CEO’s Responsibility

DON’T BLAME BOBBIE!

Though I’d oft leave a response to a comment alone and surfice it to say “at times you have to agree to disagree” but to wit?

To suggest or even hint that a shareholder would for greed of gain ask of it’s CEO (Bobbie or any), that they engage in “Stock Manipulation” is well a cheap shot & a lazy way to refute in a debate of opinion or a retort. As to “overexcited investors” or claims of “ridiculous valuation”. This amounts to:

1) Blame the Victim
2) Throw Away Statements

Surely, as stated in my factual remarks bellow, Bob Nardelli was not unjustly compensated for his time & efforts. As for the shareholder well they took a 9% “pay cut” if you will, having absorbed the lack of luster reflected in HD stock throughout one of the prolonged housing & building booms of late in the US spanning several years up to mid 2006.

To make the claim of “ridiculous valuation” you would have to support that by credible information relevant to the industry, if any thing I would say Bob is a best responsible for watching the water drain out of the “Moat” that was left for him. Now the barbarians are at the gate & the townspeople have fled or are revolting.

If we were to follow the concept that 46X earnings is “ridiculous valuation” how about these? ALL “ridiculous”?

FYI ~ Google is now trading at 45 to 46 times 2006 earnings expectations, compared with eBay at about 45 times 2006 earnings expectations and Amazon at about 40 times.

Here’s the rub:

At Home Depot’s annual shareholder’s conference on May 29, 2006, in Wilmington, Delaware, many of the companies shareholders expressed anger and confusion about CEO Nardelli’s pay package of $123.7 million, excluding stock option grants, over the past 5 years. Nardelli was awarded this package while Home Depot’s stock sunk about 9%, and competitor Lowe’s saw a 185% increase on a split-adjusted basis. While some stockholders were prepared to ask some tough and pointed questions to the board of directors, they were hindered by the fact that only one of the board’s members actually showed up to the meeting, Nardelli himself. Their comments were kept to a strict time limit, displayed on a large clock. Nardelli refused to acknowledge any shareholder’s comments, answer any questions, and he promptly left after only thirty minutes, causing an uproar of anger and rage. Votes on shareholder proposals afterward showed an unusually high level of dissent, with over one third withholding their support for Nardelli’s re-election as CEO.

The company’s “official” excuse for the absence of the board on the day of the meeting was that “many” of the directors were at headquarters over the past few days for their quarterly meeting and remain there today on company business. But directors had over a month’s notice of the meeting, with the date and location of the meeting being posted on April 14th, 2006. Directors are also paid for travel expenses to and from shareholder meetings by the company, with full access to a corporate jet.

I have no qualms with CEO’s with fortitude & the integrity of strong leadership who take a company through tough times, but hey the “Let them eat cake” cavalier attitude & shareholders be damned demeanor of Bob & the directors. We’ll to recourse a well worn quote, “Throw the Bums Out!”. No by “manipulation” but by proxy.

Regards,

Scott

FYI – (Not “sucking up” here), but most of what I have read of your past articles seem well reasoned and credible. I just think your “off the mark” on this one.

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Why don’t we start by comparing HD’s valuation in 2000 to their main competitor’s (LOW) during the same period.

price to sales.:

HD – 3.55
L – 1.37

Average P/E
HD – 46.6
L 30.1

price to cash flow:

HD – 51
L – 21

Clearly both companies were over priced – HD much more so.

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OK, so now you’re actually going to try and support your claim (that HD was not overvalued in 2000) by comparing HD’s 2000 valuation with a few overvalued companies of today. Let me see if I can put this clearly. YES! GOOG, AMZN and EBAY ARE ALL OVERVALUED. 45 times earnings, unless said earnings are depressed and primed to rebound in a big way, is insane. The PE multiple of the S&P 500 is currently around 16 and that is probably too high given the current economic environment. Too high for me anyway.

message to Vitaliy:

Keep up the good work. It ‘s nice to hear a rational voice among the noise once in a while.

“since he took over he’s done a terrific job of creating shareholder value.”

I think Bush used terms such as this before someones ‘sacking’ – “Brownie’s doing a heck ov’ a job!”

**News Update**
Home Depot, the No. 1 home improvement retailer, announced Wednesday that its chairman and CEO Robert Nardelli resigned effective Jan. 2.

Now in a year or two perhaps we could have a good company & stock.

Regards.

Thank you all for your comments!

Vitaliy