Attention Home Depot Shareholders! Home Depot is going to listen to you — next time. Home Depot CEO Bob Nardelli had to hold down the fort at the retailer’s recent annual meeting. Nardelli was the only board member who bothered to show up. In a short, but very contentious board meeting, Nardelli shrugged off shareholder efforts to examine the company’s executive compensation package, and rejected every shareholder proposal — except one — with no discussion. The only resolution that passed was one that changes the methodology of voting for directors to a majority vote of shareholders. The company’s perfunctory handling of its Annual Meeting drew stinging criticism from the business media. In response, Home Depot issued a company press release on June 1st, saying, in part, “the Company said today it would return to its previous format for its 2007 annual meeting of shareholders.” In other words, a format where the board members actually show up. Bob Nardelli was quoted as saying, “Consistent with the way we run our company – in which we listen, learn and lead – we will return to our traditional format for next year’s annual shareholders meeting, which will include a business overview, the presentation of proposals, an opportunity for shareholder questions and with the board of directors in attendance.” At the Home Depot meeting, roughly one-third of the shareholder votes were withheld from each elected board member. Nardelli, for example, was elected with 32% of the shareholders withholding their votes. Home Depot has been criticized by some of its institutional holders, such as pension funds, for paying Nardelli too much (more than $37 million), and for having a Board of Directors with many conflicts of interest. 40% of the shareholders voted in favor of having more control over executive compensation, and 45% supported more control over retirement benefits for the company’s executives. The Home Depot press release shows the company is read to listen, learn…and follow.
In related Home Depot news, the company admitted in its latest quarterly filing with the Securities and Exchange Commission (SEC) that it deliberately saturates its stores so close to one another, that it cannibalizes almost one-fifth of its stores. “In order to meet our customer service objectives,” the company wrote, “we strategically open stores near market areas served by existing stores (“cannibalize”) to enhance service levels, gain incremental sales and increase market penetration. Our new stores cannibalize approximately 18% of our existing stores as of the first quarter of fiscal 2006.” No wonder community groups complain that there is no market need for another Home Depot near them. This retailer, and Wal-Mart deliberately over-build stores to saturate a trade area to gain market share. The new Home Depots being built today have little to do with need on Main Street, but more to do with perception on Wall Street. Community groups should use this statement to support their claim that the store is not needed in their community in the first place. Maybe this is something Home Depot shareholders will ask Bob Nardelli to talk about at next year’s more open (and attended) Annual Meeting.
