There was a minor clue in the WSJ about how Mr. Bob Nardelli, formerly President of Home Depot, managed to get such a rich comp package. In a small paragraph in the middle of a long article, there was a brief reportage of the last days of Jack Welch at GE. He realized that there were three candidates for his position and convinced the Board to grant all three candidates a very high package. He did this knowing that two of the three would be leaving GE, obviating two of the packages. If they did not, GE kept three very talented people (in his opinion). When Nardelli chose to leave when he did not get the top job, he used the GE package as proof of his value to HD. The HD Board, who had a couple high rollers such as Mr. Langone, who never met a compensation package that he didn’t like, went along with it, presumably because of Jack Welch’s “vision”.

I’m not currently a stockholder, and I do not plan on being one any time soon since the problems created by Six Sigma are going to take years to get out of the system. Likewise, the talent that was gathered together has blown into the winds, either through the Company’s cost cutting or through the talent’s disgust with the state of the Company. When I was a stockholder, I was dismayed with the Board, especially Ms. B. Hill, who sits on five boards, presumably also running her own business. No mere mortals have that sort of attention span, and that may be the real clue here. Companies have been paying for gods, but what they’re getting are mortals.

Given the current political climate, there are sure to be hearings and such, but I don’t really think that you can legislate this stuff. Doing so assumes that government and regulation can do a more efficient job than the market place. The proof of this lesson is that with all his high compensation, even excluding the exit package, Nardelli was a mortal with a bad case of hubris. The stock price reflects that reality.  But I’m not sure that this is entirely his fault.

With very high compensation, one is not likely to encounter such an executive in a grocery store or fast food restaurant. And it is not us who are the victims, but rather the executive since they no longer have touch with the everyday world.  While those who buy and consume their products live ordinary lives, the highly compensated executive only associates with other highly compensated executives.  And by doing so, they leave themselves open to making decisions that make perfect sense in their world and no sense in the rest of the world.

As usual, there are “state of mind” clues that came up along the way. I cut up my gold Home Depot credit card several years ago and sent it to Mr. Nardelli after they fired a guy in Wyoming for running an anti-Home Depot management web site. My comment then was “This is not the Home Depot that I knew.” As it turns out, a lot of customers felt that way.

The market speaks.