Corporate Governance Guidelines

 


Effective August 18, 2005

*                                    Mission Statement

*                                    Primary Functions of the Board

*                                    Members of the Board of Directors

*                                    Board Operations

*                                    Board Committees

*                                    Compensation of Directors

*                                    Policy on Stockholder Rights Plans

*                                    Management Succession

*                                    Director Orientation, Continuing Education and Store Visits

*                                    Direct Shareholder Communication with Board

*                                    Executive Compensation

*                                    Publication of Corporate Governance Guidelines and Committee Charters

*                                    Exhibit A: Director Independence Standards

 

1. Mission Statement

The Board of Directors (the "Board") of The Home Depot, Inc. (the "Company") is committed to maximizing long term stockholder value while supporting management in the business and operations of the Company, observing the highest ethical standards and adhering to the laws of the jurisdictions within which the Company operates.

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2. Primary Functions of the Board

The primary responsibility of the Board is to exercise its business judgment to act in what it reasonably believes to be the best interests of the Company and its shareholders. In carrying out its responsibilities, the Board selects the Company's management, acts as an advisor to management and oversees management's performance. It is management's responsibility to manage the day-to-day operations of the Company. The Board periodically reviews the Company's long-term strategic plan, business initiatives, capital projects and budget matters. The Board believes that, as a general matter, management speaks for the Company in any interaction with third parties.

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3. Members of the Board of Directors

Members of the Board are elected each year by the Company's stockholders at the annual meeting of stockholders. The Board, however, may adjust the number of Board members within the limits approved by the Company's stockholders (not less than three nor more than fifteen) as set forth in the Company's Certificate of Incorporation. Additionally, the Nominating and Corporate Governance Committee will periodically evaluate and review the Board's organization, including its size, and make any recommendations to the Board, as appropriate.

Those nominated for director must demonstrate integrity, accountability, informed judgment, financial literacy, passion, creativity and vision. A majority of the members of the Board are independent directors, as determined by the Board in accordance with the categorical standards set forth in Exhibit A to these Guidelines. In addition, the Board is comprised of directors from various backgrounds and professions in order to maximize perspective and ensure a wealth of experiences to inform its decisions.

Directors and nominees for director are eligible for nomination for election to the Board provided that such directors or nominees have not reached age 72 by the calendar year-end immediately preceding the Company's next Annual Meeting of Stockholders.

The Board does not believe that it should limit the number of terms for which a person may serve as a director, because such term limits could deprive the Company of the valuable contributions made by directors who have developed, over time, significant insights into the Company and its operations. As part of its responsibilities, the Nominating and Corporate Governance Committee will evaluate each director's nomination for re-election to the Board upon the expiration of his or her term.

In the event of a change in circumstances involving a director's employment status, position and/or business or professional association, the director shall notify the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance committee will evaluate the change in circumstances and will recommend to the Board whether the director should continue serving as a member of the Board.

Directors may only serve on four public company boards, inclusive of the Company's Board. Any director seeking to join as a member of another public company board must first obtain the approval of the Nominating & Corporate Governance Committee to continue as a member of the Company's Board. Any director that sits on more than such four public company boards as of August 6, 2004, shall reduce such board memberships to such maximum of four, as of the regularly scheduled quarterly meeting of the Company's Board immediately preceding the Company's 2007 Annual Stockholders' Meeting at which nominations for the Company's Board are made and voted upon. Any director who sits on more than such four public company boards as of August 6, 2004, shall not be allowed to replace or substitute any existing such memberships with a new membership to the extent that such action would leave the director with participation on more than such four public company boards.

The Board will select a Lead Director from among the independent directors serving on the Company's Board. The Lead Director will act as a liaison between the non-management directors and the Company's management, chair the executive sessions of non-management directors and consult with the Chairman on agendas for Board meetings and other matters pertinent to the Company and the Board.

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4. Board Operations

The Board has four regular meetings each year and such special meetings as are deemed necessary, and directors are expected to attend all Board meetings and meetings of the Committees of the Board on which they serve. The Chairman, in coordination with the Lead Director, sets the agenda for each meeting, taking into account input and suggestions from other members of the Board and management. The Board must be given sufficient information to exercise fully its governance functions. Generally, Board members receive information prior to each Board meeting so that they have an opportunity to reflect properly on the matters to be considered at the meeting. The Board ensures that adequate time is provided for full discussion of important items.

The non-management directors will meet without management present at each regularly scheduled meeting of the Board. These executive sessions will be chaired by the Lead Director. The non-management directors may meet without management present at such other times as may be determined by the Lead Director to be appropriate.

Board members have full access to management and to information about the Company's operations. Regular attendance and participation in Board meetings by management is encouraged as appropriate. In addition, the Board and any of its Committees have the authority to retain advisors, including outside counsel, as they may deem necessary and appropriate, without obtaining approval for such engagements from the Company.

The Board, in consultation with the Nominating and Corporate Governance Committee, conducts an annual self-evaluation in order to determine whether the Board and its Committees are functioning effectively.

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5. Board Committees

The Board has established four standing committees and one advisory council: Audit, Leadership Development and Compensation, Nominating and Corporate Governance, Executive and the IT Advisory Council. The Audit Committee, Leadership Development and Compensation Committee and Nominating and Corporate Governance Committees are comprised solely of independent directors as determined by the Board in accordance with the Company's categorical standards attached as Exhibit A. Committees receive authority exclusively through delegation from the Board, and their roles are defined by the Company's By-Laws and by Committee charters adopted by the Board. Any director who is not a member of a particular Committee may attend any Committee meeting, but shall not be compensated as a member of the Committee for such attendance. The Nominating and Corporate Governance Committee, in consultation with the Chairman and the Lead Director, shall periodically review committee assignments and make recommendations to the Board for rotations of assignments and appointment of chairpersons, as appropriate. The Chair of each Committee, in consultation with management and the other Committee members, will develop the agenda for each meeting and will determine the frequency of the Committee meetings consistent with the Committee's charter and the needs of the Company. The Chair of each Committee will report on the proceedings of each Committee meeting to the Board, when requested by the Board and in accordance with the Committee's charter.

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6. Compensation of Directors

From time to time, the compensation of non-management directors is reviewed by the Leadership Development and Compensation Committee, which makes recommendations to the full Board. In order to align the interests of non-management directors with stockholders, the Company requires that each non-management director's annual retainer shall be two-thirds Company equity. Furthermore, equity awards made to non-management directors stipulate that shares of Company stock may not be sold until the non-management director retires from the Board or for one year after withdrawal if such non-management director terminates his or her Board service for any reason other than ordinary Board retirement.

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7. Policy on Stockholder Rights Plans

The term "stockholder rights plans" refers to plans that some companies adopt to make a hostile takeover of the company more difficult. The Company does not have such a plan and has no present intention of implementing a rights plan because a hostile takeover of a company our size would be unlikely. However, if the Company were ever to adopt a rights plan, the Board would seek prior stockholder approval unless the Board, including a majority of the Board's independent members, determines that, based on then prevailing circumstances, it would be detrimental to the Company and not in the best interests of the Company's stockholders to defer the effectiveness of a rights plan until stockholder approval may be obtained. If the Board were ever to adopt a rights plan without prior stockholder approval, the Board would submit the plan to stockholders for ratification, and if not ratified, would cause the plan to expire, without being renewed or replaced, within one year from its adoption.

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8. Management Succession

At least annually, the Chief Executive Officer will review management development and succession planning with the Board. The Board will oversee a process whereby the qualities and characteristics necessary for an effective Chief Executive Officer are evaluated and updated, and advance planning for contingencies such as the departure, death or disability of the Chief Executive Officer and other senior members of management is conducted.

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9. Director Orientation, Continuing Education and Store Visits

The Nominating and Corporate Governance Committee oversees directors' orientation and education program designed to enhance the knowledge and skills necessary or appropriate for the performance of the director's duties and responsibilities. Further, in the interest of further developing an understanding of the industry, as well as interacting with customers and store associates, it is recommended that each director visit a minimum of 12 stores annually.

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10. Direct Shareholder Communication with Board

Stockholders and others who are interested in communicating directly with the members of the Board of Directors, including communication of concerns relating to accounting, internal accounting controls, audit matters, fraud or unethical behaviors, may do so by email to HD_Directors@homedepot.com or by writing to the directors at the following address:

Name of Director or Directors
c/o Secretary to the Board of Directors
The Home Depot, Inc.
2455 Paces Ferry Road, N.W.
Atlanta, Georgia
30339

Information regarding these methods of communication can be found on the Company's web site, www.homedepot.com, under "Corporate Governance."

All correspondence received is opened and screened for security purposes and is then entered into a log for tracking purposes. The Corporate Secretary of the Company reviews such correspondence and provides the Board at each of its meetings with a summary of all such correspondence and a copy of any correspondence that, in the opinion of the Corporate Secretary, deals with the functions of the Board of Directors or the standing committees of the Board of Directors or that otherwise requires their attention. Correspondence relating to accounting, internal controls or auditing matters is immediately brought to the attention of the Company's internal audit department and handled in accordance with procedures established by the Audit Committee with respect to such matters.

Stockholders will receive a written acknowledgement from the Corporate Secretary upon receipt of a written complaint or concern. All communications are treated confidentially, and stockholders can remain anonymous when communicating their concerns.

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11. Executive Compensation

The Company's Leadership Development and Compensation Committee, a committee of the Board of Directors comprised entirely of independent directors, has the responsibility of maintaining an executive compensation program designed to attract, motivate and retain the most highly talented and experienced leadership for the Company. The program is designed around various components of compensation, including base salaries, incentive bonuses, and various equity awards, including restricted stock, deferred shares and stock options.

The Committee considers performance in establishing every element of executive compensation. In addition, all of the Company's equity awards include time-based vesting requirements. The Company also utilizes restricted stock to provide long-term retirement benefits that align the interests of the Company's senior leadership with those of shareholders. Thus, the Company's approach in awarding compensation is to utilize performance-based criteria to determine the amount or value of the awards, to utilize time-based vesting as an incentive for leadership retention and to provide long-term retirement benefits.

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12. Publication of Corporate Governance Guidelines and Committee Charters

The Board shall publish these Corporate Governance Guidelines and the Charters of the Audit, Leadership Development and Compensation and Nominating and Corporate Governance Committees and make them available upon request as required by the listing standards of the New York Stock Exchange and applicable rules of the Securities and Exchange Commission.

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Exhibit A: Director Independence Standards

A majority of Board of Directors of The Home Depot, Inc. (the "Company") shall be independent. No director shall qualify as "independent" unless the Board of Directors affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). In making such determination, the Board of Directors shall consider the factors identified below, as well as such other factors that the Board of Directors may deem relevant. A director will not be deemed independent if:

1.        the director is employed by the Company or any of its affiliates (as used herein, such term shall have the meaning set forth in Rule 144(a)(1) promulgated under the Securities Act of 1933, as amended) or was employed by the Company or any of its affiliates at any time during the preceding three years;

2.        the director is a member of the immediate family of an individual who is, or has been, employed by the Company or any of its affiliates as an executive officer (as used herein, such term shall have the same meaning as the term "officer" in Rule 16a-1(f) under the Securities Exchange Act of 1934 (the "Exchange Act")) at any time during the preceding three years;

3.        the director (a) presently receives, or his or her immediate family member receives, more than $100,000 in any consecutive 12-month period in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), or (b) the director or the director's immediate family member had received such compensation during any consecutive 12-month period within the preceding three years;

4.        (a) the director or his or her immediate family member is presently a partner of a firm that is the Company's internal or external auditor; (b) the director is presently an employee of such firm; (c) the director's immediate family member is presently an employee of such firm and participates in the firm's audit, assurance or tax compliance (but not tax planning) practice; or (d) the director or his or her immediate family member was within the preceding three years (but is no longer) a partner or employee of such firm and personally worked on the Company's audit during such three year period;

5.        the director (a) is presently an executive officer or an employee, or his or her immediate family member is an executive officer, of another company (including any tax-exempt organization) that makes payments to, or receives payments from, the Company for property or services in an amount which, in any single fiscal year, exceeds $1 million or 2 percent of such other company's consolidated gross revenues for its last fiscal year, whichever is greater, or (b) the Company and the company of which the director is an executive officer or employee or his or her immediate family member is an executive officer had such relationship within the preceding three years;

6.        the director is affiliated with, or his or her immediate family member is affiliated with, a paid advisor or consultant to the Company;

7.        the director has, or his or her immediate family member has, a personal services contract with the Company;

8.        the director or his or her immediate family member is employed and compensated by a foundation, university or other nonprofit institution that has received significant charitable contributions from the Company that are disclosed or will be required to be disclosed in the Company's proxy statement; and

9.        the director (a) is presently employed, or his or her immediate family member is presently employed, as an executive officer of another company where any of the Company's present executive officers serves on that company's compensation committee, or (b) such director or his or her immediate family member was employed in such capacity within the preceding three years.

In addition to being independent as determined by the Board of Directors in accordance with the factors set forth above, (a) members of the Audit Committee may not (i) receive, directly or indirectly, any compensation other than directors' fees from the Company, or (ii) be an "affiliated person" of the Company or any of its subsidiaries as such term is defined under Rule 10A-3 under the Exchange Act and (b) members of the Leadership Development and Compensation Committee must qualify as "outside directors" as such term is defined under Section 162(m) of the Internal Revenue Code of 1986, as amended, and as "non-employee directors" as such term is defined under Rule 16b-3 promulgated under the Exchange Act.

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