March 30, 2009 6:27AM

Nardelli’s Compensation Problem

By Ray Hennessey

Bob Nardelli is living on borrowed time as CEO of Chrysler.

 

Rick Wagoner is quitting as chief executive of General Motors, after the White House forced him out as a condition of the latest round of corporate bailout money. Chrysler, too, is set to get its share of loans from the government, but, thus far, Nardelli isn’t being asked to leave.

 

True, there are differences between Wagoner and Nardelli. Wagoner has led GM since 2000, while Nardelli took over Chrysler after its Cerberus-backed buyout in August 2007. And GM has been in much worse financial shape than Chrysler.

 

But Nardelli will be on a very short leash, and look for Congress to question his every move.

 

You see, he has a compensation problem.

 

When Nardelli resigned as CEO of Home Depot in 2007, he was essentially run out as a result of his pay. Not only that, he was criticized by shareholder activists for ignoring investor concerns about his pay. Indeed, at a May 2006 annual meeting, he refused to answer questions from shareholders and gaveled the meeting to a quick close, ignoring shareholders who wanted to exercise their rights by asking questions and making comments to the board. Nardelli and Home Depot would later apologize for the spectacle.

 

When Nardelli quit Home Depot in 2007, he drew more ire by walking away with a $210 million golden parachute – even though his tenure did little to boost Home Depot’s stock price.

 

In fact, House Financial Services chairman Barney Frank, D-Mass., was critical Nardelli back then, calling the severance package “out of control.”

 

Frank’s words back then echo now in the controversy over bonuses paid to AIG executives and any compensation going to CEOs of financial-services companies that have taken federal bailout dollars.

 

Perhaps Nardelli has learned from the experience. He was, after all, the first of the Big Three auto execs to agree to take just $1 in pay.

 

How Nardelli structures his future compensation will judge how hard a time the government gives him – and Chrysler – in the coming months. Already, the government has suggested that Chrysler isn't viable and its future lies with  Fiat as a partner, not as a standalone company. That doesn't speak well to Nardelli's turnaround skills.

 

Given the public outrage over outsized compensation and taxpayer fatigue with bailouts and stimulus, Nardelli shouldn’t expect the government to give him the benefit of the doubt.