Thursday, January 04, 2007

Home Depot: When CEO Pay Is Not Okay

I really like the fact my own CEO has a good pay package. Because his good pay package has translated into good pay packages for everyone at the company; the rising tide lifting all ships theory working in practice. In addition, where my company is today is largely because of the CEO. He didn't start the company, but he turned it from an also-ran into a cash generating machine. And he should be recognized what he did for both shareholders and employees.

But my situation is something of an anomaly since my company has only a couple hundred people, nearly all whom have college degrees, and a huge percentage with PhDs (including the CEO himself). For attracting and retaining this kind of talent the same sort of package that motivates the CEO has to motivate everyone else.

The same can't be said of the recently departed CEO of Home Depot. In a company where tens of thousands work for an hourly wage, he was taking home pay packages totaling in the hundreds of millions of dollars ("$123.7 million in compensation excluding certain stock option grants"). That might be okay for someone who started what became a large company like Jobs or Gates and created thousands of new jobs and generated billions of dollars of new wealth. But we're talking about a professional manager recruited from GE in 2000 when the stock was about 40 and who saw it go up no more than 10 points during his tenure. In fact, from 2002 to today the stock has been below or equal to where it was when he started (source: the new toy-size WSJ). And for that he was granted a guaranteed $3 million dollar annual cash bonus?

To add insult to injury, his exit package is ridiculous: $210 million dollars. That is ten times Carly's exit package, which I thought was insane when it was announced.

It's people like this who give capitalism and business a bad name, and the reason it angers me so much. They become poster children for anti-business crusades and bad legislation that does nothing to reign in excesses.

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