The day has finally arrived. Executive compensation bad boys Angelo Mozilo of Countrywide Financial Corporation (NYSE: CFC), former Citgroup Inc. (NYSE: C) CEO Chuck Prince and former Merrill Lynch & Co. Inc. (NYSE: MER) head Stan O'Neal will be hauled before Congress to be subjected to pseudo-populist grandstanding.The evidence is pretty damning. At Countrywide, the board of directors brought in a new compensation consultant after the current one said Mozilo's pay was inflated. In an email released by Congress [subscription required], Mozilo responded to a consultant's email that the board's proposed compensation plan lowered his earnings potential by saying that "At this stage in my life [...] this process is no longer about money but more about respect and acknowledgment of my accomplishments.... Boards have been placed under enormous pressure by the left wing antibusiness press and the envious leaders of unions..."
Wait. Back up. Was Mozilo saying that some people were jealous of the fact that he earned hundreds of millions in compensation while presiding over the destruction of value? Who wouldn't be jealous of that? Most of us actually have to create value to get paid. Unfortunately, the new American dream of executive compensation seems to be earning 9 figures while destroying shareholder value.
But I have to ask: Why are the CEOs being questioned? Isn't that kind of like chastising perpetually-injured Atlanta Braves pitcher Mike Hampton for his $121 million contract? Shouldn't the moron general manager who signed on the dotted line be the one on the line?
It is Angelo Mozilo's job to try to get paid as much as he can -- the failure is one by the board of directors and the large institutional shareholders who didn't bat an eye at pay packages that are obviously excessive. The threat of withholding support for the board by major pension and mutual funds could go a long way towards cleaning this mess up. This doesn't happen nearly enough, but it's our only hope restoring some semblance of shareholder democracy.
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Reader Comments (Page 1 of 1)
3-07-2008 @ 10:45AM
jerry wald said...
let the market work their salaries, let the owners work steriods -- congress -- work the border, work placement of judges, work spending cuts, work security, work entitlements, work an energy policy - bunch idiots in congress only concerned iwth keeping their jobs, having clout and making money -- jsut like the CEO's
3-07-2008 @ 11:51AM
Beltway Greg said...
The problem is with compensation on the Street and in the financial services industry in general. When I was a broker you got paid if you could get the clients to trade. Sad. Look at the bad days suffered by Citigroup this year. Why do these people take such outrageous positions? Simple because it isn't their money. But, if they shoot the three pointer at the buzzer from half-court they got all the marbles. This actually increases the likelihood that they'll take outlandish risks. If they were personally responsible for their loses things would change. I know that can't happen and market calamities can befall even the saviest of investors. Still bonuses of $20-30 million dollars are ridiculous. And executive pay is beyond reason.
Beltway Greg.
3-07-2008 @ 7:24PM
Sheldon L said...
Hey Joe you must be kidding! It's easy to agree that many CEO' are vastly over paid, but 300% of lowest paid employee -- that's hysterical.
So if a McDonald burger flipper or Wal-Mart clerk is earning $20,000 or even $40,000 (which they are not) you would pay a CEO of a company worth tens of billions a measily $60,000 or even $120,000.
You have not thought that through pal. LMAO
3-07-2008 @ 8:09PM
Joe said...
I personally do not feel that any CEO of publicly traded company should receive more than 300% of the lowest paid permanent employee.
Private companies they should receive what ever they can.
3-09-2008 @ 11:56AM
dtrigger said...
hey Sheldon,
a leader needs to follow before he/she can lead!
3-11-2008 @ 4:10PM
ken scotta said...
These CEOs and CFOs are in " Cahouts" with each other. The boards are not doing their jobs by letting golden parachute deals. Could be that the boards are working together to dfraud the shareholder? Could the legal beagles of these companies be getting their own kick backs. Could our federal watchdogs be in the back pockets of organized crime? If I was the "God Father" this how I would want my kids to grow up.
6-05-2008 @ 8:50PM
anonymous said...
The CEO's and CFO's of any PUBLICLY traded company should only get 40 times of what the average worker makes. So if a McDonald's average worker makes 20K a year, you multiply that 40 times and that's the yearly salary of the CEO. Not 400 times plus which is really absurd. Some of these CEO's are crooks. Ever heard of the likes of Kowslowzki of Tyco, Samsung chairman Lee Kun-Hee, Kenneth Lay of Enron, Former CEO of Brocade Communications Systems Inc., Brocade Communications Systems Inc. CEO Gregory Reyes, Countrywide Financial CEO Angelo Mozilo, and numerous others. Enough is enough. A CEO is a no different than any working person, except that they get are overly paid and steal other people's money. It's like a bank manager with the keys to the bank vault and when no one is looking, will pocket all the undocumented money into his own pocket. They're just criminals with University degrees wearing Armani suits. By the way, John Gotti always wore Armani suits and he's a mobster.