Home Depot Inc.
Summary:
With no one bailing out yet, it appears as though the Home Depot execs are prepared to go down with the ship. They are being hit fairly hard in the wallet by this downturn, and the horizon doesn't look very bright. The executive compensation program is consistently updated and approved by shareholders, so it appears to be well-aligned with shareholder interests. Executive pay reflects the current lull in company performance, but perhaps should be even lower.
Analysis:
One of the main reasons for the poor economy has been the real estate market. This has had a ripple effect on several related industries. One of the hardest hit has been the Retail Building Supply Industry. Due to a decrease in construction and homeowners moving away from large investments in homes with decreasing value, retailers in the building supply industry like Home Depot have seen a significant drop in sales. For Home Depot, not only are sales down in almost every category, but product costs on things like wood and metal are on the rise as well.
Look for Home Depot to continue to struggle for a while, with plans to close 15 stores and drop 50 stores from their growth plans as evidence. It looks as though shareholders may face similar woes in the immediate future, as the stock price has seen as significant drop recently. Price per share has fallen from the low $40s in early 2007 to a recent low of $21.46 in mid-July. We would expect the executive compensation program to mirror the recent woes of the company.
So… What Are They Paid?
Starting off with salaries, we see that the CEO makes only $1 million per year and the NEOs average a suitable $757,000. Bonuses are very low, as they should be. The CEO was paid a paltry $500,000, while the NEOs averaged $206,000 (half the bonus from the previous year). Although they have received the bar minimum, we still would like to see the bonuses go down to zero instead of 20% of base salary.
Stocks and options appeared to be OK, but also could have been lower. The CEO received an average amount of $4.35 million in stock and another $2 million in options. The NEOS averaged much less; about $2 million in stock awards and $450,000 in option awards. These numbers certainly could be lower, but paying execs primarily in this manner has the added bonuses of creating an incentive to bring the stock price back up.
The perquisites given out to the execs are average compared to the rest of the DOW 30. The CEO gets an average amount for personal airplane use of $110,000, $75,000 for life insurance, and something in between those two amounts for both tax reimbursements and matching contributions. Matching contributions are still high for NEOs, but every other category is pretty low.
Compensation Details:
| CEO | NEO Avg. | |
|---|---|---|
| Base Salary | $1,007,692 | $756,948 |
| Bonus | $500,000 | $205,959 |
| Stock | $4,345,701 | $2,030,906 |
| Options | $1,986,818 | $447,611 |
| non-Equity Incentives | N/A | N/A |
Reference Links:
(1) Annual
Proxy Statement
(2) Annual
Report