Home Depot , under fire by critics who charged that it overpaid former Chief Executive Robert Nardelli, said the 2007 compensation package of its new CEO was valued at $8.9 million, with 89% of that at risk based on company performance.
The home improvement retailer said it reached agreement with Frank Blake, who succeeded Nardelli as chairman and CEO this month, on terms of his pay on Jan. 23.
Blake's annual base salary is $975,000, and his compensation pact does not include a guaranteed bonus or severance benefits, Home Depot said.
The $8.9 million includes the base salary; bonus target of $1,950,000; $2.5 million in performance shares based on the company's shareholder return compared with the S&P 500 over a three-year period; $2.5 million in stock options that will only vest if the share price rises 25% from the grant date; and $975,000 in long-term incentive pay contingent on per-share profit meeting three-year performance goals.
"After being criticized broadly for Nardelli's comp package, we believe the board had to align compensation to returns to earn shareholder respect," Goldman Sachs analyst Matthew Fassler said in a research note.
Nardelli, who left the retailer by mutual agreement with the board on Jan. 2, had been assailed by shareholders and others who charged his pay was not in line with Home Depot's stock performance.
Nardelli was entitled to severance of $210 million under terms of his employment pact.
Shareholders on Jan. 10 asked a Georgia state court to issue a temporary restraining order on the severance pay. A judge in Atlanta earlier this week declined to do that, but gave plaintiffs two months to depose certain directors and gather information in the case.