Image Matters, Ask Home Depot’s Former CEO Bob Nardelli

Former Home Depot CEO Bob Nardelli and General Electric CEO Jeffrey Immelt provide a case study in divergent approaches to running a company post Enron.

One strategy depends on numbers alone to trump all. The other balances the scales of capitalism with image.

The styles of these CEOs and others are contrasted in a recent Wall Street Journal column in the context of what caused Nardelli’s ultimate unraveling. Columnist Alan Murray characterizes Nardelli’s extravagant compensation package as his “biggest problem.”

But how did his compensation become a problem? Presumably it was not a problem for Home Depot board members who hired him after Immelt beat out Nardelli for the top spot at GE. Compensation became a problem only after his image—weakened by his own inaction, miscalculations and incommunicado—left him vulnerable to stakeholder action on a number of fronts.

Shareholder return suffered prompting protests despite doubling sales and earnings. Strategic shifts sparked a proxy fight for board seats. And, writes Murray, Nardelli didn’t apologize for his pay package, nor did he reduce it.

Obviously the numbers played a role in Nardelli’s exit, but his lack of initiative and communication about issues important to influential audiences provided the path to his ouster. Hind sight is 20/20, but there is more than a fighting chance that Nardelli never would have had to apologize for his salary, nor reduce it, if he had taken better care of his image.

Image, contrary to popular wisdom, is more than a glossy photograph. Immelt, whose image graces plenty of magazine covers, understands this concept.

Immelt, according to the column, also generates sound operating results and a languishing stock price. Yet he is perceived as one of America’s leading CEOs. Granted, he has taken initiatives that Nardelli did not take, such as tying his salary to performance. But he also took action and communicated to his stakeholders about other important issues, such as the environment.

Effective, forward-thinking executives of both public and private companies understand the scales of capitalism are balanced with image and performance, not one over the other.

P.S. One other note for those who aspire to the top exec seat, Nardelli did attempt to improve his image, but too late into his tenure. Aspiring c-level execs would do well to consider image as part of their strategy from the start. And, existing CEOs would do well to start paying attention to image before most consider it necessary—when trouble starts.

For more on how CEOs from Procter & Gamble, Wal-Mart and Citigroup handle the modern image demands of CEO-ship, order a back copy of the January 4 Wall Street Journal. Or, if you already subscribe, access the online archives. It will be time well spent.