CEOs pocket big pay while their companies tank
By MIKE HALL
WASHINGTON, D.C. — Three
CEOs — Angelo Mozilo of Country-
wide Financial Corp., E. Stanley
O’Neal of Merrill Lynch and Charles
Prince of Citigroup — presided over
companies that lost a combined $20
billion in just the past two quarters of
2007 as a result of investments in sub-
prime and other risky mortgages.
For that kind of performance, the
CEO trio pocketed more than $320
million in compensation, stock
bonuses and other rewards last year.
That disconnect between performance
and pay, says Rep. Henry Waxman
(D-Calif.), shows that “there seems to
be two different economic realities in
this country. Most Americans live in a
world where economic security is pre-
carious and there are real economic
consequences for failure. But our na-
tion’s top executives seem to live by a
different set of rules ... CEOs seem to
hit the lottery when companies col-
lapse.”
Waxman made his remarks at his
U.S. House Oversight and Govern-
ment Reform Committee’s hearing
March 7 on CEO pay and the mort-
gage crisis.
b h
m k
Waxman says all three companies
“bet heavily on the subprime market”
and suffered enormous losses. Coun-
trywide lost $1.6 billion in 2007 and
its stock lost 80 percent of its value.
Merrill Lynch lost $10 billion and its
stock lost 45 percent of its value. Citi-
group also lost $10 billion and its
stock lost 48 percent of its value.
According to a report released by
the committee, the companies’ nose-
Bennett Hartman
Morris & Kaplan, llp
Attorneys at Law
Oregon’s Full Service Union Law Firm
Representing Workers Since 1960
Serious Injury and Death Cases
• Construction Injuries
• Automobile Accidents
• Medical, Dental, and Legal Malpractice
• Bicycle and Motorcycle Accidents
• Pedestrian Accidents
• Premises Liability (injuries on premises)
• Workers’ Compensation Injuries
• Social Security Claims
dives paid off for the three CEOs.
O’Neal and Prince pulled the rip
chords on their golden parachutes and
resigned. Mozilo appears ready to do
the same as soon as Bank of America
completes a deal to buy Countrywide.
The report shows that O’Neal left
Merrill Lynch with a $161 million re-
tirement package. Prince was awarded
a $10 million bonus, $28 million in
unvested stock options and $1.5 mil-
lion in annual perquisites when he left
Citigroup. Mozilo received more than
$120 million in compensation and
sales of Countrywide stock. Says
Waxman:
Any reasonable relation between
their compensation and the interests
of their shareholders appears to have
broken down. The obvious question is
this: How can a few executives do so
well when their companies do so
poorly?
Nell Minnow, co-founder of the
Corporate Library, an independent
group that studies corporate gover-
nance and executive pay, describes
herself as a “passionate capitalist.”
But she told the committee that not
only is the compensation the three re-
ceived far out of line compared with
performance, it also should be re-
turned to shareholders.
“The undue compensation awarded
to these failed CEOs should be re-
turned to shareholders,” she testified.
“In addition, they should be held liable
for providing false and misleading
statements to investors and held ac-
countable for the impact of their poor
strategic decision-making policies.”
Minnow also called for stronger
shareholder rights in determining
CEO pay throughout the corporate
world.
“Now, shareholders only vote on
stock options and have no say over
any other aspect of compensation,”
she said. “So directors have nothing to
lose by approving pay plans that pay
off like perpetual pin-ball machines,
designed so that everything you hit
rings a bell.
The committee report also found
that Countrywide retained three com-
pensation consulting firms to develop
Mozilo’s pay package. After the first
two firms made recommendations that
apparently didn’t suit Mozilo, a third
company was retained that, the report
says: “...appeared to serve as Mr.
Mozilo’s personal adviser” with the
goal of achieving “maximum opportu-
nity” for Mr. Mozilo. The final con-
tract was significantly more generous
than Exequity [the second compensa-
tion firm] originally recommended.
During their testimony, the CEOs
claimed reports of their pay were ex-
aggerated by the media. But the com-
mittees’ report suggests that Mozilo is
trying to deflect blame onto unions —
because organized labor has been
leading the way in many shareholder
actions seeking to hold corporate ex-
ecutives accountable.
The committee came across
Mozilo’s accusations while sorting
through various financial documents.
REVERSE MORTGAGES
For Homeowners 62 and Older
Get The Financial Independence and Security You Deserve
• Supplement Your Retirement Income.
• No Monthly Payments.
• You Maintain Ownership and Title.
T URN Y OUR H OME E QUITY I NTO C ASH , L INE OF C REDIT ,
M ONTHLY I NCOME OR A C OMBINATION OF P LANS .
Talk with Lynn or Julie, the Reverse Mortgage Specialists at:
We Work Hard for Hard-Working People!
111 SW Fifth Avenue, Suite 1650
Portland, Oregon 97204
(503) 227-4600
www.bennetthartman.com
Our Legal Staff are Proud Members of UFCW Local 555
PAGE 2
Lynn Russell
360-694-7272 or
1-866-684-7272
205 East 11th Street, Suite 104, Vancouver, Washington
NORTHWEST LABOR PRESS
In a 2006 e-mail, responding to an ex-
ecutive compensation consultant who
was disappointed that Countrywide’s
board had made revisions in Mozilo’s
compensation package, Mozilo wrote:
“boards have been placed under enor-
mous pressure by the left-wing, anti-
business press and the envious leaders
of unions and other so-called “CEO
Comp Watchers.”
He goes on to say that “a decade
from now,” the public will realize how
wrong it was to attack honest “entre-
preneurship.”
(Editor’s Note: Mike Hall is a
writer for the national AFL-CIO Now
Blog News.)
IBEW launches
union campaign
at Comcast
The International Brotherhood of
Electrical Workers announced March
12 that it will try to unionize Comcast,
a telecommunications giant that last
year took in $25 billion in revenue.
Matt Carroll, IBEW Local 89 presi-
dent and lead Northwest organizer on
the Comcast campaign, says less than
2 percent of Comcast’s 90,000 employ-
ees are unionized. IBEW represents
Comcast workers in Chicago, Philadel-
phia, New Jersey and Alabama, and
Communications Workers of America
represents Comcast workers at facilities
in California, Michigan, and Pennsyl-
vania. But the company has success-
fully resisted further unionization.
So IBEW is trying a new approach
— a “virtual” campaign. Organizers
and volunteers show up outside Com-
cast workplaces with a banner and
fliers that direct workers to a Web site.
In mid-March, the union campaign
kicked off in the Pacific Northwest,
New England, Illinois, New Jersey,
Pennsylvania, and Florida.
The Web site for the Northwest,
www.comcastworkers.com, enables
workers to download and mail in union
authorization cards. If the union col-
lects enough cards, it can request an
election to be overseen by the National
Labor Relations Board.
The Northwest campaign is being
headed up by IBEW Local 89 — an
Everett, Wash., telecommunications lo-
cal with members in Washington, Ore-
gon, Idaho and Northern California, at
Verizon and two rural telecom compa-
nies, CenturyTel and Frontier.
Comcast management appears to be
reacting swiftly. In Auburn, Wash.,
managers held an emergency meeting
when the union banner appeared, and
then came out to watch the entrance
while employees drove out in their
company vans.
In the first several days of the North-
west campaign, IBEW staff and volun-
teers hit every Comcast work site from
the Canadian border to Corvallis, Car-
roll said.
MARCH 21, 2008