Home Depot ( HD) CEO Bob Nardelli finally got an offer he couldn't refuse. Ending months of tumult at the Atlanta-based home-improvement retailer, Home Depot's board generously handed Nardelli $210 million Wednesday to pack his bags. Wall Street applauded, sending shares up 4% in midday trading. The move comes less than a month after a big shareholder, riled by Nardelli's hefty pay and the stock's long stupor, threatened to start a proxy fight if Home Depot's board didn't agree to review its strategy and corporate governance. The company agreed to a meeting but pledged to stay its charted course. Countless other rumors have been swirling about the company, which has been hit hard by the rise of rival Lowe's ( LOW). One had private equity players circling Home Depot for a possible $100 billion leveraged buyout. The company said no deal is in the works. Now, after six years of well-paid mediocrity, Nardelli is leaving. The problem for shareholders is that he isn't taking his wealthy patrons on the company's board with him. Home Depot says the golden parachute includes both cash and stock and is consistent with the terms of a "pre-existing employment contract entered into in 2000." Still, some observers say the whole deal smells rotten. "It's disturbing, but given this board it doesn't surprise me," says Charles Elson, the chair of the University of Delaware's corporate governance program. "It's contractual. The question is why would they ever get into an agreement that they would have to pay him this?"
In exiling Nardelli, who had been roundly criticized on Wall Street for taking home nearly $300 million in compensation over the past six years, the board is merely shuffling players in the executive suite. The board hasn't done anything to address the issue of runaway executive pay at Home Depot, which is one of the things that led activist shareholder Relational Investors to begin demanding change at the retailing giant. Relational's co-founder, Ralph Whitworth, has yet to weigh in on the news of Nardelli's departure. But don't look for Relational, a San Diego-based investment fund with a history of agitating for better corporate governance, to walk away just because Nardelli is. When Relational went on the offensive last month, it blamed both Nardelli and Home Depot's board for the company's poor performance. In a letter to Nardelli, Whitworth said: "We attribute this performance to deficient strategy, operations, capital allocation, and governance." One of the things Relational, which owns more than $500 million in Home Depot stock, is calling for it is the creation of a special board committee to consider a corporate restructuring, or a partial or complete sale of the company. One of Home Depot's board members is investment banker Kenneth Langone, who has been widely blamed for pushing through a huge pay package for former New York Stock Exchange ( NYX) Chairman Dick Grasso. If you're a CEO, it seems to pay to have Langone on your side.