensation arrangement does not provide for payment of severance upon termination.
There are examples in recent years of other major companies' reducing the amount they pay their top official.
General Electric Co. granted Chief Executive Jeffrey Immelt 3.4 million in total annual compensation in 2005, far less than the 16.25 million his predecessor, Jack Welch, earned in 2001, the year Immelt replaced Welch. Immelt earned about 8.5 million in total annual compensation at GE in 2004 and 7.6 million in 2003, according to regulatory filings.
The New York Stock Exchange, which faced an uproar over former CEO Richard Grasso's 187.5 million pay package, offered John Thain 4 million a year in total compensation when he took over as CEO in 2004. That was a pay cut from what Thain had received as a Goldman Sachs Group Inc. executive. The NYSE also said Thain would serve without an employment contract.
Steven Hall, an executive compensation expert who runs a consulting firm in New York, said such examples are likely the exception, not the rule.
"I don't anticipate it being across the board," Hall said. "The problem that you have is that people that have the background to be CEOs, proven or not, are very limited in supply. There's a lot of competition for them."
According to Wednesday's filing with the Securities and Exchange Commission, Blake will earn a base salary at Home Depot this year of 975,000.
He also could be entitled to a management incentive plan award equal to double his base salary and a long-term incentive award equal to his base salary. Blake and the company must meet certain performance targets for Blake to get those awards.