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Depot, Inc.’s Annual Meeting of Shareholders is scheduled to be held on May 25,
3 in the Home Depot proxy urges the board of directors to adopt a policy
shareowners be given the opportunity at each annual meeting to vote on an
advisory resolution to approve the report of the Compensation Committee set
forth in the proxy statement. An advisory vote will allow shareowners to
voice in the executive compensation practices of Home Depot while not directly
affecting the board’s ability to set compensation policy. (See attached for full
text of the proposal.)
programs are one of the most powerful tools available to a company to align
employee interests with the long-term interests of shareowners. CalPERS believes
that a shareowner advisory vote of the annual compensation committee report
an effective mechanism to enhance transparency in setting executive pay,
accountability to shareowners, and to more effectively link pay and performance.
one of the largest shareowners of Home Depot, CalPERS urges you to vote FOR
Proposal 3. We
believes such a vote may compel the board to reexamine its compensation
practices and act accordingly in cases where Home Depot’s compensation packages
may be excessive.
ISS and Glass
Lewis are recommending that shareowners support this proposal.
you to support this important initiative by voting For Proposal 3. Please
to the proxy statement for more information or call The Altman Group, Inc.
(201) 460-1200 who is assisting us with this effort if you have any questions
need assistance in voting your shares.
Investment Officer, Global Equity
of this solicitation is being borne entirely by CalPERS and is being done
through the use of one or more of the following forms of communication: mail,
e-mail, and/or telephone communication. CalPERS is not asking for your proxy
do not send us your proxy card but return it to the proxy voting agent in
envelope that was provided to you.
PROPOSAL REGARDING COMMITTEE REPORT
ON THE PROXY CARD)
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
that stockholders of The Home Depot, Inc. ("Home Depot") urge the board of
directors to adopt a policy that Home Depot stockholders be given the
opportunity at each annual meeting of stockholders to vote on an advisory
resolution, to be proposed by Home Depot's management, to approve the report
the Leadership Development and Compensation Committee set forth in the proxy
statement. The policy should provide that appropriate disclosures will be
to ensure that stockholders fully understand that the vote is advisory; will
affect any person's compensation; and will not affect the approval of any
compensation-related proposal submitted for a vote of stockholders at the
or any other meeting of stockholders.
view, senior executive compensation at Home Depot has been excessive in recent
years. In each of the last three years, CEO Robert Nardelli has been paid
salary of more than $1,800,000, well in excess of the IRS cap for deductibility
of non-performance-based compensation. His bonus in each of those years has
at least $4,000,000, and he was awarded restricted stock valued at over
$8,000,000 in 2002, 2003 and 2004. Mr. Nardelli has also received a
disturbingly large amount of compensation in form of "loan forgiveness" and
gross-ups related to that forgiveness, which totaled over $3,000,000 in each
the past three years.
believe that the current rules governing senior executive compensation do
give stockholders enough influence over pay practices. In the United Kingdom,
public companies allow stockholders to cast an advisory vote on the "directors
remuneration report." Such a vote isn't binding, but allows stockholders
voice which could help reduce excessive pay. U.S. stock exchange listing
standards do require shareholder approval of equity-based compensation plans;
those plans, however, set general parameters and accord the compensation
committee substantial discretion in making awards and establishing performance
thresholds for a particular year. Stockholders do not have any mechanism
providing ongoing input on the application of those general standards to
individual pay packages. (See
Bebchuk & Jesse Fried, Pay
performance criteria submitted for stockholder approval to allow a company
deduct compensation in excess of $1 million are also broad and do not
constrain compensation committees in setting performance targets for particular
executives. Withholding votes from compensation committee members who are
standing for reelection is a blunt instrument for registering dissatisfaction
with the way in which the committee has administered compensation plans and
policies in the previous year.
we urge Home Depot's board to allow stockholders to express their opinion
senior executive compensation practices by establishing an annual referendum
process. The results of such a vote would, we think, provide Home Depot with
useful information about whether stockholders view the company's compensation
practices, as reported each year in the Leadership Development and Compensation
Committee Report, to be in stockholders' best interests.
stockholders to vote for this proposal.