The Five Dumbest Things on Wall Street This Year

4. Mr. Fix-It

When it comes to defending shareholders' interests, Home Depot's (HD Quote) board is really nailing it.

Relational Investors -- a big San Diego-based fund that's known for lighting a fire under underperforming execs -- told Home Depot this month that it wants to discuss CEO Bob Nardelli's performance. Relational suggests creating a special committee to consider a restructuring or sale of the company.

It's not hard to see why big shareholders such as Relational might be annoyed. Home Depot shares remain stuck below their 2001 levels, as customer service deteriorates and growth stagnates. The company's stock has lagged far behind that of chief rival Lowe's (LOW Quote).

"We attribute this performance to deficient strategy, operations, capital allocation and governance," Relational principal Ralph V. Whitworth wrote in a letter to the board.

It's kind of hard to argue with him, given the board's lame reply. Home Depot agreed to a meeting but shrugged off talk of a strategic review, saying it just did one. And it reiterated its unfathomable support for the rotten Nardelli regime.

Nardelli isn't just overpaid, after all. He has continued to pinch pennies on his ugly, unfriendly stores -- while pouring billions into stock buybacks.

That might sound like a recipe for disaster, but Home Depot's board has its own name for the Nardelli plan, referring to it as a "balanced approach to capital allocation through business investments and cash returned to its shareholders."

A better, if less balanced, approach might involve finding a competent CEO.