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On a day when Home Depot chairman and CEO Robert Nardelli resigned with a $210 million separation agreement, the incoming chairman of the House Financial Services Committee indicated that he will offer legislation to give shareholders more power in determining executive pay.

Rep. Barney Frank, D-Massachusetts, who will assume his new position when Democrats officially take over the House on Thursday, January 4, blasted the Atlanta-based home improvement chain.

“The action of Home Depot’s board of directors to simultaneously dismiss Robert Nardelli and provide him with $210 million in severance is further confirmation of the need to deal with a pattern of CEO pay that appears to be out of control,” Frank said in a statement Wednesday, January 3.

Later, in a speech at the National Press Club, Frank asserted that corporate boards give too much leeway to the executives they’re supposed to oversee.

“Boards of directors don’t provide any real check on CEOs,” he said. “They don’t stand up to the CEO. They may stand up to the workers.”

In legislation that he intends to introduce later in the congressional session, Frank will propose that shareholders vote on executive compensation packages. Currently, company boards set executive pay.

Most of the shareholders who weigh in will be large funds like the California Public Employees’ Retirement System, Frank said.

“They are sophisticated and thoughtful, and corporations would benefit from their increased participation,” he said.

Soaring executive pay exacerbates growing income disparity, Frank argues. He cited statistics showing that families with incomes below $92,000, or 90 percent of Americans, saw their incomes fall 4 percent after inflation between 2001 and 2004—a time when the economy was expanding.

“Business leaders who are frustrated by the unwillingness of the American voter to be supportive of their agenda for economic growth should look to the contrast of Mr. Nardelli’s consolation prize and the resistance of business to raising the minimum wage,” Frank said in a statement.

He elaborated in his Press Club speech, warning against the “increasing separation of the well-being of the average citizen from overall economic growth.”

Part of the problem is that the economy is often viewed in a Wall Street framework. “If corporate profits go up, that’s a good thing,” Frank said. “If wages go up, that’s a bad thing. That’s the perceived wisdom that I’m trying to change.”

Democrats want to shift the focus to workers. Frank advocates a “grand bargain” between congressional Democratic majorities and the business community, which usually finds Republicans more sympathetic to their causes.

In Frank’s deal, businesses would facilitate unionization, support expanded health care, raise wages and acquiesce to labor and environmental provisions in trade agreements. In return, Democrats would back immigration reform, trade pacts and an easing of rules on foreign direct investment.

Such an agreement would break political deadlock, Frank maintains. “Right now, we’re stalled,” he said. “That’s why the business community should care.”

Several members of the corporate lobby, however, were reticent to comment on Frank’s notion until they learned more about it.

“It’s an interesting theory, which means nothing until there’s specific legislation on the floor,” says Martin Reiser, manager of government policy for Xerox Corp. “It’s a little all-encompassing but at the same time unspecific.”

One area where Frank is explicit is his desire for the government to help those hurt by globalization and technological advances. But he doesn’t advocate eliminating inequality, just reducing it.

“Inequality is necessary in a capitalistic system,” Frank said. “But you do not have to have government reinforce it. You can have government retarding it. The public sector needs to be valued as a partner.”

He also asserts that unions improve quality of life on the job. For instance, he is wary of a Wal-Mart’s new approach to workforce management.

The Wall Street Journal reported on January 3 that the massive retailer will assign duties to workers at times when store traffic is highest, regardless of traditional schedules.

“Yeah, and if you have to pick your kid up at school, that’s tough,” Frank said. “Unions help to protect people’s dignity in the workplace.”

—Mark Schoeff Jr.

The following is an excerpt of a proxy statement that Home Depot filed April 14. It includes a discussion of the terms of the employment agreements for the company’s named executive officers, who include Dennis Donovan, executive vice president, human resources:

“The Company also has employment agreements with Dennis M. Donovan, Executive Vice President – Human Resources, dated as of March 16, 2001, and with Frank L. Fernandez, Executive Vice President, Secretary and General Counsel, dated as of April 2, 2001. The initial term of Mr. Donovan’s agreement terminates on December 31, 2005, and beginning on January 1, 2003, automatically extends so that the remaining term is always three years. The initial term of Mr. Fernandez’s agreement terminates on April 2, 2004, and beginning on April 2, 2002, automatically extends so that the remaining term is always two years. Each agreement provides that the automatic extensions will continue until either the Company or the executive gives written notice of termination of the extension provision.

“The employment agreements provide for each of Messrs. Donovan and Fernandez to receive a base salary of not less than $525,000 per year. Mr. Donovan is eligible for an annual bonus of no less than his then-current base salary. Mr. Fernandez is eligible for an annual bonus of no less than 65% of his then-current base salary. Both Messrs. Donovan and Fernandez were guaranteed a bonus for Fiscal 2001. In connection with the commencement of employment, Messrs. Donovan and Fernandez each received awards of stock options exercisable for 320,000 shares, which vest 25% per year beginning on the second anniversary of the grant date, and awards of deferred stock units corresponding to 328,821 shares and 50,000 shares, respectively. Mr. Donovan’s units vest in one-third increments on the first, third and fifth anniversaries of his date of employment and Mr. Fernandez’s units vest in increments of 25% annually beginning on the second anniversary of the date of his employment agreement. The agreements provide that for 2002 and subsequent calendar years, Messrs. Donovan and Fernandez are eligible for an annual grant of stock options exercisable for at least 90,000 and 70,000 shares, respectively.

“In connection with their relocations, Messrs. Donovan and Fernandez received loans in the amount of $3 million and $500,000, respectively. Interest on the loans accrues at the rate of 5.8% per year. Interest will be forgiven annually on the respective anniversaries of the loans. Mr. Fernandez’ loan was fully satisfied as of the end of Fiscal 2005. Mr. Donovan’s loan must be repaid upon the earlier of (1) the fifth anniversary of the date of the loan or (2) 90 days following the termination of the executive’s employment by the Company for cause or by the executive without good reason.

“Upon the termination of the employment of either Mr. Donovan or Mr. Fernandez by the Company for cause or by the executive without good reason, the Company will pay the executive all cash compensation accrued but not paid as of the termination date. If the employment of Mr. Donovan or Mr. Fernandez is terminated by the Company other than for cause, by the executive for good reason or for any reason within 12 months after a change in control or due to death or disability, the executive will receive all cash compensation accrued but not paid as of the termination date and certain additional benefits, including salary and target bonus continuation for 24 months and immediate vesting of all unvested equity-based awards, which such award will continue to be exercisable (1) by Mr. Donavan through the end of the awards’ original term and (2) by Mr. Fernandez through the shorter of the end of the awards’ original term or third anniversary of the end of his employment with the Company. In the event of a change in control, in addition to receiving any protection that is applicable to other senior executives, all grants of equity-based awards to Messrs. Donovan and Fernandez shall become fully vested and exercisable.

“Pursuant to their respective agreements, each of Messrs. Donovan and Fernandez has agreed that during the term of his employment and for two years thereafter, he shall not, without the prior written consent of the Company, participate (as defined in the agreements) in the management of certain competitors of the Company. During the same period, each executive has also agreed not to solicit any employee of the Company to accept a position with another entity or to solicit any vendor or customer of the Company to alter its relationship with the Company in any way that would be adverse to the Company.

“Under the terms of the agreements with Messrs. Nardelli, Donovan and Fernandez, termination of employment for good reason generally means the occurrence of certain events without the executive’s consent, including, among other things, (1) the Company assigning him duties inconsistent in any material respect with his duties and responsibilities as contemplated by the employment agreement or taking any other action that results in a significant diminution in such executive’s position, duties or responsibilities, (2) failure of the Company to comply with any material provision of the employment agreement, or (3) in Mr. Donovan’s case, cessation of a direct reporting relationship with Mr. Nardelli.

“Termination for cause means, among other things, that the executive (1) has engaged in conduct that constitutes willful gross neglect or willful gross misconduct with respect to employment duties that results in material economic harm to the Company, subject to certain conditions, or (2) has been convicted of a felony involving theft or moral turpitude. Any determination that cause exists must be approved by a majority of the Company’s Board of Directors after giving notice of such meeting to the executive and providing the executive and his legal counsel an opportunity to address the Board at such meeting. In addition to these and other benefits set forth in the applicable employment agreements, Messrs. Nardelli, Donovan and Fernandez are entitled to participate in the benefit plans offered to all executive officers of the Company and to receive the same perquisites as are commonly provided to other senior executives of the Company. The Company will also reimburse them for income taxes applicable to certain specified benefits and payments under the agreement and for excise taxes imposed in the event payments or benefits received by the executive under their respective agreements, or otherwise, result in “parachute payments” under the Internal Revenue Code.”

Click here to read the full proxy statement.

Employers that have migrated from traditional newspaper ads to online advertising to meet recruitment objectives may want to reconsider their strategy. Upwards of two-thirds of job seekers say they use both print and online ads to seek work, according to a study conducted by the Conference Board.

“Print and online tools are not mutually exclusive,” says June Shelp, an economist and director of new initiatives at the New York City-based Conference Board. “There is no question that the Internet has become an established me­thod that is used when looking for work, but people are still relying on traditional newspaper ads as well.”

Slightly more than 71 percent of survey participants say they use online ads when looking for a job, statistically equal to the 70.6 percent who reported using newspaper ads. The Conference Board polled a nationally representative sample of 5,000 households for the study, which was released in early November.

Job board experts, however, disagree with the study’s findings. They estimate that online tools are much more widely used than newspapers are. They do agree, however, that employers should not underestimate the significant role that newspapers can play in certain recruitment missions.

When looking to fill positions in rural areas or where there are low rates of Internet connectivity, newspapers may be a more effective recruitment tool, says Jonathan Duarte, president and CEO of Go Jobs Inc., a job board and recruitment consultancy in Orange, California. Recruiters staffing manufacturing jobs also may have better luck using traditional print ads, he says.

San Francisco, Los Angeles or New York, advertising online could be more effective, according to Duarte.

Geography is not the only factor that recruiters should consider when deciding whether to advertise a job opening in a newspaper versus online. Certain pockets of the population, such as office professionals, have more access to the Internet, making them better targets for online ads.

“It is important for companies to know who they are targeting, because it will have an influence on where to advertise,” Duarte says.

The study shows that job seekers use a variety of tools when looking for work, with print and online ranking highest. Fifty percent of participants report networking with friends and colleagues when looking for work. Employment agencies ranked lower: Only 26 percent of the survey respondents said they used them to aid their job search.

While use of newspapers and online ads as employment tools is virtually equal, the perception of their effectiveness differs widely, according to the study. Almost 40 percent of survey respondents who have been extended a job offer attribute it to an Internet search. By comparison, just 23.9 percent of survey participants who received a job offer cite newspaper ads as the source of employment—below employment agencies at 29.9 percent and networking with friends and colleagues at 27.1 percent.

Duarte isn’t surprised by the findings. The quality and quantity of information that job seekers find on the Internet allows them to better target their prospective employers, which could play a part in landing a job, he explains.

Job seekers can find details about the company, its address and a better description about the job opening than they probably could find in a newspaper advertisement.

“The Internet has billions of pages of information,” Duarte says. “There are about 120 pages in any given Sunday edition.”

—Gina Ruiz

 

Talent management is the top strategic HR issue that companies expect to face in 2007, according to a recent survey by ORC Worldwide.

Specifically, respondents say they are concerned about acquiring, developing and retaining talent at all levels of the organization.

The survey is based on responses from 35 members of the Senior HR Officers Network, MidCap Senior HR Officers Network and Human Resources Solution Network. Participating companies have operations in more than one country and have workforces ranging up to 90,000 employees.

Previous studies by ORC had found that succession planning was a top concern for organizations.

“While succession planning remains a key activity, it is clearly no longer the sole activity of talent management,” the study says.

In fact, when asked about the highest-priority HR initiatives for 2007, 37.1 percent of survey respondents say talent management, while only 2 percent mention succession planning.

“While we believe that succession planning continues to be an important initiative in most organizations, the processes and programs may be in place and working well, allowing member companies to expand their focus into other areas of managing talent,” the study says.

Companies have started to take a broader approach to talent management because they have begun to recognize there is a shortage of talent, particularly in industries like engineering, says Jodi Starkman, director of talent management at ORC.

“We have moved from companies beginning to think about this to actually managing the whole human supply chain,” she says.

Talent management has already started to take up a lot of HR executives’ time, according to the survey. Twenty-nine percent of respondents say the majority of their time was spent on talent management activities.

The second-highest priority for 2007, according to respondents, is strategic HR management. These activities include HR outsourcing, aligning HR activities with the business and implementing common global HR processes.

Twenty-three percent of respondents say that recent business growth will affect the company’s HR strategy next year. Another 23 percent cite mergers and acquisitions and divestitures as a factor that will affect their HR strategies.

The biggest challenge for companies trying to create broad-based programs to attract, train and retain talent is workforce planning, Starkman says.

“Companies need to get a handle on defining their global talent demands over the next five years,” she says.

—Jessica Marquez

With recent news of a possible IPO, Salary.com could make waves in the swelling market for talent management software. But the firm must navigate around an obstacle embedded in its name—the perception that it focuses on compensation alone.

Paul Hamerman, an analyst with Forrester Research, says Salary.com could use funds from an initial public offering of stock to expand its product lineup through an acquisition. A possible target, in his view, would be a firm that provides technology for employee development or recruiting. But, Hamerman warns, an IPO won’t necessarily overcome the firm’s reputation as a niche specialist.

“They’re not well known as a performance management player,” he says. “It’s a challenge for a company named Salary
.com to go to market selling a broad set of talent management products.”

In mid-November, Salary.com filed a registration statement with the U.S. Securities and Exchange Commission relating to a proposed initial public offering of its common stock. The Waltham, Massachusetts-based company declined to answer questions about the filing, including when it expects an IPO to take place or how much money it hopes to raise.

The filing, though, provides details about Salary.com’s operations. For the year ended March 31, Salary.com’s revenue totaled $15.3 million, up from $10 million the previous year. But the company’s net loss has widened in recent years to $3.1 million for the year ended March 31.

According to the filing, the company intends to use proceeds from the IPO for purposes including “possible acquisitions and investments.”

Salary.com is well known for providing consumer salary information. For organizations, its compensation management products are designed to help customers figure out how much to pay new and existing employees and run overall compensation programs. Among Salary.com’s products is TalentManager, which is a set of tools for linking pay to performance. It includes software for setting goals and tracking performance.

Applications for tasks such as compensation, performance and learning management have been hot sellers, as companies appreciate the value created by workers and seek to pinpoint top performers.

SAP and Oracle, along with smaller HR tech players such as Taleo and SuccessFactors, sell talent management applications. Consolidation already is under way in the arena.

Jim Holincheck, an analyst with research firm Gartner, says Salary.com has not come too late to the talent management party. “It’s still very early on,” he says. “Most firms are still dependent on Microsoft Word for their performance appraisals.”

But he warns that should Salary.com go public, it will have to generate plenty of growth to justify the increased overhead that comes from being a publicly traded company, such as complying with Sarbanes-Oxley regulations.

Yankee Group analyst Jason Corsello argues that Salary.com’s relatively small revenue and its lack of profitability may give investors pause. But if the stock is a hit, he says, other talent management vendors could follow Salary.com’s lead. “It could definitely be a catalyst for lots of companies to go public.”

—Ed Frauenheim