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.")


At 2:35 PM, Anonymous Anonymous said...

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

At 3:35 PM, Blogger 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.


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