It looks like the CEOs pushed out at Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) will do very well. According to MarketWatch, "Daniel Mudd, the outgoing CEO of Fannie Mae, could receive more than $9 million in combined severance pay, retirement benefits and deferred compensation." The head of Freddie, Richard Syron, could do even better. The amounts may come down a little if performance clauses in the contracts cut bonus pay.
The complaining is misplaced. The departing CEOs at places like Merrill Lynch (NYSE:MER) and Citigroup (NYSE:C) did much better. Paying financial firm chief executives large sums is part of doing business. That issue is not confined to banks and brokerages. It extends to almost every other large industry.
The US business culture has become one of paying CEO hundreds of times more than entry level workers at the same companies. The entire systems would have to be altered for that to change. Activist investors have been working on the problem for years, and nothing has happened.
The excitement over the Fannie and Freddie CEO comp deals only serves to show that the company's boards believed that the executives would do a good job when they came into the firms and that, at the time, there was no reason to think that their stocks would trade for under $1.
No one puts together a pay package on the assumption that a corporation's stock will fall 99%. It is hard to find senior management who will take $1 as an exit package, even if things do go wrong..
Douglas A. McIntyre is an editor at 247wallst.com.











Reader Comments (Page 1 of 1)
9-09-2008 @ 8:47AM
Ulysses said...
You conveniently forget Enron, et al. You forget that our tax dollars directly or indirectly paid for and will pay for this debacle sponsered by the U.S. Congress and the Clinton adminstration. When corporations fail, it is in the free market arena, not in a government-sponsored sphere where anyone could have done a better job then these two have.
9-09-2008 @ 9:29AM
Hank said...
WAAH! Sounds like someone needs their poopy diaper changed you little pu**ies!
9-09-2008 @ 10:03AM
Dan Barnett said...
Freddie is due to make a dividend payment shortly. Interesting to see what happens.
Hank: Grow up.
9-09-2008 @ 10:08AM
Floyd Mason said...
Clinton hasn't been in office for almost 8 years. Republicans should accept responsibility for their deregulation and their moral hazard or just be quiet. We have a crisis, CEO's get huge bonuses, peolple get the bill, and Republicans spin it that it Clinton's fault.
There are two reason's for the failure and a third for the CEO pay. The first two are a poor government administration and poor management at Fannie and Freddie, the third is greed.
9-09-2008 @ 10:37AM
Larry Checco said...
When you write that the entire system would need to be changed--WE are the system. Let's change it!
9-09-2008 @ 2:48PM
Ed said...
The Dems, really stuck it to Freddie's Fannie!
ICEddie.
9-09-2008 @ 2:51PM
ICEeddie said...
Until Democrats/Liberals are willing to eat their own like Republicans when they see corruption, we will never be able to solve a single problem. You all act like the (R) are for the RedSkins and (D) is for Dallas. It's we the people against the management and owners. "Wake up bright people!" The rest get out of the way!
ICEddie.
9-16-2008 @ 11:31AM
KennyG said...
Because a "business culture" becomes so horribly out of whack, doesn't make it right. How many jobs pay you what you make in 2 years just to go away? Wrong is wrong, and you should know better.
9-22-2008 @ 8:27AM
Larry Checco said...
No More Bull
For years I’ve been telling my clients that good branding is far less about logos, taglines, marketing, advertising and public relations, and far more about quality leadership and staff; accountable and
ethical behavior; and a willingness, ability and commitment to live up to what you say about your organization or company.
In short, a good brand is all about trust. And if ever I needed a case study to prove my point, enter today’s massive financial industry collapse!
How much money do you think Merrill Lynch over the years invested in creating and promoting its logo, the Bull? What they failed to tell us is Bull was his first name; his last name started with an “S.”
Lack of trust
The reason that the financial markets are in such a mess is because no one trusts anyone. Instead, investing with Wall Street right now is like buying a pig in a poke. You have no idea what the true value of your purchase is.
Wall Street, including the rating agencies, needs to regain the trust of investors, and a great place to start would be with board and senior management compensation packages.
There is no way stockholders should allow boards to create compensation packages that are not in line with executive performance. How is it, for example, that the former CEOs of Merrill Lynch and Countrywide Mortgage can run their companies into the ground and still walk away with hundreds of millions of dollars in, what in essence, is shareholder money.
Let’s change it
The often touted rationale for such obscene payouts is “That’s the way the system works.” Well, WE are the system. Let’s change it.
It will take a while for Wall Street to regain the trust of investors. Which is why I also tell my clients, it’s a lot easier—and cheaper—to maintain a healthy brand by living up to what you say about your company than to try to rehabilitate one that has been tarnished, or worse. I think recent history has proven my point.
Am I angry? You’re darn tootin’. And you should be, too. As stockholders, let’s start holding corporate boards and senior management strictly accountable for their actions.
Let’s not take any more bull!
9-22-2008 @ 8:27AM
Larry Checco said...
No More Bull
For years I’ve been telling my clients that good branding is far less about logos, taglines, marketing, advertising and public relations, and far more about quality leadership and staff; accountable and
ethical behavior; and a willingness, ability and commitment to live up to what you say about your organization or company.
In short, a good brand is all about trust. And if ever I needed a case study to prove my point, enter today’s massive financial industry collapse!
How much money do you think Merrill Lynch over the years invested in creating and promoting its logo, the Bull? What they failed to tell us is Bull was his first name; his last name started with an “S.”
Lack of trust
The reason that the financial markets are in such a mess is because no one trusts anyone. Instead, investing with Wall Street right now is like buying a pig in a poke. You have no idea what the true value of your purchase is.
Wall Street, including the rating agencies, needs to regain the trust of investors, and a great place to start would be with board and senior management compensation packages.
There is no way stockholders should allow boards to create compensation packages that are not in line with executive performance. How is it, for example, that the former CEOs of Merrill Lynch and Countrywide Mortgage can run their companies into the ground and still walk away with hundreds of millions of dollars in, what in essence, is shareholder money.
Let’s change it
The often touted rationale for such obscene payouts is “That’s the way the system works.” Well, WE are the system. Let’s change it.
It will take a while for Wall Street to regain the trust of investors. Which is why I also tell my clients, it’s a lot easier—and cheaper—to maintain a healthy brand by living up to what you say about your company than to try to rehabilitate one that has been tarnished, or worse. I think recent history has proven my point.
Am I angry? You’re darn tootin’. And you should be, too. As stockholders, let’s start holding corporate boards and senior management strictly accountable for their actions.
Let’s not take any more bull!