Wednesday, January 03, 2007

Nardelli's Ridiculous Severance

I'm amazed at reading stories of Robert Nardelli's $210 million severance package. As a CEO, I find it disgusting by any measure. A man as wealthy as him should be embarrassed by the size of the package for failing to deliver for Home Depot. In his time, we worked to make the company more efficient by destroying the service led culture of the company. After he took over, you could not find what you were looking for. On top of that, you couldn't find people to help you. Even worse, those that worked there could not give advice on what to do. Then when you found something, you'd have to wait in a long line to pay. This is not how to run a company. It is how you get short term financial results.

No wonder Lowe's ate their lunch. No wonder Home Depot's stock is down. CEO's have great responsibility - that is for sure. However, large company CEO's have access to great resources for consultants, staff and capital investment. With all that is available to them, CEO's should be fired if they trash a company. Being allowed to take shareholder money like this shows a lack of diligence from the Board of Directors. It also sends a terrible message to other employees about how their work is valued.

The risk/reward equation for large company CEO's is completely screwed up vs. the entrepreneurial founder and CEO. If you fail at a startup, you typically lose money, especially if you started it. If you fail at a large company, you make money while you are failing and then get more on your way out. This makes no sense. Shareholders need to take action to prevent this if they want innovation and performance.

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