For decades , activist shareholders were an entertaining , but largely ignored , Wall Street sideshow .

Disgruntled investors would attend annual meetings to harangue executives , criticize strategies -- and protest that their complaints were being ignored .

One agitator appeared in face paint and a red nose after executives called him a clown .

Today , however , it seems that activists have captured the center ring and are directing the main event .

On Wednesday , shareholder advocates could claim one of their biggest prizes yet when Home Depot announced the resignation of its chairman and chief executive , Robert L . Nardelli , long a target of shareholder ire for his large compensation and the company 's flagging stock price .

The main investor who pressed for the overthrow at Home Depot might at first glance seem an unlikely rebel : Ralph V . Whitworth , a lawyer educated at Georgetown and a former campaign worker for President Ronald Reagan who in December announced he had bought about $ 1 billion of the retailer 's stock , or a 1.2 percent stake , through his fund , Relational Investors .

But the rapid success of Mr. Whitworth 's campaign against the management and strategy of Home Depot demonstrates how thoroughly activists have moved into Wall Street 's inner sanctum .

Mr. Whitworth has said he still intended to nominate himself and at least one other candidate to Home Depot 's board at its shareholder meeting in the spring .

`` There 's a lot more respect for investors like me now , `` said Mr. Whitworth , 51 .

`` I still have to make threats , but now everyone wants to deal with us fast .

They realize we 've got real power and we 're here to stay .

`` The shake-up at Home Depot may be just a taste of things to come as shareholders and management at a number of companies , including Brink 's , the Borders Group and Applebee 's International , square off for battle at annual meetings this spring .

As those fights begin , expect few clown noses .

`` Activist shareholders have a power and audience beyond what they 've ever enjoyed , `` said Howard Steinberg , a lawyer who advises corporate boards and deal makers .

`` They 're developing a credible track record , and as a result , more and more managers are forced to engage with them .

Activists ' time has come . ``

Since July , activists have pressed successfully to push out chief executives at Pfizer and Sovereign Bank .

Institutional investors and mutual funds have set aside hundreds of millions of dollars to invest in underperforming companies with the intention of demanding new board seats or alternative strategies .

Much of that newfound influence is owed to recent legal changes and heightened attention to issues like executive compensation .

But it also draws on the fact that many activists have now amassed the wealth , knowledge and networks critical for success .

`` For years these guys were seen as politically motivated oddballs or annoying attention seekers , '' said Nell Minow , editor of the Corporate Library , a research group that rates corporate governance practices .

`` Now some of those same people control hundreds of millions of dollars and have been around longer than many C.E.O. ' s '' Before the 1980s , much shareholder activism was directed by ideological agitators , including unions , religious organizations and populist figures like Ralph Nader , who bought shares in companies as platforms for urging social , environmental or political changes .

The United Shareholders Associations , which Mr. Whitworth helped found in 1986 with the corporate raider Boone Pickens , was one of the first major efforts to organize shareholder activists around profit-minded goals .

Every spring the group would select about 50 companies and begin asking embarrassing questions at shareholder meetings .

In 1993 , the last year of the group 's operation , 25 of 43 of the companies , including I.B.M , reached agreements with Mr. Whitworth .

`` The head of General Mills once called me a socialist , '' Mr. Whitworth said in an interview .

`` I told him I was the ultimate capitalist .

Business people would return my calls for the first time , and it was giving me an entree into a world I otherwise could n't access . ``

Foremost among the goals successfully sought by United Shareholders were regulatory changes that made it possible for dissidents to nominate only one or two directors to a board , rather than an entire slate .

By the mid-1990s , corporate raiders realized the rule offered a less expensive way to stage a takeover rather than buying a company outright .

When the California Public Employees ' Retirement System began looking for a fund that would use activism to increase returns in 1996 , Mr. Whitworth and a colleague , David H . Batchelder , founded Relational Investors .

The fund today oversees about $ 7 billion , all invested in only nine companies that are chosen with an eye toward activist intervention .

In most cases , Mr. Whitworth forces his way onto a company 's board , either by threatening or staging a proxy fight .

Investors say the fund has averaged a return of about 25 percent annually over the last nine years .

Activist shareholders like Relational were further aided by changes in the law .

In particular , they say that regulations passed in 2004 requiring money managers and mutual funds to disclose how they vote in proxy elections have forced once-passive managers to become activists .

`` There was a sense before that mutual funds in particular just voted with management , '' said Ann Yerger , executive director of the Council of Institutional Investors .

`` But post-Enron and Tyco , investors expect money managers to justify their votes now , and to be listening to anyone warning about dangers . ''

Moreover , money managers and hedge funds are beginning to advertise their activist intentions , bragging that aggressiveness gives them an edge .

In November , the noted investor Robert A . Olstein announced formation of an activist fund .

`` We want to have an edge , '' said Eric R . Heyman , co-manager of the new Olstein Strategic Opportunities Fund .

`` Our skill is approaching companies and persuading management to adopt certain decisions , sometimes aggressively , and that 's why people invest with us . ``

Another important shift is a court ruling last year making it easier for shareholders to challenge directors nominated by companies .

`` Shareholders ' toolboxes are getting more and more robust every year , `` said Ms. Minow of the Corporate Library .

Moreover , as the number of activist investors grows , a vast ad hoc network has formed that makes it more difficult for companies to win a fight .

The universe of activist investors has expanded to include hedge funds like Pirate Capital , which is fighting to add its executives to the board of the security company Brink 's , and investors like Carl C . Icahn , who failed to gain board seats after a public spat with Time Warner 's chief executive , Richard D . Parsons .

When two activist investors , Pershing Square Capital Management and Nelson Peltz , bought large amounts of stock in Wendy 's International in 2005 , many other like-minded buyers jumped in , according to analysts .

As a result , the board had no choice but to accept activists ' suggestions , said James V . Pickett , Wendy 's chairman .

Ultimately , three representatives of Mr. Peltz 's fund joined the board .

`` Most of the issues the activists raised at Wendy 's were things we were already dealing with , `` Mr. Pickett said .

`` They just increased the intensity .

But when they own that much of the company , you have to listen to them even if you do n't want to . ``

For Mr. Whitworth , who has grown so wealthy that he once gave a charity $ 1 million in exchange for PaulMcCartney 's playing at his wife 's 50th birthday party , that kind of access has increased his effectiveness , he says .

After forcing his way onto the board of Mattel , Mr. Whitworth was given a gold-plated Barbie in appreciation by other directors when he left .

But such shifts have also increased his ambitions .

`` I was a firebrand .

Now I 've mellowed a lot , `` he said .

`` But I 'm still young .

I look forward to helping a lot more companies become more efficient , whether they like it or not . `` .

Summary: Rapid success of activist shareholder Ralph V Whitworth to get Home Depot 's former chief executive Robert L Nardelli to resign demonstrates how thoroughly activists have moved into Wall Street 's inner sanctum .

Summary: Whitworth has said he still intends to nominate himself and at least one other candidate to Home Depot 's board at its shareholder meeting in spring .

Summary: Shake-up at Home Depot may be just beginning as shareholders and management at many companies battle at annual meeting this spring .

Summary: Photo .


For a half-century , the blue oval logo atop Ford Motor 's headquarters has served as a kind of beacon for the American automobile industry , a signpost for local motorists on area highways and a guidepost for pilots landing at Detroit 's airport nearby .

But lately , blue is the only word for the malaise surrounding Ford , which is rapidly seeing its position in the industry and in its hometown eroded by its failure to combat foreign competition .

This year , Ford expects to permanently lose its grip on second place in the American market to Toyota , which passed it twice in monthly sales in the last six months , including December .

As many as half its blue - and white-collar employees have decided to take voluntary buyouts from a company where jobs were long seen as lifetime guarantees .

Ron Cimino , 44 , used to regret not landing a job at Ford , where his father worked for 52 years .

Turned down in 1984 because he lacked a master 's degree , Mr. Cimino of Dearborn wound up starting his own import-export business .

`` I 'm glad I did n't end up working at Ford , `` he said .

`` I never thought I 'd say that . ``

To be sure , General Motors and Chrysler have their own problems that are weighing on this city .

Their headquarters are here , too , as are some of their car plants , and thousands of their employees have their own worries as each company struggles financially .

But Ford 's troubles , arguably , are felt more acutely here .

After all , G.M. placed a good bulk of its manufacturing 60 miles north , in Flint , Mich . , and once had factories from Massachusetts to California as well as the Midwest .

Chrysler , though still a big local employer , has had German owners for nearly a decade .

Ford , by contrast , is woven more into the fabric of Detroit , with the Ford name on office buildings , museums , high schools and highways , as well as the football stadium , Ford Field , which opened downtown in 2002 .

Now , as the annual Detroit auto show prepares to open to the media this weekend , much of this city 's bedrock is unexpectedly at risk .

In November , Ford disclosed it had pledged nearly all its assets , including the trademark on its 100-year-old logo , as collateral against $ 25 billion in loans needed to fund its restructuring .

Ford has generated a particular sense of sympathy , bewilderment and fear here that its crosstown rivals have not .

There is sympathy , analysts say , because more of a human element is involved , namely the Ford family .

Puzzlement because Ford seemed to be the one Detroit auto company that had an answer for Japanese competition in the 1980s and 1990s with its profitable sport utility vehicles .

And fear that if a once-powerful company like Ford could falter , no one in Detroit may be safe .

The sentiment is readily voiced in places like Miller 's Bar , where the red leather barstools and colored Christmas lights evoke the watering hole in `` It 's A Wonderful Life . ``

It has been a Dearborn gathering spot since 1941 .

`` Dearborn , '' said the owner , Mark Miller , `` is Ford . ''

Judy Dolan , a secretary for the Detroit Building Trades Council , said during an interview at her home , `` I feel horrible about the situation they 're in . ``

She drives only Ford vehicles in support of her hometown company .

Concern over Ford 's future bubbled up late last month in conversation at the holiday cocktail parties held by the Detroit and foreign car companies and their parts suppliers .

Given the attention to Ford 's situation , the company 's new chief executive , Alan R . Mulally , who arrived in September from the Boeing Company , is already recognized wherever he goes .

Mr. Mulally said in an interview that he was recently lost in a local supermarket when another shopper came up to him .

`` Oh , Mr. Mulally , we 're so glad you 're here , `` he recalled her saying , before she helped him find shampoo .

His predecessor was William Clay Ford Jr . , who became the face of the company in television ads over the last four years as he struggled to fix Ford 's problems -LRB- he remains chairman -RRB- .

The family is the reason many company employees past and present refer to the automaker as Ford 's .

It is not a grammatical error , as visitors here might assume , but a nod to the fact that it is a company built by the original Henry and all the Fords that followed him .

`` The Fords have a relationship with the American people , '' said James P . Womack , the author and expert in manufacturing efficiency who advised Mr. Mulally at Boeing .

They include Kevin Boyle 's retired father , also named Kevin , who immigrated to Dearborn from Ireland in the 1950s , drawn by the chance to work for a company founded by the most famous man in the auto business .

`` People came to Detroit with an intense connection with that name , and then their lives became tied up with that name , '' said Mr. Boyle , a professor of history at Ohio State who has written extensively about the automobile industry .

`` It was a badge of honor to work for Ford . ''

Numerous families here boast multiple generations of Ford employees , some who worked on the assembly line , others -- fathers and sons , mothers and daughters -- who toiled in company offices .

`` I started there when I was 19 , and my whole family worked there , '' said Karen Kenniburg , who manages the vehicles driven by Ford executives .

The Fords , for their part , have given back , not just in jobs but also in charities .

Guests at a Nissan holiday party last month at the New Detroit Science Center drank wine and munched crab cakes beneath a wall of donors dotted with names of various Fords .

The same was true for Honda , whose event took place in an atrium outside Orchestra Hall .

That seeming omnipresence , however , makes the departures from Ford more poignant .

Last month , more than 30,000 blue-collar workers accepted deals to give up their jobs .

About half were ready to retire , but the rest were workers who did not have enough seniority to begin drawing pensions .

They accepted payments of up to $ 140,000 apiece to leave .

Ford 's white-collar employees are not exempt .

The company has already cut 4,000 managers , and 10,000 more are set to go by spring .

Last month , one of every three salaried employees was called in by their boss to be told Ford was giving them the opportunity for a buyout .

If they did not accept , their jobs might not be safe , some were told .

Altogether , more than 45,000 people , or half the number employed by the company at the beginning of the year , will not be working at Ford in 2007 .

That is likely to hurt business at Miller 's Bar , where 60 percent of the patrons work for Ford , and 18 of 25 cars in the parking lot on a recent afternoon bore Ford logos .

Others will be affected , as well .

At a Starbucks on Michigan Avenue , a mile away from Ford 's headquarters , and once a hangout for Mr. Ford , one customer , Shelley Boda , 32 , said she was unable to land a job at the company , where her father , grandfather and numerous relatives worked .

Instead , she chose the health care field , now less of a safe haven than she had hoped .

With Ford cutting so many jobs , and the rich benefits that went with them , `` there wo n't be anyone here who can afford health care , `` she said .

Professor Boyle said Ford employees and the community were now realizing that what they thought was a `` safe bet '' was not .

`` The funny thing is , people did n't see it as a bet , `` he said .

`` You would have parents who worked the line and have enough to send kids to college .

They would go off and get engineering degrees , marketing degrees and work for the companies .

`` That has crumbled .

There are few things more terrifying than that . ``

And yet , many still believe in the power of the Fords themselves to save their company .

Ms. Kenniburg said they gave Ford an advantage over G.M. and Chrysler as they devise a comeback plan .

`` The Ford family , '' she said , `` they 're going to do everything in their power to keep this company going . `` .

Summary: Much of bedrock of Detroit , Mich , is unexpectedly at risk as annual Detroit auto show prepares to open to media .

Summary: Ford in November disclosed it had pledged nearly all its assets , including trademark logo , as collateral against $ 25 billion in loans needed to fund its restructuring .

Summary: Ford has generated particular sense of sympathy , bewilderment and fear in Detroit that its crosstown rivals have not .

Summary: Analysts say there is sympathy because of human element is involved , namely Ford family .

Summary: Puzzlement because Ford seemed to be one Detroit auto company that had answer to Japanese competition in 1980s and 1990s with its profitable sport utility .

Summary: Fear that if once-powerful company like Ford could falter , no on in Detroit may be safe .

Summary: Some residents comment .

Summary: Photos .


Everyone who knows him says it : In a tough fight , Kenneth G . Langone is a guy you want in your corner .

But when Robert L . Nardelli , the former chief executive of Home Depot , refused to bend to the will of an exasperated board and accept a pay cut , he lost the crucial support of a friend who as lead director not only recruited him but presided over his compensation contract that would later draw so much fire .

For Mr. Langone , a voluble man whose passions include Italian meatballs , golf and the Roman Catholic Church , it was a surprising reversal .

Mr. Langone prides himself on his loyalty to his friends and , as a director who has served on the compensation committees of General Electric , Yum Brands and the New York Stock Exchange , he has never been shy about paying his chief executives well .

Now , people who have spoken with him in recent days say , he is angry with Mr. Nardelli over his unwillingness to have his pay reduced .

In an era of escalating pay , with chief executives on Wall Street taking in $ 50 million a year and former General Electric executives like David Calhoun getting $ 100 million compensation deals from private equity investors , being paid well was a way for Mr. Nardelli , a scrappy former football player , to keep score .

In light of Mr. Langone 's vocal and unyielding support for the $ 190 million pay package that was awarded to Richard A . Grasso , the former chief executive of the New York Stock Exchange , he might have been expected to fight to the bitter end to save Mr. Nardelli .

But as friends who have served on boards with him say , beneath the bluster and occasional histrionics lies a more pragmatic man well aware of his fiduciary duties as a director -- especially at Home Depot , a company that he helped found and that has made him a billionaire .

`` Ken does not back down , but he also has a strong sense of propriety , '' said Gary E . Earlbaum , a real estate executive who introduced Mr. Langone to Bernard Marcus , a founder of Home Depot , more than 30 years ago .

`` His loyalty is to the enterprise . ''

Mr. Langone declined to comment .

Mr. Nardelli did not return messages left for him .

At age 71 , when many corporate executives start slowing down a bit , Mr. Langone continues to manage a full schedule of corporate , political , legal and philanthropic activities .

He is a top financial supporter of Rudolph W . Giuliani , who is weighing a possible run for the White House , and he is the chairman of New York University Medical Center .

Mr. Langone also still devotes considerable time and energy to contesting the lawsuit brought against him and Mr. Grasso by Eliot Spitzer , the former attorney general for New York who is now the state 's governor .

That 's all in addition to his day job , running Invemed Associates , the small investment bank he founded .

But it has been his passionate and unstinting defense of Mr. Grasso 's pay , much of which was set during his time on the exchange 's compensation committee , that has come to define Mr. Langone 's public image .

His detractors see him as a living symbol of the excesses of runaway executive compensation , a bullying old-school titan whose tendency to befriend his chief executives blinds any objective ability he might have had to keep a ceiling over their pay .

Mr. Grasso 's huge compensation package , and , according to the lawsuit brought by Mr. Spitzer , his efforts to keep other directors in the dark about it , are perfect examples of this , they say .

`` Ken Langone is the root of the problem .

His philosophy is that you can never pay a C.E.O. too much money , `` said Richard Ferlauto , the director of pension investment policy at the A.F.L. - C.I.O.

`` That was revealed in his defense of Grasso .

Now we are focusing on the role of Langone `` at Home Depot , he said .

`` We blame him and his cronies for the original contract . ''

His defenders , on the other hand , point to his long experience as a director and his acute knowledge of a director 's responsibilities , honed from more than 30 years ' experience as an independent investor .

Yes , he has a big heart and an inclination to overpay at times , they say , but his ethics are beyond dispute .

`` I do n't care what kind of a battle I 'm in but I would want Ken Langone on my side , because he is on the side of honor and righteousness , `` said Frank Borman , a former director at Home Depot .

Mr. Langone 's pursuit of Mr. Nardelli , whom he met in 1999 , when he became a G.E. director , was infused with a sense of glee at the prospect of landing such a corporate star .

Mr. Nardelli , well aware of the value of the G.E. pedigree , drove a hard bargain .

A result was the 2000 contract , which , with its guarantees and perks , may well be an anachronism today as rich pay packages come under increasing scrutiny .

At Home Depot , Mr. Langone is a particularly involved director .

He is chairman of the nominating committee and has played a significant role in shaping the current board .

He is also a member of the executive and audit committees .

He would frequently start his mornings with a call to Mr. Nardelli , and he thrilled in digesting the latest sales data as well as updates about Lowe 's , the retailer 's main competitor .

And , while walking the floors at store outlets was a responsibility for directors , Mr. Langone did more than his share , as well as inspiring the Home Depot sales force at the frequent pep rallies he attended .

Still , when it became clear that a combination of the poor performance of Home Depot 's stock and Mr. Nardelli 's obstinate demeanor had made his position untenable , Mr. Langone threw his support with the rest of the board .

In a 2004 interview for an article about Mr. Langone and his role in the Grasso controversy , Mr. Nardelli said : `` Change is difficult .

But it is the only constant in today 's environment .

It takes courage and leadership . ``

`` I think Ken stands by good business judgment . '' .

Summary: Home Depot 's former director Robert L Nardelli 's refusal to bend to will of exasperated board and accept pay cut lost him crucial support of friend Kenneth Langone , co-founder and director of company , who not only recruited him but presided over his compensation contract that would later draw so much fire .

Summary: Langone is believed to be angry over Nardelli 's unwillingness to have his pay reduced .

Summary: Photo .


Gap 's board , it appears , has had enough .

After a dismal holiday season -- the third in a row -- the chain 's directors are participating in a broad review of the company 's strategy , intensifying pressure on the chief executive , Paul S . Pressler , to pull it out of a protracted sales slump .

Gap said yesterday that sales plunged 8 percent in December after a return to the simple fashions that fueled the chain 's meteoric rise in the 1990s , like T-shirts and hooded sweaters , failed to lure customers back into stores .

In an admission that the back-to-basics approach has not worked , the company cut its earnings forecast for 2006 , blaming deep discounts -- like $ 100 off a fur-lined parka -- required to sell left-over piles of winter clothing .

`` We are clearly disappointed , '' Mr. Pressler said in a statement .

Gap 's results in December contrasted sharply with that of its competitors .

The nation 's retailers reported respectable sales increases for the month , according to several industry groups , even as warm weather hurt winter clothing sales and higher fuel prices pinched consumer spending .

Sales at stores open a year rose 3.1 percent in December , compared with the period in 2005 , according to the International Council of Shopping Centers , which predicted a 2.5 percent gain .

For November and December combined , sales rose 2.8 percent , within the group 's forecast .

As they have for much of the year , department stores like Saks -LRB- up 11.1 percent -RRB- , Federated -LRB- up 4.4 percent -RRB- and J . C . Penney -LRB- up 2.6 percent -RRB- posted strong gains .

But smaller clothing chains like Abercrombie -LRB- down 1 percent -RRB- .

Express , a unit of Limited -LRB- down 5 percent -RRB- .

And Ann Taylor -LRB- down 5.3 percent -RRB- struggled to stand out .

`` A lot of these retailers limped across the finish line , '' said John D . Morris , a senior retail analyst at Wachovia Securities , who speculated that bargains on flat-screen TVs captivated consumers in a season when there were few must-have fashions .

Wal-Mart , which heavily promoted flat-screen TVs , said sales rose 1.6 percent , beating its own predictions of a meager 1 percent increase .

`` Flat-screen TVs flogged fur-lined hoodies , '' Mr. Morris said .

There were plenty of those hoodies at Gap , which heavily discounted much of its winter clothing in the days immediately before and after Christmas .

-LRB- The fur-trimmed parka , originally $ 169 , was marked down to $ 68 several days before Christmas . -RRB-

As a result of the deep discounting , Gap profit margins for the fourth quarter will be `` significantly below '' those of last year , said Sabrina Simmons , senior vice president for corporate finance at the chain .

The board 's decision to intervene in a review of Gap 's brand strategies suggests that the directors are fed up with the chain 's poor results and the executives who have failed , season after season , to turn it around .

`` This is a clear judgment coming down on the leadership of the Gap brand , '' Mr. Morris said .

Revenue in December dropped 4 percent , to $ 2.34 billion , from $ 2.44 billion a year ago .

The worst performance was at the Gap and Old Navy brands , where monthly sales dropped 9 percent and 10 percent , respectively .

As a result , Gap yesterday reduced its earnings forecast to 83 cents to 87 cents a share , down from $ 1.01 to $ 1.06.

Even at Gap , which often describes its sales as `` disappointing , '' the December results appeared to jolt executives .

The word `` disappoint '' was used at least four times yesterday in a prerecorded phone message and news release describing December sales .

Mr. Pressler said that he and the board would review brand strategies at Gap and Old Navy and that he was `` committed to making the necessary changes to improve performance . ''

Banana Republic will not be included in the review because that chain 's sales are improving .

As the division introduced pricier , preppier fashions , like an $ 88 silk-cashmere half-zip pullover , December sales rose 2 percent , making Banana a bright spot for the company .

The strategic review would be the second in the last year for the beleaguered Gap division , which has struggled to recapture business after several years of changing missions and fluctuating fashions .

Over the summer , after months of brainstorming , Gap 's brand president , Cynthia Harriss , introduced the back-to-basics strategy to investors and analysts , even bringing back the lower-case Gap logo used for the chain 's first store in 1969 .

But the trip down memory lane did not win over shoppers .

`` We did not gain the traction we had expected , '' Mr. Pressler said .

Summary: Gap says sales dropped 8 percent in December .

Summary: Cuts its earnings forecast for 2006 .

Summary: International Council of Shopping Centers says sales at stores open one year rose 3.1 percent in December compared with period in 2005 .

Summary: Combined sales rose 2.8 percent for November and December within group 's forecast .

Summary: Department stores posted strong gains in December , while smaller clothing chains struggled .

Summary: Wal-Mart says sales rose 1.6 percent , beating its own predictions of 1 percent increase .

Summary: Graphs .

Summary: Photo .