Barney Frank should stop worrying about stockholders who are just fine, thank you, and worry about fixing the big, stupid corporation that he works for.
Written by randomfool on January 15th, 2007 with
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Read more articles on General Folly and Randomness and Politics and Companies & Products I Can't Stand and Business.
Bob Nardelli, now the former CEO of The Home Depot, resigned last week and, if I were him, I would have resigned too. In addition to earning hundreds of millions of dollars over his four year tenure at the company he received a severance package of $210 million because, yes, he refused to take a pay cut. Now, I don’t disagree that his compensation offends common sense. Nardelli was passed over for the top job at General Electric when Jeff Immelt (the GE board must be stoked right about now) was selected to replace Jack Welch (an overrated but legendary CEO) but he never clicked with the people at Home Depot because he tried to change the company and people don’t like change. The people who don’t like change, however, are usually ignored if the company makes money and its stock price goes up. In Nardelli’s case, his military style of leadership made Home Depot a lot more profitable but his personality failed to sell well on Wall Street and the stock has languished. Stock prices are so random that it is hard to blame a guy who by all financial measure did well but was unable to convince people otherwise, despite the statistics. He also pissed people off by having a stockholder meeting with no directors and little opportunity for questions and answers and for his pay package.
I personally do everything I can to avoid going to Home Depot. I much prefer Lowe’s and even my local Ace Hardware. In my opinion, Nardelli should have done something about making his stores more appealing and focused less on services and selling to contractors (programs that he invested billions of dollars into). I’m not the only one with these opinions and that is often the reason cited by “experts” as to why Lowe’s outperforms Home Depot in certain performance metrics, including stock price appreciation.
All that being said, I don’t feel too bad for stockholders of The Home Depot. They had the ability to vote with their dollars and not invest in the stock if they didn’t like Nardelli. What makes me mad is people like Barney Frank, the new Chairman of the House Financial Services Committee, who wants to use this issue (and a few other big pay packages for CEOs) as an opportunity to create some kind of legislation to address the issue. Barney Frank had this to say:
“The action of Home Depot’s Board of Directors to simultaneously dismiss Robert Nardelli and provide him with $210 million in severance is further confirmation of the need to deal with a pattern of CEO pay that appears to be out of control. Some defenders of CEO pay argue that CEOs are rewarded for increasing the stock or the overall value of the company, but judging by today’s market reaction, Mr. Nardelli’s contribution to raising Home Depot’s stock value consists of quitting and receiving hundreds of millions of dollars to do so.
Business leaders who are frustrated by the unwillingness of the American voter to be supportive of their agenda for economic growth should look to the contrast of Mr. Nardelli’s consolation prize and the resistance of business to raising the minimum wage.”
Please, Barney, don’t do us any favors. Stockholders can decide for themselves and they ultimately pay the price if they overpay their CEOs. Just leave them alone. Why not focus on injustices that matter, like wasting taxpayer money. Taxpayers can’t decide not to invest in the government anymore (well, I guess they could through Treasury bonds but that’s different). If I don’t like the way the government is spending my money, I can’t elect to take my money elsewhere. I am stuck investing in the most evil, greedy and wasteful corporation in the world and there is nothing I can do about it except select from lame choices of people who waste billions getting elected.
I think it would be an excellent use of taxpayer money to pay a $210 million to Barney Frank if he would just resign from Congress but it would probably cost more than that to remove him. At least Bob Nardelli actually can get fired. Barney Frank has been a member of Congress since 1981, firmly entrenched enough to be, abset a sex scandal or something like that, largely untouchable. Barney Frank should stop worrying about stockholders who are just fine, thank you, and worry about fixing the big, stupid corporation that he works for. And, by the way, raising the minimum wage will cost stockholders a lot more than CEO pay package…by order of magnitude!
Written by randomfool on January 15th, 2007 with
no comments.
Read more articles on General Folly and Randomness and Politics and Companies & Products I Can't Stand and Business.
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