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Does Home Depot Hate Investors?
Dear American Capitalist Readers,
It’s no surprise to most investors that the biggest hurdle for Home Depot’s management is management. Falling profits, admission to backdating options, CEO Bob Nardelli’s obscene pay, and a recent share buyback announcement and bogus buyout rumors have done nothing more than inflate a stock that should trade sub-40.
Even now, it seems the board of directors cares very little for investors after snubbing a Relational Investors’ letter that called for the appointment of a special committee to evaluate the strategic direction of the company, the performance of management and alternative business strategies… because, says the “well run” company, the “board just finished a strategic review,” according to TheStreet.com.
In its letter (sent to Home Depot CEO Bob Nardelli on December 13, 2006), Relational’s said the board is responsible for the poor stock performance over the last six years. In fact, according to a Definitive Proxy Statement (found here http://ir.homedepot.com/EdgarDetail.cfm?CIK=354950&FID=898822-06-1486&SID=06-00), “We believe the Company's board of directors is presented with enormous responsibility and opportunity to reverse the Company's chronic inferior stock price performance experienced since 2000. We attribute this performance to deficient strategy, operations, capital allocation, and governance. We are planning an advocacy program designed to spur positive action to address these deficiencies. In that vain, under separate cover we have submitted the attached Notice of Shareholder Proposal.”
As said earlier, Home Depot will reportedly oppose the proposal and any proxy battles, “adding that its board of directors recently completed a strategic review and unanimously supports the management team,” according to CNNMoney.com. Plus, seeing that Relational only owns about a 1% HD stake, its fight may not have legs.
That’s not to say Relational won’t make Nardelli’s life a living nightmare, though. Just ask Jay Sidhu, the former CEO of Sovereign Bancorp. Last year, and without shareholder approval, Sidhu announced plans to sell about a 20% stake in Sovereign to Spain’s Banco Santander Central Hispano so he could finance the purchase of a bank for $3.6 billion.
Relational wasn’t too happy with this and took on Sidhu and Sovereign with a “massive public relations campaign to get other investors to join its campaign,” according to The Street.com. This is what may have helped Relational get its seat on the Sovereign board and helped unseat Sidhu.
If Relational takes the same path… well, Nardelli may want to think about stepping down now.
Take care,
Ian L. Cooper, Editor, Early Alert Trader and Death Cross Trader
