Viewers Respond--Your Emails on Pay Rage
We wanted to hear from you--and we did--as it was your turn on sound off on the pay rage issue that exploded this week after the resignation of Home Depot CEO Robert Nardelli. Our question focused on what the new CEO Of Home Depot--Frank Blake--should make. Nardelli resigned lastTuesday, January 3rd--and left with a $210 million severance package which included $20 million in cash (we have to note that the package was part of his employment contract when he was hired six years ago.)
FYI: As we've mentioned in previous posts--there's a lawsuit by HD shareholders to stop Nardelli from getting ANY benefits.
Okay--here's what you said as CNBC's Rebecca Jarvis reported on air. First up was Colleen of Canada who said "Pay should be one dollar each year with incentives tied to performance."
Josh wrote in saying "People at the top are paid way too much. We need a better distribution of wealth in corporate America and Blake's pay should be 200 times the lowest paid worker." We decided to do the math on this one: assuming the lowest paid worker gets the federal minimum wage--or about $15,000 a year--Blake would then get $3 million a year.
Jack from British Columbia takes a more free-market approach: "Compensation should be whatever the market will bear. The notion that someone earns too much or too little is absurd. You are worth what you are worth."
And the last response read on air (don't go away-we have more below) was from Stan who wrote: "No more employment contracts. CEO's get salary plus stock bonus. Stockholders vote on all stock bonus packages for upper management. No golden handshakes, no perks."
Here are some other gems you sent in:
It's the Board's Fault; Mike from Pennsylvania
Nardelli was handsomely paid, and his termination pay was beyond silly.[Buffett works like crazy for $100,000/year plus stock appreciation]
That said, the business grew and performed well under his management. The stock didn't grow. The stock was richly overvalued when he took over.
The board hired Nardelli under a stock-based agreement, and when that didn't pay well, changed the deal. The board is at fault.
Don't like it, then don't own the stock; Rohe from New Hampshire
I have always thought that people should try to get paid as much as they can. If you are unhappy with the policies of a public company then don’t own the stock and don’t do business with the company. Was Nardelli overpaid? In my opinion yes, but I sold the stock long ago and I shop at Lowe's.
On another point, I did not see Barney Frank complaining about the Red Sox paying $100 million to hire a Japanese pitcher. Couldn’t they find an American pitcher to do it for less? Couldn’t Nike, a public company spending the shareholder’s money, find a golfer to promote their product for lees than they pay Tiger? Joe Kernen plays golf and would probably take less. Couldn’t Disney find someone who would star in a movie for less than Tom Hanks? Maybe the question should how do you get rid of the board of directors that screws up a major hiring decision?
I think the question “How much is the CEO worth?” is probably much easier after the fact but so is, “Which stock should I buy?”
Shareholder greed; Bo from Louisiana
This is not professional or college sports where contracts mean nothing. The CEO should be paid whatever his contract specifies. What should be discussed is why the contract was so lucrative and what, if anything, will prevent it in the future. Of all of the people complaining, how many would turn it down if they could have negotiated something similar?
Each time this issue arises, the most frequently heard comment is that if good packages are not offered the best candidates cannot be attracted. Contracts like this are issued, in my opinion, based on board and shareholder greed hoping for a savior that will generate significant stock price appreciation. As long as that is the motive, this issue will never go away.
Who is going to recommend a candidate perceived to be less qualified because he/she is cheaper? The question in every case should be, "Is it possible to get a proper return on this investment?” If total compensation is tied to performance the answer is easier to obtain. If not, you sometimes get lucky but usually you get what you deserve.
I am not a fan of ridiculous and unjustified compensation, but if this compensation is compared to $15 million a year news anchors, $20 million per movie for couch jumping actors, and multi millions per year for athletes, none of whom have employees or produce anything, is it really out of line in today's uncontrolled compensation race?
Reap what you sow; RJ from Georgia
This may not be a popular opinion but you reap what you sow and if you don’t like the harvest, then don’t sow the seed for it.
Many people are outraged that the CEO is walking away with a package that may not be “in line” with his performance. Well in all due respect to those opinions, Bob Nardelli is due to get what he was offered, agreed to and signed in his contract. Regardless of what shareholders and public opinion now thinks 7 years later, it should not matter. Home Depot wanted him in 2000 and ponied up to get him, so the seed was sown and now Bob Nardelli is only rightfully so reaping the harvest. That is the honest thing to do and that is what integrity is about. Furthermore he should not be expected to accept any less.
Mr. Blake Should Go Shopping; Keller
I would (respectfully) suggest the Board offer Mr. Blake the following arrangement:
Part One: Base Pay: $100,000 per month; everything else is performance based, using criteria that make sense such as customer satisfaction, employee retention, same store sales, gross profit margins, etc. He should have the ability to make lots of money, but for the right reasons.
Part Two: Mr. Blake should be required to spend two separate weeks a year working with Habitat for Humanity (I'm not a member) and buy all his supplies at various Home Depots in the area, interacting with employees, trying out the automated checkout systems, chatting with other customers in line, asking for help, all incognito, and actually experience the use of his products live.
The Board might be amazed at what happens.