As Robert Nardelli vacated the top seat at The Home Deport on Jan. 3, investors mostly applauded his exit. But as the former CEO departed with roughly $210 million in cash, stocks, and insurance and retirement benefits, his severance package ignited shareholder ire.

Investors had carped for months to the company's board of directors about Nardelli's paycheck, asserting that his pay was not indicative of performance. Sure, under Nardelli's six-year tenure, The Home Depot made considerable steps forward, expanding internationally into Mexico, Canada, and China as well as creating HD Supply to target sales to production builders. But on his watch, share value shrank and market share eroded—all as his pay swelled.

CEO CIAO: Robert Nardelli's $210-million severance package from The Home Depot has put the spotlight on executive compensation. Getty One These issues are hardly limited to The Home Depot. Executive compensation is emerging as investors' newest sore spot. Against a backdrop littered with examples of corporate scandal and CEO greed, investors everywhere are demanding more accountability; they want to know if money's being taken out of their pocket to pad someone else's.

And all this comes at a time when a dive in the home building market has investors wondering if public builder executives will feel any of the pinch. A multiyear run up in the home building market has swelled public home builder executive pay packages, most notably in bonus pay.

According to Lehman Brothers equity research, already beefy incentives have proportionally doubled since 2002. This compensation growth propelled four public home builder CEOs—Bruce Karatz (who resigned from KB Home in November 2006), R. Chad Dreier, Ara Hovnanian, and Bob Toll—into the top 16 on Forbes' list of top-earning CEOs, alongside the chiefs of major financial, pharmaceutical, and technology giants.

More Disclosure

Investor outrage over so-called gold-plated pay packages and sweetheart deals has led to a Securities and Exchange Commission overhaul of the rules governing compensation disclosure. Regulation now mandates that companies provide a consolidated list of everything executives receive in the form of compensation—from cash to incentives to perks. And the fallout from this shift in governance is expected to cause a stir this proxy season.

“If you think institutional investors are hot under the collar, just wait,” says Amy Borrus, deputy director of the Council of Institutional Investors. “There will be more ammunition.”

The investment community is particularly concerned that some home builder exec bonuses are paid out as a percentage of revenue. This type of structure fails to adequately tie payout to performance, suggesting that in a good market executives could get paid for just showing up.

Paul Hodgson, a senior research associate at The Corporate Library, an organization that tracks corporate governance and executive compensation, says this type of pay program makes it difficult for executives to not receive a bonus even if their companies' revenues decrease.

“[This type of pay program] is appropriate for companies emerging out of bankruptcy or a startup … but these [home] builders have been in business for quite some time,” he says. “Most companies of that kind of vintage have moved into a different type of pay program.”

And pay for performance was the justification Beazer Homes USA spokespeople gave when the company's board approved a 6.25 percent raise for CEO Ian J. McCarthy. The compensation boost also came with a threefold increase in long-term stock option grants. The take-home value will hinge on how well Beazer's stock performs against a nine-member, public builder peer group, the company says, ensuring that McCarthy wins when shareholders win.