Home Depot's new CEO takes heat

NEW YORK (CNNMoney.com) -- Although Home Depot's new chief executive Frank Blake apologized at the outset of the company's annual meeting Thursday, it wasn't enough to pacify some very irate shareholders still steaming about blunders made at last year's meeting by former chief Robert Nardelli.

"There's no better way to deal with a mistake than to acknowledge it, fix it and deal with it. I apologize for last year's meeting. It was a mistake. It won't happen again," Blake told the gathering of shareholders in Atlanta.

Nardelli, who was ousted from his post in early January, was severely criticized by shareholders for being the only member of the company's board to be present at the 2006 shareholders' meeting and for restricting questions from attendees.

"Last year [Nardelli] said 'No' to all questions. That showed complete disrespect to all shareholders," one attendee told Blake.

The meeting was monitored via Webcast in New York.

Another attendee, Richard Ferlauto with the American Federation of State, County and Municipal Employees, which owns about 2.5 million of Home Depot's stock in retirement plans, said he was happy to see board members present.

"I'm so glad to see all of you here because last year nobody showed up when we came to urge the board to institute a vote allowing shareholders to have a say on executive pay," Ferlauto said.

Ferlauto referred to insurer Aflac (Charts, Fortune 500) which earlier this year became the first U.S. company to allow to receive a non-binding vote on executive compensation that will take effect in 2009.

"Last year we said the board was too chicken to face us. Now we're saying they can be like the duck on this particular resolution," he said.

Shareholder Evelyn Davis didn't hide her anger with the board and even labeled Blake as "a phony."

"I am voting against all the directors because this company is caving into one class of shareholders, the institutional investors," she said. "The rest of us, the smaller shareholders, are being treated as second-class shareholders."

"I think this company will be put up for sale or go private. Mark my words. You heard it here first," she told the gathering.

Blake, a senior executive with Home Depot (Charts, Fortune 500) since 2002, took over as CEO on Jan. 3.

Among the challenges he inherited from Nardelli's reign are a demoralized workforce, a stock options backdating scandal, widespread resentment over Nardelli's $210 million severance package, slowing sales and sluggish stock growth. Home Depot shares have dipped 3.4 percent so far this year.

While some shareholders took Blake to task over these issues, the company's recently reported 30 percent drop in first-quarter profit and a 4.3 percent decline in sales, others offered their support by calling Blake a "breath of fresh air."

"You are not a phony. I want to go on record to correct that," said another shareholder

Blake said he expected the weakness in housing activity to hurt Home Depot's business in the short term, but his longer-term outlook remained that the housing sector would be a "terrific market" for the company.

"There are 86 million houses in the United States. The median age of a house is 34 years. These fundamentals will continue to drive demand for us particularly for repair and renovation work," he said.

At the same time, he said sales for the current year would be essentially flat to up 2 percent while he expects full-year profits to decline 9 percent.

Regarding Home Depot's supply business, which has been growing much faster than the company's retail operations, Blake said the company was still exploring strategic options, including a sale of the division, a publicly traded spinoff or taking the unit private.

"We're still determining what would create more value," he said.

All 11 of Home Depot's nominees for board directors were re-elected for a 1-year term. The company also rejected shareholder proposals about giving shareholders an advisory vote on executive compensation, retirements benefits, equity compensation and splitting the role of chairman and CEO.