Joe Nocera’s account of the Home Depot annual general meeting in today’s New York Times is unmissable, a wholly worthy successor to the paper’s meticulous dissection of the cosy intertwined relationships on the company’s board.
Afterward, the words on people’s mouths are “appalling,” “disgraceful” and “arrogant.” I would add one more: contemptuous. I’m sure there are plenty of boards and chief executives who have contempt for their shareholders, but most of them are at least smart enough to keep it to themselves. On Thursday morning, in Wilmington, Del., Mr. Nardelli and the Home Depot board let the world know exactly how it feels about the people for whom they are supposed to work.
I’d like to think a reaction against the contemptuous and arrogant behavior of chairman and CEO Robert Nardelli will be a turning point in the outrageous rewards grabbed by so many corporate chieftains in the US. But I fear not.
Whatever shame may result from The New York Times’s flaying of Nardelli is more than balanced by a lengthy hosannah he received in the Bible of the corporate elite: Harvard Business Review. In its April issue, leading management guru Ram Charan wrote a lengthy paean to the “culture change” Nardelli has led since he took the reins at Home Depot in 2000. From the abstract:
The story of the vision, strategy, and leadership skills Nardelli used to move Home Depot to the next level has been told. But vision, strategy, and leadership alone–while necessary–are not enough. Typically, culture change is unsystematic and, when it works, is based on the charisma of the person leading the change, Ram Charan says. “But Home Depot shows–in perhaps the best example I have seen in my 30-year career–that a cultural transition can be achieved systematically.”
Funnily enough, unlike the Times, Charan doesn’t dwell on the $245 million Nardelli has reaped from his job in five years (the founders he replaced kept their salaries at $1 million). Nor does he explain why Home Depot has so badly underperformed compared to its rival Lowe’s. Since Nardelli arrived, Home Depot shares have dropped 12%, while Lowe’s have gone up 173%. As Nocera remarks, “You’ve heard of pay for performance? This is the classic definition of pay for pulse.”
Clearly Home Depot’s culture has changed. But it’s hard to see how any objective observer would see it as a change for the better.