Re Mortgage mess CEOs defend pay by ToaKohe-Love


									                                  Re: Mortgage mess CEOs defend pay

Re: Mortgage mess CEOs defend pay


      • From: "Alvin E. Toda" <aet@xxxxxxxx>
      • Date: Sat, 8 Mar 2008 15:36:29 −1000

On Sat, 8 Mar 2008, Gary wrote:

       On Fri, 07 Mar 2008 13:20:47 −0800, Rita <Rita@xxxxxxxxxxx> wrote:

               Mortgage mess CEOs defend pay

               High−profile ex−banking execs fire back following attacks on packages,
               telling lawmakers that figures were exaggerated by the media.

               By David Ellis, staff writer

               NEW YORK ( −− A trio of high−profile CEOs defended
               their oversized pay packages to Congress on Friday, even as their companies
               and shareholders lost billions of dollars as a result of the ongoing mortgage

               Countrywide Financial's (CFC, Fortune 500) founder and CEO Angelo
               Mozilo, former Merrill Lynch (MER, Fortune 500) Chairman and CEO
               Stanley O'Neal and ex−Citigroup (C, Fortune 500) chief Charles Prince
               testified before the House Committee on Government and Oversight Reform,
               calling reports of their pay "grossly exaggerated" in some instances and
               pointing out that they lost millions as well.

               Their remarks found little sympathy however, as a number of lawmakers
               chastised the execs for fostering the current mortgage crisis at a time when
               homeowners are at risk of losing their homes and as the country teeters on the
               brink of recession.

               "If you don't bear personal responsibility, I don't know who does," said Rep.
               Elijah Cummings, D−Md.

               All three executives made headlines in the past year for their lofty
               compensation after their companies lost billions in the U.S. housing market.

               Between 2002 and the close of 2006, the three executives were paid $460
               million, according to a report issued by the Congressional committee just a
               day earlier.

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                              Re: Mortgage mess CEOs defend pay

            Mozilo, who grew Countrywide from its modest beginnings into the nation's
            largest mortgage lender, reportedly stood to collect a windfall of $115 million
            after his firm agreed to a yet−to−be completed sale to Bank of America
            (BAC, Fortune 500). After facing heavy criticism from lawmakers, Mozilo
            forfeited $37.5 million in payments tied to the deal.

            In his testimony, Mozilo called reports of his pay package "grossly

            Upon his departure from Citigroup in November, Prince left with
            approximately $68 million, while O'Neal collected about $161 million after
            he stepped down in October.

            Defending lofty pay packages

            Both men contended that their compensation was in line with pay scales
            within the broader financial services industry and that reports about their pay
            packages were "inaccurate."

            But since their compensation was tied directly to the performance of the
            company via stock and options, Prince, O'Neal and Mozilo argued that their
            pay was buoyed by impressive profits the companies delivered in the years
            leading up to the mortgage crisis. They also said that they have lost millions
            since as their companies have seen the price of their stock plummet in recent

            In all three instances, the terms of their pay package were determined by
            independently by members of their respective board of directors who
            commonly rely on handsome pay packages to attractive and retain top talent.

            But also in focus were the cozy relationships between the directors
            responsible for determining pay and compensation consultants who get hired
            by directors to advise on executive pay, which was the centerpiece of an
            earlier hearing sponsored by the committee in December. Lawmakers have
            argued that these firms are merely getting paid to tell the board and CEO
            what it wants to hear.

            One remedy proposed Thursday by Nell Minow, editor and co−founder of the
            corporate governance research group The Corporate Library, was to give
            shareholders greater rights in determining members of the board or creating
            an indexing system where pay would adjust based on the company's
            performance in relation to its peers.

            Minow argued that hefty pay packages for CEOs are sensible, but only when
            they generate such returns for shareholders.

            "We want CEOs to be paid hundreds of millions of dollars," Minow told
            lawmakers. "But there is no excuse for people getting so much for doing so

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                                   Re: Mortgage mess CEOs defend pay

                Pay in focus

                Even though Prince, O'Neal and Mozilo garnered plenty of attention on
                Capitol Hill, they are not the first, nor will they be the last, top execs to enjoy
                handsome pay packages.

                In December, Goldman Sachs (GS, Fortune 500) Chairman and CEO Lloyd
                Blankfein took home nearly $68 million in restricted stock, options and cash,
                making it the largest bonus ever given to a Wall Street CEO.

                Chrysler Chairman and CEO Robert Nardelli made headlines when he was
                forced out of Home Depot in January of last year and left with $210 million
                in cash, stock options and retirement benefits.

                Excessive compensation and hefty severance packages or "golden
                parachutes" have been burning issues in recent years. Many companies have
                rewarded CEOs handsomely through multi−million dollar salaries,
                eye−popping bonuses or attractive perks like country club memberships.

                Executive pay has drastically outpaced the pay gains experienced by the
                average American worker, according to an annual study published in August
                by The Institute for Policy Studies and United for a Fair Economy.

                Between 1996 and 2006, CEO pay rose 45%, at a time when the average pay
                for an American worker grew just 7%.

                That same study revealed that CEOs at 386 of the Fortune 500 companies
                took home $10.8 million in total compensation in 2006, more than 364 times
                what the average worker earned that same year.

        I watched a few minutes of the House committee yesterday on CNBC. The CEOs were
        gathered around the witness table. It amused me because it seemed they regarded the
        Committee members much like a dog owner would watch a dog who was suddenly growling
        at him. But no fear −− these dogs are much too well trained to have caused their masters any
        serious problems. They were NOT overly aggressive in their questioning.

        I'm reminded of Jack Cafferty's observation that while it's not surprising that 71% of
        Americans have no confidence in the Congress −− what is scary is that 29 % do.

Great article. It shows that our corporate structure is no good and needs to be repaired at the top. Shareholders
should not just have more say on board member selection, they should be able to come on the board to
investigate unethical actions or misconduct of company staff and officers.

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