Home Depot Not Fixed

But recently, its sales have lagged as the weakness in the U.S. housing market spread to the home improvement retail business. In November, it reported a 3% drop in third-quarter profits, missing Wall Street estimates. The company also lowered its forecast for the all-important fourth quarter, citing continued weakness due to a housing slowdown that Nardelli said "came faster and deeper" than he had expected.

Its revenue also missed expectations for the quarter, while its same-store sales fell 5.1%.

The company has been roundly criticized for cutting back on service in its stores in an attempt to cut costs, allowing Lowe's (LOW Quote), its closest competitor, to gain market share.

With top-line weakness coinciding with all the public criticism about corporate governance issues, the company has become the subject of leveraged buyout rumors and shareholder activism.

Sanford C. Bernstein & Co. analyst Colin McGranahan said in a note to clients Wednesday that Nardelli's ouster was "likely tied to [a] move to defend the company from activist shareholders."

Relational Investors, a San Diego-based investment fund with a history of agitating for better corporate governance, has gone public demanding changes at the retailer and threatening a proxy fight.

On Tuesday, New York City Comptroller William C. Thompson Jr., who makes investment decisions for the pensions of the public workers of the city, called on Home Depot to allow shareholders to ratify compensation packages for senior executives through a nonbinding vote.