Stockholders of publicly traded companies, as well as the general public, have recently become outraged with executive compensation and their hefty bonuses, especially in light of the mounting losses at some companies. It seems that no matter what happens or what they do, executives somehow always win. They win big during their employment, and sometimes even more as they retire. With all that money, you'd think that haggling over some perks in their package would be beneath them . . . but it isn't.
The recent outrageous perk award goes to Continental Airlines (NYSE: CAL) CFO Jeffrey Misner who asked for and was granted a free lifetime parking spot at Jacksonville International Airport. As long as the 54-year-old retiree lives within 200 miles of Jacksonville Airport, and providing Continental has operations at the airport, Misner will have a free parking place. Of course, that's just a perk that goes with a $2,997,000 retirement pay.
At the beginning of the year, many were shocked to hear that Countrywide Financial Corp. -- the poster child of the subprime mortgage meltdown, which has been bought by Bank of America (NYSE: BAC) -- CEO Angelo Mozilo was going to receive a $36.4 million cash severance payments, $400,000 per year for consulting services, and perks including the use of a private airplane. He walked away from most of these after a public outcry. Don't feel bad though, he still left with at least $23.8 million.
It just doesn't cease to amaze me how some people have the nerve to ask for certain perks in addition to their very fine salaries and severance pays. Here are some more examples:
In the days leading up to its acquisition by Bank of America (NYSE: BAC), Countrywide Financial (NYSE: CFC) founder and chief value destroyer Angelo Mozilo is getting emotional. Business Week reports that the man whose tan makes George Hamilton look like Casper "choked up" at the company's annual meeting to approve the deal. In an emotional speech, Mozilo described his love of the organization he'd built and described his tears as a "drawback of being Italian."
Let's see: Mozilo sold hundreds of millions of dollar in stock at several times the current price, and will now walk away from battered shareholders with a bloated net worth resulting from horrific corporate governance, leaving Bank of America to deal with the shareholder lawsuits and attorneys general investigations into the company's practices.
Remember Tammy Faye's tearful interviews after her televangelist collapsed amid revelations of extramarital affairs and air-conditioned doghouses? It might not be quite as pathetic, but Mozilo is one of the few people who can give the late Ms. Faye a run for her money in the unsympathetic display of emotion department.
I somehow doubt that shareholders were moved by Mozilo's speech, which was delivered in a shareholder meeting free of a question and answer session, marked by an overwhelming security presence reflecting the number of people who hate Mr. Mozilo.
TheStreet.com's Jim Cramer says the acquired Bear Stearns portfolio is worth even less than he thought.
How bad was that Bear Stearns portfolio? I am beginning to believe that JPMorgan's (NYSE: JPM) (Cramer's Take) buy of Bear is looking like a big mistake. It can only be justified by what might have been an even bigger problem for JPM -- the collapse of the trades that Bear made, which were being processed by JPM's clearing.
We are now beginning to get a real sense of the worthlessness of the mortgage portfolios. Not that we got any help from the SEC, which has taken a "we don't care what's in the mortgages as long as you tell us you have mortgages" attitude. That's been worthless for investors, and maybe even for JPMorgan.
The losses now exceed $400 billion, according to my modeling (if you simply assumed that 50% of the exotic mortgages that were issued from 2005 to 2007 eventually went into default). That's amazing, but it looks like I dramatically underestimated the losses. UNDERESTIMATED!
The most egregious issuers of these exotic mortgages were Bear, Merrill Lynch (NYSE: MER) (Cramer's Take) and Lehman Brothers (NYSE: LEH) (Cramer's Take). I believe that JPM has taken in a huge number of uninsurable, non-hedgeable mortgage instruments that are a pure write-off. And that means they are probably underwater on everything they took in.
Almost everyone believes that Countrywide Financial (NYSE: CFC) CEO Angelo Mozilo is a thug. But, it turns out he is a smart one. Some fairly powerful people got special loans from his company. They were often people Mozilo needed as pals.
According to The Wall Street Journal (subscription required), "These borrowers, known internally as 'friends of Angelo' or FoA, include two former CEOs of Fannie Mae, the biggest buyer of Countrywide's mortgages."
Two of the people involved were James Johnson, who does some work for Barack Obama, and Franklin Raines, who had some scandal problems before he left Fannie Mae (NYSE: FNM).
Since Countrywide had business dealings with Fannie Mae, the whole deal looks a bit tawdry.
No one knows whether these loans will cause legal problems for any of the parties involved. But, it does, once again, raise the question of the wisdom of Bank of America (NYSE: BAC) buying a company with such an ugly past and so many chapters of less-than-ethical behavior.
Perhaps no one cares about the ethics part if there is money to be made.
Douglas A. McIntyre is an editor at 247wallst.com.
With Jose Canseco firmly established as the least likable foreclosure victim, Ed McMahon might be the most sympathetic of the celebrity foreclosure candidates. The Wall Street Journalreports (subscription required) that long-time Johnny Carson straight man Ed McMahon "faces the possible loss of his Beverly Hills home to a foreclosure action initiated by a unit of Countrywide Financial Corp. (NYSE: CFC)."
As of February 28th, McMahon was $644,000 in arrears on a $4.8 million loan backed by the home. The six-bedroom house has been on the market for 2 years but the recent price reduction hasn't attracted a buyer.
Just when you thought Countrywide couldn't sully its reputation any further, the company might take Ed McMahon's house. And it gets worse. According to his spokesman, the 85-year old hasn't been able to work because he broke his neck in a fall 18 months ago.
What's next? CEO Angelo Mozilo accidentally sending a rude emai to a borrower who had the nerve to contact him in search of help? Oh wait, he already did that.
Not only is Countrywide Financial (NYSE: CFC) CEO Angelo Mozilo horrifically bad at creating (or even retaining) value for shareholders, but he's also not so good at managing email.
A Countrywide customer emailed Mozilo asking the company to modify the terms on his adjustable rate mortgage. The email was sent to 16 Countrywide employees, a common practice in the current market environment.
Annoyed by the email, Mozilo did his best Marie Antoinette impersonation:
"This is unbelievable. Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the Internet. Disgusting."
Analysts surveyed by Thomson Financial expect Countrywide Financial (NYSE: CFC) to post a much smaller profit for the first quarter, while Archer Daniels Midland (NYSE: ADM) is expected to report a profit gain. Both companies are scheduled to report results Tuesday morning.
Countrywide Financial is expected to earn two cents per share, which is down 97% from the same period in 2007 when it earned 72 cents per share, but that swings from a loss of 79 cents per share in the most recent quarter. However, the company tended to fall short of earnings estimates even before the credit crunch set in; that fourth-quarter loss of 79 missed estimates by 163%.
Formerly one of the top residential mortgage lenders, California-based Countrywide Financial is being bought out by Bank of America (NYSE: BAC). In the past year, Countrywide's revenues were $24 billion, and its net income is in the red to the tune of $703.5 million. Not surprisingly, the consensus recommendation of analysts remains to hold CFC.
The stock has fallen 84.9% in the past year and closed Monday at $5.83.
Countrywide Financial's (NYSE: CFC) corporate governance satire worthy of Gilbert & Sullivan continues with the release of the company's proxy statement.
CEO Angelo Mozilo's pay package dropped 79% -- to $10.8 million. Worse, president and COO David Sambol and managing director Andrew Gissinger III did not even come close to meeting the company's insider stock ownership guidelines -- which worked out well for them given the company's precipitous decline in value.
Just for laughs, here's an excerpt from the company's executive pay philosophy pulled directly from the proxy statement:
Pay for Performance. Our compensation programs are intended to motivate our named executive officers to achieve a superior level of performance in the diversified financial services industry. The amount of compensation for each named executive officer is intended to reflect the executive's experience, his or her individual performance and the performance of the Company. Several of our compensation programs are expressly tied to performance of the Company or the named executive officer, including our annual incentive awards program and our equity awards program. In general, our compensation is heavily weighted toward performance-based pay, and we seek to balance incentives for both short-term and long-term performance.
Here's my question. If you're a Countrywide director reading this, feel free to respond in the comment section: When you're stock declines from over $40 to under $10, how can your CEO earn $10.8 million under a pay-for-performance philosophy?
Perhaps Countrywide has a sense of humor, and the description of executive pay was meant to be ironic. But the company's shareholders probably aren't laughing.
Countrywide (NYSE: CFC) CEO Angelo Mozilo, perhaps the most reviled executive in corporate America, will get $10 million as part of a Bank of America (NYSE: BAC) takeover of the mortgage broker. Investors and members of Congress are incensed. The "bonus" is described in SEC filing as "performance based." Countrywide shares are down from $42.24 to $5.63 over the past year.
One powerful senator may go after the payment. "It's perverse for Bank of America to reward the principal architects of the bad business practices that caused this housing crisis,'' said Sen. Charles Schumer, D-NY, said in a statement, according to the AP. Perhaps shareholders will get lucky and Schumer will fight the pay-out of the money.
It is a shame that Bank of America would hurt its own reputation by doing this. Countrywide was available for sale because it was in such deep trouble. BAC did not need to "pay off" Mozilo to get a deal done.
Douglas A. McIntyre is an editor at 247wallst.com.
MOST NOTEWORTHY: Countrywide Financial, AstraZeneca, Massey Energy and International Coal were today's noteworthy upgrades:
Wachovia upgraded Countrywide (NYSE: CFC) to Market Perform from Underperform, as they do not expect any other bidders to emerge and for the acquisition by Bank of America (NYSE: BAC) to close.
HSBC upgraded AstraZeneca (NYSE: AZN) to Overweight from Neutral on valuation and their belief that an agreement with Ranbaxy on Nexium is possible.
Massey Energy (NYSE: MEE) and International Coal (NYSE: ICO) were upgraded to Neutral from Underweight at JP Morgan citing higher coal price forecasts.
The FBI is probing whether Countrywide Financial (NYSE: CFC) committed securities fraud by making false statements about the mortgage bank's deteriorating financial position.
The Wall Street Journal (subscription required) reports that a "potential issue facing the company is whether it has been candid in its accounting for losses. People familiar with the matter said that Countrywide's losses may be several times greater than it has disclosed."
Aside from the potential civil and criminal issues at stake, the investigation could kill the takeover of Countrywide by Bank of America (NYSE: BAC). It is not clear whether the mortgage company can make it as an independent operation if the big bank withdraws it offer. If auditors and the government determine that CFC losses are much greater than represented, it might drive the mortgage firm into insolvency.
The Bank of America deal is probably the only way that Countrywide shareholders can get any money for their shares. The company's stock has dropped from a 52-week high of $42.24 to just above $5, which is not much above its 52-week low.
The news reports of the FBI probe is likely to push shares lower. If new, significant losses have to be reported, the price of CFC's stock may go to zero.
Douglas A. McIntyre is an editor at 247wallst.com.
It's all very confusing. SRM Capital Management's Jonathan Wood has blastedBank of America's (NYSE: BAC) deal to acquire Countrywide Financial (NYSE: CFC) as being grossly inadequate. Legg Mason Value Trust's legendary manager Bill Miller agrees.
And yet the stock isn't doing anything to suggest a better deal is coming. In fact, Wall Street has serious questions about whether the deal will close at all. With credit market worries showing few signs of subsiding, Countrywide shares are trading at discount of more than 20% to the value of the deal -- an unusually large arbitrage spread indicating that investors have their doubts about the deal's future.
Over on SeekingAlpha, Richard Shinnick wonders why Bank of America is doing this deal: "Why are you saving Countrywide? Why take this risk? You can build your own national mortgage network! In fact, you already have one! Why do you need this? What are you thinking?"
I agree, and also question the value of Countrywide's national mortgage network. The company has spent nearly 40 years building a strong network and brand, but you have to think that, financial woes aside, the hugely negative press attention has hurt the company's image. I would argue that the Countrywide name has such a negative connotation as to be worthless. As Warren Buffett has said, "It takes 20 years to build a reputation and 5 minutes to ruin it."
SRM Capital Management head Jonathan Wood has been slamming Bank of America (NYSE: BAC)'s deal to acquire Countrywide Financial (NYSE: CFC) for more than a month now, but with shares of the target company still trading at nearly a $2 discount to the buyout price, investors appear too skeptical that Wood will make any progress. Analysts at Friedman Billings Ramsey and Stifel Nicolaus have suggested [subscription required] that if there is any revision in the deal's price, it would likely be a downward move.
The crux of Mr. Wood's argument seems to be that Bank of America "should pay a price closer to Countrywide's book value, currently $22 a share," according to the Wall Street Journal.
The problem is that Countrywide's book value is overstated and will have to weather future writedowns. It isn't like Countrywide is sitting on a huge cash pile. In addition, the company has tons of future liabilities: shareholder lawsuits, investigations, even exceptionally rare lawsuits filed by bankruptcy trustees accusing the company of "sustained bad faith."
Countrywide's struggles have been front-page news for over a year -- Bank of America hardly snuck in and negotiated a back-room with an unknown entity. Wood can complain all he wants but I don't see anyone stepping forward with a better offer.
Stockholders of publicly traded companies, as well as the general public, have recently become outraged with executive compensation and their hefty bonuses, especially in light of the mounting losses at some companies. It seems that no matter what happens or what they do, executives somehow always win. They win big during their employment, and sometimes even more as they retire. With all that money, you'd think that haggling over some perks in their package would be beneath them . . . but it isn't.
In the days leading up to its acquisition by 
Here are some highlights from this past week's 
Countrywide Financial is expected to earn two cents per share, which is down 97% from the same period in 2007 when it earned 72 cents per share, but that swings from a loss of 79 cents per share in the most recent quarter. However, the company tended to 
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