HD » Topics » THIS SHAREHOLDER PROPOSAL.

This excerpt taken from the HD DEF 14A filed Apr 15, 2009.

THIS SHAREHOLDER PROPOSAL.

 

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Table of Contents

EXECUTIVE COMPENSATION

 

COMPENSATION DISCUSSION & ANALYSIS

This excerpt taken from the HD DEF 14A filed Apr 13, 2007.

Shareholder Proposal

RESOLVED:     The shareholders of The Home Depot, Inc. ("Home Depot" or the "Company") urge the Board of Directors (the "Board") to seek shareholder approval of any future extraordinary retirement benefits for senior executives. The Board shall implement this policy in a manner that does not violate any existing employment agreement or vested pension benefit.

For the purposes of this resolution, "extraordinary retirement benefits" means receipt of additional years of service credit not actually worked, preferential benefit formulas not provided under the Company's tax-qualified retirement plans, accelerated vesting of retirement benefits, and retirement perquisites and fringe benefits that are not generally offered to other Company employees.

SUPPORTING STATEMENT:

Supplemental executive retirement plans ("SERPs") provide deferred compensation for a select group of management or highly compensated employees whose compensation exceeds limits set by Federal tax law. Because SERPs are unfunded plans and payable out of the Company's general assets, the associated pension liabilities can be significant.

Our Company's proxy statement discloses that it maintains the Home Depot FutureBuilder Restoration Plan for certain key senior executives. The proxy statement states:

    Restoration Plan.    The primary purpose of the Restoration Plan is to provide additional retirement income to certain key executive employees of the Company and its participating affiliates to reduce the impact of certain provisions of the Internal Revenue Code that limit the maximum benefits that may accrue under the Company's qualified retirement plans. In particular, the Company intends for the Restoration Plan to offset the effects of the maximum compensation limitation under Code Section 401(a)(17) by providing the amount of supplemental retirement income specified in the Restoration Plan. The Restoration Plan constitutes an unfunded, nonqualified deferred compensation plan that benefits certain designated employees who are within a select group of key management or highly compensated employees.

In an article entitled "Executive Pay; the New Executive Bonanza: Retirement," New York Times (April 3, 2005) it was reported that Chairman, CEO and President Robert Nardelli will be eligible for estimated annual retirement benefits of $3.9 million.

In our opinion Home Depot already provides Mr. Nardelli very generous compensation. According to the proxy statement, in 2005 Mr. Nardelli received a salary of $2.1 million; a bonus of $7 million; other annual compensation of $2.9 million; restricted stock awards valued at more than $14.6 million; and an LTIP payout of $2.4 million. In 2005 he was also granted 590,000 stock options with an estimated grant date present value of more than $8.1 million.

To help ensure that the use of extraordinary pension benefits for senior executives is in the best interests of shareholders, we believe such benefits should be submitted for shareholder approval. Because it may not always be practical to obtain prior shareholder approval, the Company would have the option of seeking approval after the material terms were agreed upon.

We urge your support for this important reform.

22


RESPONSE TO PROPOSAL REGARDING RETIREMENT BENEFITS

WHAT IS THE RECOMMENDATION OF THE COMPANY?

The Company believes that adoption of this proposal would prevent the Company from timely attracting and retaining senior leadership critical for the Company's future success. The Company recommends that you vote against adoption of this proposal.

WHY DOES THE COMPANY OPPOSE THIS PROPOSAL?

This proposal was submitted in 2006 and rejected by Company shareholders. Specifically, the Company already has a formal policy and process for the review and determination of retirement benefits for its senior leaders. The process is conducted by the Company's Leadership Development and Compensation Committee, which is comprised solely of independent directors, and by all of the Company's independent directors in the case of the Company's Chairman and Chief Executive Officer. The Company believes that adoption of a proposal to seek advance approval from shareholders would significantly limit the Company's ability to timely attract, motivate and retain the senior leadership critical for the Company's future success. In addition, the Company does not have a defined benefit retirement plan for any of its associates, including executive officers. Consequently, we do not believe that this proposal is in the best interest of Company shareholders.

WHY DOES THE COMPANY PROVIDE RETIREMENT BENEFITS TO SENIOR EXECUTIVES?

Retirement benefits are a critical component of a senior executive's overall compensation program and are essential to attracting, motivating and retaining the most highly talented executives with a demonstrated history of leadership and operating performance. Retirement benefits are also an important factor in an executive's decision to accept or reject a new position because in many instances, the best leaders must forfeit accumulated retirement and pension benefits with their current employer in order to accept a new position. Because the Company needs to continue to recruit experienced executives from other companies, the Committee must have flexibility to provide competitive benefits, including the replacement of retirement benefits, that a senior executive relinquishes when leaving his or her current employer to join the Company. As the Company continues to implement its growth strategy, the Committee must have the compensation tools necessary to competitively attract and maintain the very best leadership.

WHAT IS THE COMPANY'S PROCESS FOR APPROVING RETIREMENT BENEFITS?

The Committee is required to approve all retirement benefits for executive officers of the Company. In addition, the retirement arrangements of the Company's Chairman and CEO must be approved by a two-thirds majority of the independent directors of the Board. In determining these retirement arrangements, the Committee and the independent members of the Board undertake a formal comprehensive review process, including the significance of the leadership position being evaluated, past and current performance, consultation with nationally recognized independent compensation advisors, benchmarking against other companies of similar size and complexity of operation and, generally, the competitive economic environment.

HOW WOULD ADOPTION OF THE PROPOSAL AFFECT THE COMPANY'S ABILITY TO ATTRACT AND RETAIN THE BEST LEADERSHIP?

The Company believes that adoption of this proposal would have a significant adverse impact on the Company's ability to recruit and retain the best leadership talent available. The executive compensation process needs to be sufficiently flexible to allow the Company's Board to privately recruit and make binding offers and commitments on a timely basis. Requiring shareholders' advance approval of retirement benefits would prevent this and would be impractical for several reasons. First, the shareholder pre-approval process would make recruiting negotiations public and would jeopardize the executive's current employment arrangements. Second, even if shareholder approval followed an offer or commitment of employment, the offer would have to become public long in advance of a shareholders' meeting, again jeopardizing the executive's current employment. Further, since the Company, like most other public companies, conducts its shareholders' meeting annually, this process would prevent the Company from hiring or retaining leadership talent at the time these challenges and opportunities arise. Consequently, the Company would be limited to making binding offers once a year.

If adopted, the Company believes that this proposal would deter highly qualified executives from considering

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employment with the Company and significantly hinder the Company's ability to compete for these executives in any meaningful way. For all of these reasons, the Company believes that the day-to-day decisions of hiring and compensating senior leaders should continue to be managed by the independent members of the Board of Directors that are elected annually by the Company's shareholders.

WE RECOMMEND THAT YOU
VOTE AGAINST THE ADOPTION OF
THIS SHAREHOLDER PROPOSAL

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SHAREHOLDER PROPOSAL REGARDING EQUITY COMPENSATION

(ITEM 8 ON THE PROXY CARD)

Harold Mathis, Jr., located at P.O. Box 1209, Richmond, Texas 77406, is the beneficial owner of 100 shares of the Company's common stock and has submitted the following resolution:

This excerpt taken from the HD DEF 14A filed Apr 14, 2006.

Shareholder Proposal

RESOLVED:    The shareholders of The Home Depot, Inc. ("Home Depot" or the "Company") urge the Board of Directors (the "Board") to seek shareholder approval of any future extraordinary retirement benefits for senior executives. The Board shall implement this policy in a manner that does not violate any existing employment agreement or vested pension benefit.

For the purposes of this resolution, "extraordinary retirement benefits" means receipt of additional years of service credit not actually worked, preferential benefit formulas not provided under the Company's tax-qualified retirement plans, accelerated vesting of retirement benefits, and retirement perquisites and fringe benefits that are not generally offered to other Company employees.

SUPPORTING STATEMENT:

Supplemental executive retirement plans ("SERPs") provide deferred compensation for a select group of management or highly compensated employees whose compensation exceeds limits set by Federal tax law. Because SERPs are unfunded plans and payable out of the Company's general assets, the associated pension liabilities can be significant.

Our Company's proxy statement discloses that it maintains the Home Depot FutureBuilder Restoration Plan for certain key senior executives. The proxy statement states:

    Restoration Plan.    The primary purpose of the Restoration Plan is to provide additional retirement income to certain key executive employees of the Company and its participating affiliates to reduce the impact of certain provisions of the Internal Revenue Code that limit the maximum benefits that may accrue under the Company's qualified retirement plans. In particular, the Company intends for the Restoration Plan to offset the effects of the maximum compensation limitation under Code Section 401(a)(17) by providing the amount of supplemental retirement income specified in the Restoration Plan. The Restoration Plan constitutes an unfunded, nonqualified deferred compensation plan that benefits certain designated employees who are within a select group of key management or highly compensated employees.

In an article entitled "Executive Pay; the New Executive Bonanza: Retirement," New York Times (April 3, 2005) it was reported that Chairman, CEO and President Robert Nardelli will be eligible for estimated annual retirement benefits of $3.9 million.

In our opinion Home Depot already provides Mr. Nardelli very generous compensation. According to the proxy statement, in 2004 he received a salary of $2,000,000; a bonus of $5,750,000; other annual compensation of $6,335,146 (related to forgiveness of a loan); $13,880,000 in restricted stock awards; and grants of 600,000 stock options with an estimated potential value of more than $13,000,000 if the stock appreciates at a rate of 5% per year for the option term.

To help ensure that the use of extraordinary pension benefits for senior executives is in the best interests of shareholders, we believe such benefits should be submitted for shareholder approval. Because it may not always be practical to obtain prior shareholder approval, the Company would have the option of seeking approval after the material terms were agreed upon.

We urge your support for this important reform.

20


COMPANY RESPONSE TO SHAREHOLDER PROPOSAL REGARDING RETIREMENT BENEFITS

WHAT IS THE RECOMMENDATION OF THE COMPANY?

THE COMPANY RECOMMENDS THAT YOU VOTE AGAINST THE ADOPTION OF THIS SHAREHOLDER PROPOSAL.

WHY DOES THE COMPANY PROVIDE RETIREMENT BENEFITS TO SENIOR EXECUTIVES?

Retirement benefits are a critical component of a senior executive's overall compensation program and are essential to attracting, motivating and retaining the most highly talented executives with a demonstrated history of leadership and operating performance. Also, retirement benefits are an important factor in an executive's decision to accept or reject a new position. Removing the flexibility of the Committee to oversee this important aspect of executive compensation would place the Company at a significant competitive disadvantage. In many instances, the best leaders must forfeit accumulated retirement and pension benefits with their current employer in order to accept a new position. Most highly experienced executives would not accept a new position that resulted in loss of accumulated retirement benefits. As the Company continues to implement its growth strategy both within and beyond its traditional store formats, it will be imperative to the Company's success to have the compensation tools necessary to competitively attract and maintain the very best leadership in these industries. Because the Company will need to continue to recruit experienced executives from other companies, the Committee must have flexibility to replace benefits, including retirement benefits, that a senior executive relinquishes when leaving his or her current employer to join the Company.

WHAT IS THE COMPANY'S PROCESS FOR APPROVING RETIREMENT BENEFITS?

The Company's corporate governance requirements provide that the Leadership Development and Compensation Committee, a committee of the Board of Directors comprised entirely of independent directors, approve all retirement benefits for executive officers of the Company. In addition, all of the independent members of the Board of Directors must approve the retirement arrangements of the Company's Chairman, President and Chief Executive Officer. In determining these retirement arrangements, the Committee and the independent members of the Board undertake a formal comprehensive review process, including the significance of the leadership position being evaluated, past and current performance, consultation with nationally recognized compensation advisors, benchmarking against other companies of similar size and complexity of operation and, generally, the competitive economic environment.

HOW WOULD ADOPTION OF THE PROPOSAL AFFECT THE COMPANY'S ABILITY TO ATTRACT AND RETAIN THE BEST LEADERSHIP?

The Company believes that adoption of the proposal would have a significant adverse impact on the Company's ability to recruit and retain the best leadership talent available. The Company's view is that the executive compensation process needs to be sufficiently flexible to allow the Company's Board of Directors to privately recruit and make binding offers and commitments on a timely basis. Requiring shareholders' approval of retirement benefits would prevent this and is unrealistic for several reasons. First, it is unrealistic that the best leaders would agree to be recruited under these circumstances because the shareholder pre-approval process would make such negotiations public and would jeopardize the executive's current employment arrangements. Second, even if shareholder approval followed an offer or commitment of employment, the offer would have to become public long in advance of a shareholders' meeting, again jeopardizing the executive's current employment. Further, since the Company, like most other public companies, conducts its shareholders' meeting annually, this process would prevent the Company from hiring or retaining leadership talent at the time these challenges and opportunities arise. The Company would be limited to making binding offers once a year. Such process would deter highly qualified executives from considering employment with the Company and significantly hinder the Company's ability to compete for these executives in any meaningful way. For all of these reasons, the Company believes that the day-to-day decisions of hiring and compensating senior leaders should continue to be managed by the Board of Directors that is elected annually by the Company's shareholders.

WHY DOES THE COMPANY OPPOSE THIS PROPOSAL?

The Company has a formal policy and process for the review and determination of retirement benefits for its senior leaders. The process is conducted by the Company's Leadership Development and Compensation Committee, which is comprised entirely of independent directors, and by all of the Company's independent directors in the case of the Company's Chairman, President and Chief Executive Officer. The Company believes that adoption of the proposal would significantly limit the Company's ability to timely attract, motivate and retain the senior leadership critical for the Company's future success. Consequently, we do not believe that the proposal is in the best interest of the Company's shareholders.

WE RECOMMEND THAT YOU
VOTE AGAINST THE ADOPTION OF
THIS SHAREHOLDER PROPOSAL

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SHAREHOLDER PROPOSAL REGARDING POLITICAL CONTRIBUTIONS

(ITEM 8 ON THE PROXY CARD)

A shareholder has informed the Company that it intends to present the following proposal at the Meeting. The Company will provide its shareholders with the proponent's name and address and the number of shares of Company common stock held by the proponent promptly upon receipt of an oral or written request.

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