City of Pontiac General Employees’ Retirement System v. Langone (Home Depot)
Landmark Corporate Governance Reforms Achieved at Home Depot
Shareholder activism has led to significant new reforms at Home Depot. After a wave of unprecedented shareholder backlash caused in large part by CEO Robert Nardelli’s obscene compensation package and the revelation that Nardelli and others had received “backdated” stock options, six separate shareholder derivative suits were filed in Atlanta, Georgia. The lawsuits address CEO compensation, backdating practices, and an accounting manipulation scheme involving return-to-vendor credits.
Robbins Geller, on behalf of the City of Pontiac General Employees’ Retirement System, took over as lead counsel in these cases with the assistance of another 20 plaintiffs’ law firms. After over a year of hard-fought litigation, Robbins Geller was able to negotiate a favorable resolution of the litigation, which will result in significant corporate governance reforms at Home Depot.
As a result of the settlement, among other changes, Home Depot’s Board of Directors must: (i) restructure itself; (ii) require that two-thirds of its directors be independent; (iii) adopt enhanced director independence standards; (iv) adopt certain compensation policies and procedural safeguards for officers and directors; (v) implement voting standards requiring that director nominees receive a majority of votes cast to be elected to the board; (vi) impose safeguards on removal procedures for directors; (vii) adopt safeguards and notice requirements on stock option plans to lower the risk of backdating; and (viii) permit large shareholders or groups of shareholders to nominate directors.
On June 10, the Honorable Craig L. Schwall of Georgia’s Fulton County Superior Court granted final approval of the settlement and commended Robbins Geller for acting “with substantial skill and professionalism in representing the plaintiffs and the interests of Home Depot and its shareholders in prosecuting [the] case.”
Robbins Geller partners Darren J. Robbins, Travis E. Downs III and John C. Herman spearheaded the litigation on behalf of plaintiffs. According to Herman, “The sweeping corporate governance reforms are a substantial step forward for Home Depot and its investors, and are an exceptional settlement of the action.”
City of Pontiac Gen. Emps.’ Ret. Sys. v. Langone, No. 2006-cv-122302, Findings of Fact in Support of Order and Final Judgment (Ga. Super. Ct., Fulton Cty. June 10, 2008).