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Some other complaints included customer dissatisfaction and almost stagnant stock price of Home Depot over Nardelli's six year tenure at Home Depot. Shareholders of the company began to question Nardelli's high pay, which was around US$ 28.5 million a year for the year ended January 30, 2005. According to reports, Nardelli was asked to resign when he refused to accept the board members' request to more closely link his future incentives to shareholder gains. On the other hand, Nardelli had always argued that the company's share price was not under his control.4
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Home Depot was also criticized by some shareholders and analysts for the US$ 210 million severance package that was given to Nardelli to quit the company. This issue caught the attention of US policy makers as well. Barney Frank, the incoming chairman of the House Financial Services Committee, said that Nardelli's severance package was "further confirmation of the need to deal with the pattern of CEO pay that appears to be out of control."
Nardelli was not the only case of a senior executive being paid a high severance package. Henry McKinnell, the former head of Pfizer Inc., had left the company in 2006 with a severance package worth US$ 213 million despite the pharmaceutical company losing an estimated US$ 137 billion in stock value when he was at the helm of the company. Philip Purcell of Morgan-Stanley had received over US$ 95 million after he was asked to quit in 2005.5
According to a report by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO),6 the average worker-to-CEO pay ratios were less than 1 to 100 before 1990, which rose to above 1 to 500 by 2000. "We believe all employees should be paid fairly and that includes workers and the CEO," said Brandon Rees, a research analyst with the AFL-CIO. "The trend has been that CEOs take a disproportionate share of compensation,"7 he added.
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4] Julie Creswell and Michael Barbaro, "Home Depot ousts chief," www.iht.com, January 4, 2007.
5] Naomi Spencer, "Ousted Home Depot CEO hauls off $210 million severance package," www.wsws.org, January 08, 2007
6] AFL-CIO is a national association of labor unions in the US.
7] "Debate swirls around CEO pay," www.baltimoresun.com, May 15, 2006.
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