Three CEOs who made millions of dollars off the housing market -- even as homeowners and their companies started to suffer -- are expected to testify before Congress Friday about why they deserved such large compensation packages.
Countrywide Financial Corp. chairman and chief executive officer Angelo Mozilo, former Merrill Lynch CEO E. Stanley O'Neal and Charles Prince, former chairman and CEO of Citigroup, have all been asked to tell Congress whether they believe their pay was justified.
As CEO of Countrywide, the nation's largest lender, he stands to make millions if Bank of America's proposed $4 billion acquisition of his company goes through.
Facing mounting public opposition, Mozilo has already said that he would give up $37.5 million of severance pay, fees and benefits linked to his expected departure after the Bank of America deal closes. He also gave up some other benefits, such as use of the company's aircraft.
But he still won't leave empty-handed. Separate from his severance package, Mozilo will still keep various retirement benefits and deferred compensation already earned. Those add up to about $44 million.
And there is more.
Mozilo sold more than $127 million in stock options early on in 2007. Those sales came before he announced a $388 million write-down on profits and Countrywide's growing problems became apparent. As the company's troubles continued, Mozilo kept selling shares, cashing out an additional $30 million in options.
Now Congress wants to know whether he deserves such payouts, especially given that thousands of Americans have lost their homes and his company's stock has plunged, losing more than 78 percent of its value in 2007.
As the mortgage market has collapsed, Countrywide has foreclosed on 90,000 loans, has laid off more than 11,400 people and has reported a loss of $704 million in 2007, its first annual loss in more than 30 years.
"According to recent press reports, if Bank of America completes its proposed purchase of Countrywide Financial, you stand to collect tens of millions of dollars in severance payments and other compensation," Rep. Henry Waxman, D-Calif., chairman of the House Committee on Oversight and Government Reform, wrote to Mozilo when asking him to testify.
"I request that you be prepared to provide your perspective on this reported pay package," Waxman continued. "You should plan to address how it aligns with the interests of Countrywide's shareholders and whether this level of compensation is justified in light of your company's recent performance and its role in the national mortgage crisis."
But Congress isn't just asking the CEOs about their big compensation packages. Waxman has asked some of the people who approved these payouts to testify at the hearing, scheduled for 10 a.m. Friday.
In a letter to John Finnegan, chairman of the compensation committee at Merrill Lynch, Waxman told Finnegan that he was being invited to testify because he is the "individual most familiar with the compensation arrangements for former CEO Stanley O'Neal."
"You should plan to address how Mr. O'Neal's compensation was determined and on what basis the Merrill Lynch board of directors decided to approve his pay package," Waxman wrote.
Nell Minow, editor and co-founder of The Corporate Library, which tracks executive compensation, said that people don't mind executives making a lot of money when the company and employees are doing well.