Estimated Annual Retirement Benefit: $4,612,500*

*Calculated by The Corporate Library for the AFL-CIO Executive PayWatch

Under his employment agreement, Home Depot CEO Robert Nardelli is guaranteed defined-benefit pension equal to 50 percent of his salary and bonus at age 62. Even if Nardelli’s performance does not entitle him to a bonus, his pension benefit will be calculated as if he had earned a $4.5 million bonus.[1]

In Orwellian doublespeak, Home Depot describes Nardelli’s defined-benefit pension as “deferred compensation” even though it is in the form of a single life annuity.[2] Perhaps Home Depot does not want its other employees to know that the CEO will be receiving a defined-benefit pension during his retirement.

The stated purpose of Nardelli’s special pension benefit is to compensate him for forfeiting retirement benefits made available by his former employer.[3] Nardelli came to Home Depot after he was passed over to become CEO at the General Electric Co. Ironically, Nardelli now has a bigger paycheck than current GE CEO Jeff Immelt.[4]

Every increase in Nardelli’s annual bonus also increases the expected value of his special pension benefit. In 2005, Nardelli’s annual cash bonus increased 22 percent to $7 million, faster than Home Depot’s diluted earnings per share growth, net sales growth, comparable store sales growth, or total customer transaction growth—each of which are considered in setting his compensation.[5]

Home Depot is less generous when it comes to its other employees’ retirement benefits. Like many retailers, Home Depot does not offer its employees a defined-benefit pension plan. Instead, workers are offered a “FutureBuilder” 401(k) plan as well as an Employee Stock Purchase Plan.[6] These plans do not provide a guaranteed annual pension benefit.

In addition to his expected pension benefit under his employment contract, Nardelli participates in Home Depot’s FutureBuilder Restoration Plan. The purpose of this plan is to provide additional retirement income to key executive employees.[7] In 2005, Home Depot contributed $378,871 in shares to Nardelli’s FutureBuilder account.[8]

Lastly, should Nardelli be terminated without cause or in the event of a change in control, his employment agreement promises him immediate full vesting of his pension benefits. Other notable features of Nardelli’s golden parachute include $20 million in cash, immediate vesting of stock options and restricted stock, forgiveness of a $10 million loan, a tax gross-up and three years of benefits. [9]