Case | HBS Case Collection | March 2009 (Revised December 2009)

Relational Investors and Home Depot (A)

by Jay W. Lorsch and Kaitlyn Simpson

Abstract

In 2006, amidst shareholder upset over CEO Robert Nardelli's compensation and Home Depot's declining stock price, Relational Investors decided to further investigate the situation. As experts in turning around underperforming and undervalued companies, Relational's principals saw opportunities for Home Depot to improve its stock price through changes in strategy, corporate governance, and capital allocation. In particular, Relational felt Nardelli's growth plan for the company had caused the decline in the stock price. Relational decided to invest in Home Depot and intended to initiate a proxy fight if the board did not reassess the company's strategy. Shortly thereafter, Nardelli left Home Depot and the board offered Relational a board seat. This case describes Relational's analysis of the problems at Home Depot, why they decided to invest, and how they went about getting their recommendations implemented.

Keywords: Restructuring; Financial Management; Investment; Corporate Governance; Governing and Advisory Boards; Organizational Change and Adaptation; Ownership Stake; Business and Shareholder Relations; Corporate Strategy;

Citation:

Lorsch, Jay W., and Kaitlyn Simpson. "Relational Investors and Home Depot (A)." Harvard Business School Case 409-076, March 2009. (Revised December 2009.)