Robert Nardelli joins Jay Sidhu as another victim of activist hedge fund manager Relational Investors LLC.
However, Relational's efforts were not the exclusive factor in Nardelli's ouster at retailer Home Depot unlike the firm's efforts to eject Sidhu at Sovereign Bancorp. Last year, the firm expelled Sidhu from his 17-year long tenure after he balked at the firm's efforts to scuttle the bank's plan to sell a 19.8% stake to Spain's Banco Santander for $3.6 billion.
While Nardelli did balk at Relational's overtures last month concerning the retailer's languishing stock price, shareholder support for the CEO reached a boiling point earlier in the year concerning his compensation and the company's stagnant stock price. After six years at the helm, Home Depot's $40-a-share price remains close to where it was trading when Nardelli arrived. Despite the immovable stock, Home Depot kept paying Nardelli. Over his six-year tenure, Nardelli received
$240 million in salary, bonuses and stock grants for an average compensation of $40 million a year.
By 2006, shareholders had enough, and began questioning his pay. However, Home Depot reportedly barred them from airing their concerns at the annual meeting by limiting shareholders to one minute of speaking time and one question, according to the New York Times. To further insult shareholders, no board members showed up on stage at the meeting.
It seems Relational simply tapped into shareholder unrest to successfully push Nardelli out of the way. However, at Sovereign, Relational agitated shareholder unrest, then tapped into it to successfully shove Sidhu aside.
Of course, shareholder unrest may not end with Nardelli's ouster. Instead, his $210 million severance package is bound to elicit similar questions. —Matthew Wurtzel
See story from The Atlanta Journal Constitution
See story from The New York Times
See earlier post from Dealscape
See related story about Sidhu from The Deal
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