Thursday, January 25, 2007

Pay for Performance?

A culture and compensation shift is taking place at Home Depot. An excerpt from the Business Week article:

In what could mark the first major step toward reversing oversize executive payouts, Home Depot set new CEO Frank Blake's base salary at $975,000 and his bonus target at 200%, or $1.95 million. Of the target bonus, 70% is based on achievement of financial goals and 30% on achievement of individual performance measures, the company said in a filing with the Securities & Exchange Commission.

Blake's pay package stands in sharp contrast to ousted CEO Nardelli's $2.25 million base salary and $7 million cash bonus in 2005, none of it tied to performance. Most dramatic is that Blake's deal has no provisions for severance pay, compared to the $210 million retirement package with which Nardelli decamped. "It's fair to say that Nardelli's pay package, among others, was the high-water mark of CEO pay excess," says Nell Minow, editor and co-founder of governance adviser the Corporate Library. "The pendulum is swinging very drastically now." (See, 1/4/07, "Out at Home Depot.")


Anonymous said...

It's safe to say they learned a pricey and painful message with Nardelli.

Michael Wade said...

And remember all of the great press he had at the beginning. Of course, the severance packages are negotiated at the start of the gigs. As a result they can look very odd later if the performance has gone south.