Corporate Governance: Bob Nardelli's Interview on CNBC

As I write this post, I am listening to/watching Maria Bartiromo's interview with Bob Nardelli, CEO of Home Depot. Irrespective of my prior remarks about Bartiromo, she is certainly giving Nardelli a fairly "hardball" interview. To my pleasant surprise, she has asked direct questions about Nardelli's annual meeting fiasco.

As for Nardelli, his performance in the interview's opening moments is nothing short of robotic. Clearly, Home Depot hired the best public relations talent they could find to carefully script his remarks about the annual meeting. Nardelli was obviously told to "stick to the script," period. No deviations. No ad libs.

That script consisted of simply saying, to paraphrase, "We tried a new style of annual meeting. I take full responsibility. It didn't work well. We will return to our prior format next year." When Bartiromo pushed him for an answer as to why the director-less format was tried this year (and, to her credit, she actually asked, verbatim, "what were you thinking?!"), he repeated, several times, again, to paraphrase, "We are a society that likes to ask questions and blame. This is in the past. We won't do it again. We'll go back to our prior format next year." Meaning, he is not about to discuss the highly probably reason for the attempt to muzzle shareholders- his egregious pay package in the face of consistently poor shareholder returns for the 5 or so years he has run Home Depot.

As to the matter of his options, he avoided admitting the rules were changed for him, to his benefit, regarding the awarding of the options. Rather, he kept stressing that, if he doesn't get the stock price above the strike price, he receives nothing. Again, ducking the "why" and focusing on the "what if?"

Nardelli then went on to extol his supportive board. Yes, with the compensation treatment he's gotten, what else would you expect? Further, he spoke of their patience and support for his strategy. Meaning, I guess, that he's happy they haven't noticed that, under his leadership, Home Depot's total returns have been abysmal. According to Bartiromo, the company's stock has plunged 30% during his tenure. And 20% over the last 5 years. Lowes has done much better for its shareholders over the past 5 years.

His clever attempt to dodge responsibility is to lay it on....his board of directors. According to Nardelli, since his board has continued to employ and pay him handsomely, he must be doing alright. Nevermind that, like most boards, they would be beholden to him for nomination and continued membership. Nice 'virtuous' circle for Bob and his board- not so nice for the company's owners.

In his "final remarks," as solicited by Bartiromo, Nardelli sidesteps the poor total returns, and hammers away at the fundamental financial results, and, in his opinion, the company's 'solid commitment to corporate governance.' In short, he's being paid millions of dollars, but hasn't a clue how to affect his company's performance in ways which will result in consistently superior returns for his shareholders.

It was an interesting experience to watch a very nervous CEO bob and weave his way through a minefield of negative topics without departing from his carefully rehearsed script. He simply denied that Home Depot has problems which he is capable of solving. That is, something outside of his control is responsible for all their woes.

If I were a Home Depot shareholder, I'd want a new CEO, effective immediately. If the CEO doesn't see himself as responsible for the mediocre returns of the company he leads, and has no ideas on how to affect that performance, how can the company go wrong replacing him with someone who will try to boost the company's total return performance?