Redstate

The good-governance types take aim at Home Depot

By blackhedd Posted in Economy — Comments (4) / Email this page » / Leave a comment »

We're just coming out of another busy proxy season in corporate America. Retailing giant Home Depot (HD) just completed their annual meeting in Atlanta. Now HD has been notorious for honking off shareholders over the last half-dozen years, so they definitely had some improving to do.

HD have taken the positive and necessary step of showing ex-CEO Bob Nardelli the door (which didn't hit him on his way out). But four of HD's directors are due to age out this year too. Who will replace them is an interesting question. Disclaimer: I own HD stock.

Look out below when you hear a reporter say something like this:

...Home Depot has a chance to become a strong model for corporate governance in the next year, when four of its 11 board members are due to step aside because of age limits.

Read on...

The bete-noir of the retailing business, of course, is Wal-Mart (WMT, headquartered in Bentonville, AK). But as a large publicly-owned enterprise, HD gets its share of attention from the shareholder peanut gallery. Check this comment:

"The model on how to run a great business, how to run a great board is there," said Paul Lapides, director of the Corporate Governance Center at Georgia's Kennesaw State University. He said Home Depot set a high standard for good governance in its early years.

Now let's be quite clear that under the arrogant and none-too-effective Nardelli, HD had been a textbook example of how not to run a public company. In fact, Nardelli was the only one of HD's directors to even attend last year's annual meeting. That's quite a thumb in the eye to the rank-and-file ownership.

And of course, the debacle of Nardelli's botched pay arrangements touched off the latest paroxysm of mass-media insanity over so-called fat-cat CEOs.

As is typical with organizations, troubles like this tend to put you in a penitential mood, where you face the temptation to make up for past sins and improve your PR by doing goofy stuff, like apologize for things your ancestors did. (And occasionally by paying off professional shakedown artists from the poverty industry.)

Thus I predict that HD will find it difficult to resist the calls to elect four new directors this year that will polish the company's "good citizenship" cred:

While experts in retailing, mergers and other business disciplines can serve Home Depot well, the retailer would benefit if new directors possessed more intangible qualities, [said a headhunter for directors and a labor-union representative].

Well, no, I don't necessarily think so. I'm reminded of the invaluable T. J. Rodgers, CEO of Cypress Semiconductor, one of the extremely few out-of-the-closet conservative Republicans among the ranks of big-business leadership. Once he was asked why all of his directors were old white men, or something to that effect. If I recall correctly, he dictated his reply into a little recording machine while simultaneously driving his Jag home from the office. Legend has it that he left angry teeth marks in the little device as he jammed it into his mouth to shift gears.

The substance of his response was that a company benefits the most from directors that are highly educated businesspeople, knowledgeable about the industry, and most importantly, with either CEO-level experience of their own, or with established credentials as leading change agents.

Having direct experience on both sides of the boardroom table (as a senior manager and as a director) I'll be the very first guy in any room to jump up and say how important it is to have independent directors. The CEO and the CFO need people in the room who won't yes him, and who will always call him out when he says or does anything stupid. That means people who are not only tough-minded and strong-willed, but who have been there.

If that means they'll largely be businesspeople of a certain age, I'll take it, no problem.

But for people to be suggesting that HD needs directors who bring "more intangible qualities" to the task of representing shareholders' interests suggests clearly that another agenda is at work. Namely, one that is predictably congruent with the priorities of the political Left. Namely, one that loads so many extraneous "social" priorities onto business management that their focus on global competitiveness is attenuated. And namely, one that you will hear more and more of as the Democrats gear up to take back the White House.