Home Depot CEO turns in apron

ATLANTA — Bob Nardelli said he had no intention of stepping down. His board said it didn't want anybody else. But in the end, analysts said, the criticism over Nardelli's hefty pay and The Home Depot's poor stock performance forced a change of heart.

Nardelli abruptly resigned as chairman and chief executive of the world's largest home-improvement-store chain after six years at the helm, the company said Wednesday.

He didn't leave empty-handed. The Atlanta company said Nardelli would receive a severance package worth roughly $210 million, an amount some lawmakers decried as a golden parachute that sends the wrong message to investors.

"It's a sign of being totally out of touch," said Rep. Barney Frank, D-Mass., the incoming chairman of the House Financial Services Committee. "They don't understand the extent to which they make the American public angry."

Frank said he would push for legislation requiring public companies to allow shareholders to have a say in compensation and severance for senior executives.

At Home Depot's annual meeting in May, shareholder proposals to give investors a say on the CEO's pay and to restrict retirement benefits for senior executives were rejected.

Nardelli's severance package includes a cash payment of $20 million and the acceleration of unvested deferred stock awards now valued at roughly $77 million.

A Home Depot spokesman said the timing of the resignation, which was effective Tuesday, had no bearing on the amount.

The total package is seven times the $30 million Home Depot set aside in June for stores and employees that provide good customer service. Home Depot has 2,127 stores and 355,000 employees in the United States, Canada, Mexico and China.

Home Depot said Nardelli was being replaced by Frank Blake, its vice chairman, would succeed Nardelli immediately.

Home Depot co-founder Bernie Marcus, who had a hand in hiring Nardelli, said he supports the board's decision to replace Nardelli with Blake.

"My concern is what happens in the future, and I feel very good about it," said Marcus, who no longer works for Home Depot in any official capacity but remains one of its largest individual shareholders.

Asked about the severance payout, Marcus said the amount won't be that big a deal if the company's stock price improves.

"It's like the old story, if the stock goes up 10 points, who's going to care?" Marcus said.

Nardelli, a former college football player, became CEO of Home Depot in December 2000 after being passed over for the top job at General Electric, where he had been a senior executive.

Blake's appointment is permanent, Home Depot spokesman Jerry Shields said. The company declined to make Blake available for comment, and messages left for Nardelli with his secretary and on his wife's cellphone were not immediately returned.

Home Depot shares rose 91 cents, or 2.3 percent, to close at $41.07, near the upper end of their 52-week range of $32.85 to $43.95.

Before Wednesday's news, Home Depot's stock had been down more than 3 percent on a split-adjusted basis since Nardelli took over.

Nardelli's sudden departure was stunning. He told The Associated Press as recently as Sept. 1 that he had no intention of leaving, and a key director said the board was pleased with Nardelli despite the uproar by some investors.

That director, Bonnie Hill, did not immediately return messages left Wednesday for her at her office in Los Angeles.

Asked in the earlier interview if he had thought of hanging up his orange apron and leaving Home Depot, Nardelli said no, unequivocally. Asked what he thought he would be doing 10 years from now, Nardelli said, "Selling hammers."

For The Home Depot?

"Absolutely," he said.

Nardelli was a nuts-and-bolts leader. He helped boost revenue and profits at Home Depot and increase the number of stores the company operates.

Home Depot's earnings per share have increased by approximately 150 percent over the last five years. But the public discussion about Nardelli's pay and the company's stock price became a distraction.

As of the end of 2005, Nardelli had earned $123.7 million in compensation, excluding certain stock-option grants since becoming CEO. His compensation for 2006 has not been disclosed.

Edward Jones analyst Stephanie Hoff said she views the developments at Home Depot as a sign there was a need for change at the top, not a change in strategy.

"I think his gruff demeanor, while some people would consider that refreshing, sometimes hurt him," Hoff said of Nardelli, adding that Blake is considered by some as more articulate and polished.

"I think the board basically was looking at this situation and figured Nardelli had become such a lightning rod for criticism of his pay package," Hoff said.