Accounts of Home Depot's annual meeting brought back a vivid memory. Years ago, I was writing a cover for Business Week about corporate governance and shareholder activism. The photo editor found a marvelous picture to illustrate the article: Used big on the contents page, it showed (as I recall) the directors of United Technologies seated at the annual meeting -- all nodding off or already asleep.
Home Depot's directors went one better: They didn't show up at all. CEO Robert Nardelli, one of the most overpaid CEOs in the U.S., presided over an annual meeting at which no dissent was tolerated and not a single director was present. This affront to the company's owners is unprecedented. Perhaps realizing its mistake, the company put out a statement on Friday that said, in part: "If the board of directors' absence or the structure of our annual meeting offended any shareholder, that was certainly not our intent." So what exactly was its intent? Was this the "commitment to strong corporate governance" that Home Depot claims on its Web site?
It wasn't supposed to be this way anymore. Shareholders have been counting their victories for years now. Directors, supposedly, are no longer rubber stamps or "parsley on the fish," as Irving Olds, a former chairman of U.S. Steel, famously described their strictly ornamental nature decades ago. Shareholder activism has ousted many CEOs, given jobs to independent directors, placed outside directors in control of important board committees. It has, for better and for worse, attempted to force CEO pay to relate to performance. And every year, activist shareholders suggest new remedies to improve corporate governance; and their proposals -- the sensible ones, at least -- win a bigger proportion of votes that management ignores at its peril. And lately, hedge funds, private equity firms and some traditional institutional investors have added muscle to that of the public pension funds, union funds and individuals who've lead the activism movement.
So the shocker at Home Depot came as a bracing reminder that the old days aren't over -- and may never be. The truth is that watchdogging corporate America is a job that never ends. It's like slashing red tape, getting lean and mean, or doing the dishes. Somehow, there's always a dish in the sink five minutes after you finish, always someone a manager just has to hire, always a procedure that slows down progress. The job takes eternal vigilance, and shareholders who care about their investments can't afford to shirk it.
Home Depot's switchboard should have melted down after the meeting. Its behavior should do one more thing: It should give momentum to the shareholder proposals on this year's ballots that require directors to receive a majority vote -- not merely a plurality -- for election. That would remind them exactly what their role is, and precisely who they represent.