Home Depot 2009 Annual Shareholder's Meeting

Thursday morning at Cobb Galleria Centre I was greeted by lots of smiling faces wearing orange aprons. The shareholders, who were scant in number and advanced in age, did not fill the auditorium.

An upbeat video of employees in the US and Mexico cheering for the company's 30th anniversary kicked off the meeting.

Frank Blake opened the informal part of the meeting with a few slides on the company's performance. 2008 Financial performance declined by 8% from 2007.

A protester came to the stage with a large banner about stopping dams in Patagonia. He was quickly ushered out of the room. (read more on this below.)

Blake highlighted 4 initiatives:

1. Customer Service: Launched Customer First in '08- focused on employee training
2. Merchandising Transformation: Lower price campaign, invested in merchandising tools, reduced inventories, gained share in 9 of 13 departments year-over-year in 4Q.
3. Supply Chain Transformation: Rolled out Rapid Deployment Center network, 5 RDCs in operation, a few more online in 2009, one in Valdosta just opened, enhanced the replenishment system - 70% of product will flow through the RDCs.
4. Overseas: Canada implemented SAP Retail system - difficult, will evaluate to see if it will be rolled out further; Mexico - double digit sales; China: still learning and evaluating the potential- currently 12 stores.

2009: Total sales decline of 9%, EPS from continued operations down 7%. There will be continued investment in core business. 1Q results were ahead of plan.

Q&A was the best part - the shareholder proposals were explained at this time

• Question: A well-known shareholder asked what % of share initiatives get approved - Blake did not answer (none of the proposals were approved this year.)
• Question: Karen Katen and Armando Codina sit on GM's board, which is in precarious financial straits. What is their business acumen? We expect them to devote their time to our board. Bonnie Hill sits on 3 boards, leads 2 companies. Mr. Blake tells the directors to walk the floors, how much time do they have? Have they missed any meetings? Answer: complete confidence in the board, they're doing a great job.
• Proposal: Trillium Asset Management initiated the shareholder proposal to have HD prepare a diversity report & make it available to shareholders by Sept. 2009. This issue has been on the agenda for 12 years. The company has paid millions to settle diversity law suits. HD files annually EEO-1 reports to the Equal Employment Opportunity Commission. This information should be available to shareholders. P&G, Coke and Intel voluntary disclose this information. It was noted that HD is undertaking new initiatives on diversity. Nevertheless, the board recommended that shareholders vote against this proposal.
• Proposal: NYC Employees' Retirement System shareholder proposal on executive pay for performance.
• Proposal: CT. Retirement Plans and Trust Funds submitted a shareholder proposal to have HD audit their Energy Use. Blake is a director of the Southern Company which has instituted this audit.
• Susan Baker from Trillium Asset Management raised the Patagonia dam issue - stating that investors are concerned about HD's connection to the dam issue. (As stated in the AJC on 05/28/09 the environmental group International Rivers has tried for more than a year to get the company to stop buying wood products from two companies involved in a Chilean dam project. They believe HD can use its purchasing power to pressure the companies to stop construction of five dams in Patagonia.) Ms. Baker wanted HD to be an active part of the solution. She has been trying to meet with HD since January, but has been rebuffed. Answer: Blake said he would meet with her. He stated that one of their suppliers was part of a conglomerate. Their supplier is not directly involved in the dam project. He stated that HD shouldn't be involved with Chile's energy policy. Many shareholders clapped. Blake suggested the group deal with the Chilean government.
• The campaign cooridnator of International Rivers stated that HD must look more closely at their economic ties with the dam project. The HD supplier sells millions of dollars of CMPC products which belongs to the Mata Group. He acknowledged HD's role in encouraging their customers to be environmentally conscious consumers. He stated that HD could take this issue on as an opportunity to act & encouraged the company to sever their relationship with this supplier. (Turns out HD has taken a leadership role in forest issues, in the past. HD should get on top of this issue and explain to shareholders what their position is.)
• Quite a few references to Nardelli - all thankful that he was no longer at the helm
• Former VP praised Blake's leadership, noting that he was responsive. "Values are coming back, shareholder value will skyrocket."
• Laid off employee inquires why she is not interviewed for posted jobs. Blake responds that they will flag former employees for job opportunities.
• Request to stop selling glue tracks, from an ethical treatment of animals advocate. Blake responded that they are open to re-thinking their policy.
• An employee announced that morale was better in stores and thanked Blake for the promotions and the 401K

The meeting wasn't particularly exciting, but it was democracy in action. There is a forum for shareholders to directly tell management what they think. More shareholders, like voters, should take an active role in the process