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Two recent news stories in the world of the Fortune 500 just happened to "re-highlight" how shareholders in just two companies - Yahoo & Home Depot - were taken to the cleaners by their CEOs.

The first story is the resignation of Yahoo's CEO, Terry Semel. DailyTech.com highlights the seemingly glowing facts:

Semel has been Yahoo's CEO since 2001 and witnessed the company's revenues increase nearly nine-fold to $6.4 billion USD under his tenure. Yahoo's Board of Directors also acknowledges that Semel has created over $30 billion USD in shareholder value and increased its user base from 170 million users in 2001 to over 500 million users today. In addition, Yahoo's workforce has increased from 3,500 to 12,000 employees over the past 6 years.

Sure looks great, right? The problem is, over the past two years, the stock price has gone down from a little under $45 in January '06 (it was at $35 in June '05) to it's current price of $28. And how much did Terry Semel take home...just last year? SEVENTY ONE MILLION DOLLARS. That's right: $71 million.

The second recent story concerns Home Depot and their decision to sell it's supply unit for $10 billion - excising a major mistake by it's ex-CEO, Bob Nardelli. Nardelli's take home pay over the past six years (before he was axed in January) was $120 million. How did the stock price perform over that time? It went from a little under $40 in June '02 to a little under $40 today. And how much did he get when he resigned earlier this year in January? TWO HUNDRED & TEN MILLION DOLLARS. That's right: $210 million!!

Un-friggin'-believable, ain't it? Where were the shareholders, and why doesn't he have to give any of that back for a crappy-ass performance?

The NY Times ran an article back in April, entitled, "Has the Exit Sign Ever Looked So Good?" Here's how it starts:

What was the price of failure in corporate America in 2006?

More than $1 billion, with shareholders left holding the bag. At America's biggest companies, it was possible for chief executives to fumble, fudge or fail to deliver results -- and yet still walk away with more money than most people earn in a lifetime.

Consider:

In late January last year, Mary L. Forte was ousted as the chief executive of the Zale Corporation after her plans to transform the discount jeweler into a more upscale chain fizzled. Lackluster holiday sales pulled down profits two years in a row. Yet Ms. Forte left with a $7.2 million golden goodbye -- including $4.9 million in severance.

A few weeks later, David J. Edmondson resigned as RadioShack's chief executive, a week after admitting to lying on his resume about his college credentials. The board still chose to give him more than $1 million in severance, including unused vacation.

And in October, Jay S. Sidhu, citing health concerns, resigned as chief executive of Sovereign Bancorp amid mounting criticism from investors. Despite the bank's poor performance, Mr. Sidhu left with a $73.56 million platinum parachute lined with $24.4 million in cash and stock options, five years of free health care, and a three-year, $40,000-a-month consulting contract.

How can this be justified?

While companies boast about their pay-for-performance programs, boards typically guarantee senior executives big salaries, stock options, future legal fees, severance packages and retirement plans when they are hired - long before their on-the-job performance can be assessed. Companies argue that this is necessary to attract and motivate top talent, and is the price they pay to induce executives to sign noncompete agreements.

That's ludicrous, of course. The real reason is that all these corporate boards that determine these payouts are populated by chummy friends who know each other. One hand scratches another's back, and since there's very little that shareholders can do (Corporate America is not a Democracy, it's more like an Oligarchy), they have to sit back and take it:

'"You can certainly 'fire' a C.E.O.," said Stewart J. Schwab, the dean of Cornell Law School. "The real question is: Can you fire them without these very large severance payments being triggered?"

Most often, the answer is no. Corporate boards are often eager to avoid long legal battles and critical press reports, Mr. Schwab said. For a multibillion-dollar enterprise, others argue, paying a top executive even tens of millions of dollars might be economically rational if it lets the company quickly put problems behind it.

So that's the reason they use? These boards are afraid of being sued by the fired CEO? If Home Depot had fired Nardelli sooner, and he sued, all they would have to do would be to pull up the five year chart of the stock's performance, and voila, the reason is clear: the guy didn't perform. It's that simple really...

Read the NY Times article. It's pretty mind-numbing...

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