Countrywide’s CEO Will Walk Away With $110 Million

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Countrywide’s CEO Will Walk Away With $110 Million

By JLP | January 11, 2008

Countrywide (CFC) CEO, Angelo Mozillo, is going to walk away with a severance package of $110 million after the sale of his company to Bank of America (BAC) for $4 billion. At it’s peak in February 2007, Countrywide had a market value of nearly $26 billion.

Once again, a CEO gets a nice reward for crappy performance.

If Mozillo had any principals he’d say, “You know what, I don’t deserve this,” and give money back. I doubt that’s going to happen.

Topics: Business News |

Comments to “Countrywide’s CEO Will Walk Away With $110 Million”

morydd Says:
January 11th, 2008 at 1:24 pm

Let’s see… Maybe he could use that $110 million to pay of the balance on a thousand or so people who are being foreclosed on.

Ernesto Says:
January 11th, 2008 at 1:26 pm

There it is JPL, it’s that DCEO factor I talked about.

JLP Says:
January 11th, 2008 at 1:31 pm

morydd,

It’s not even the foreclosures that bother me since those people CHOSE to take out the loans in the first place. Rather, it’s the fact that shareholders in his firm took it on the chin, while he’ll walk away a very rich man.

JLP Says:
January 11th, 2008 at 1:31 pm

Ernesto,

You lost me.

Mrs. Micah Says:
January 11th, 2008 at 1:43 pm

I need to become a high-powered CEO. Granted I have no experience, but I’m liking a job where the worst they can do is fire me with millions and millions of dollars.

Where do I sign up?

Advanced Personal Finance » Blog Archive » BoA Buys Countrywide - You Get the Bill Says:
January 11th, 2008 at 2:34 pm

[...] As JLP at All Financial Matters reports here, Countrywide’s CEO will be paid $110M as a result of the sale. Here’s another CEO being rewarded for destroying his shareholders’ company. It’s a scene now so common that people don’t even react anymore. [...]

Heidi Says:
January 11th, 2008 at 3:15 pm

Just yesterday my work spouse and I were talking about the former Merrill Lynch CEO and the fact that they just announced a $15 billion (BILLION!)writedown - it won’t be effecting Stan O’Neal’s golden parachute either.

What a strange world we live in…

I’m with Mrs. M - where do I sign up? I know I could be at least that proficient at running a Fortune 500 firm into the ground.

trip Says:
January 11th, 2008 at 3:21 pm

August 8, 2006 in the WSJ on page C1 Mozilo was asked what is going to happen when the bulk of ARM’s start resetting, he said, “I’m not sure exactly what will happen then.”

IMHO he has been planning his exit (maybe not just like this but… ) for years now.

JLP Says:
January 11th, 2008 at 3:26 pm

Trip said:

“he said, ‘I’m not sure exactly what will happen then.’”

This coming out of the mouth of a CEO of a mortgage company! That’s pathetic.

JLP Says:
January 11th, 2008 at 3:29 pm

Heidi,

What’s a “work spouse?”

Fred Says:
January 11th, 2008 at 4:54 pm

“If Mozillo had any principals he’d say, ‘You know what, I don’t deserve this,’ and give money back.”

Seems to me that if he had any principles, he wouldn’t have gotten the company into such a mess in the first place (IOW, writing up all these borderline-predatory loans, with or without understanding their consequences).

Finance Matters Says:
January 11th, 2008 at 9:39 pm

It’s true that blame can be place on the borrowers, but I blame a lot on the lender. Lenders should always be required to do more research on the people they lend money to. Also, tighter restrictions should be made on loans especaially non-traditional loans. You should not be allowed to buy more house than you can afford!

CSalt Says:
January 11th, 2008 at 10:26 pm

Hey, the dude made a deal and he gets paid. It’s funny how we expect this guy to be honest or have principals - but someone (or some group) signed the other side of the contract. Capitalism works in funny ways sometimes. I don’t see how I can blame the dude for taking the cash. Evidently, this golden parachute or whatever was a part of his compensation package. Plus, he’ll eventually spend the 110 mil, and that money will work its way back into the economy. The money doesn’t “disappear” - it actually gets used for spending and investment.
CSalt

Mark Says:
January 11th, 2008 at 10:38 pm

It could be argued that shareholders, by investing in the stock and electing the board of directors, implicitly authorized Mr. Mozillo’s Golden Parachute and are therefore not blameless.

db Says:
January 12th, 2008 at 12:37 pm

Mark –

That’s the most ridiculous, corrupt thing I’ve ever heard.

There is a huge problem in this country (and it’s not new) — if we don’t expect our business leaders — including not just the management team but also the board of directors — to behave in a responsible manner, why should we expect anyone else to?

OK — so I can take the reasoning that the borrowers should take it on the chin for signing up for a ridiculous loan. Of course, in my own recent experience when I was shopping around for a mortgage I couldn’t find any lenders who were willing to discuss a fixed rate mortgage with me(which prompted me to choose to leave the real estate market alone), so I think a lot of people bought from the options they were given and didn’t think twice. I think this makes them a little stupid and I don’t think they should be bailed out, but I do have sympathy for them.

However, we discuss here in the pf blog world the concept of taking responsibility for your money. At the individual level, we know it doesn’t work so well if you try to conduct your personal business affairs in a shady manner.

Why should we accept that the management team of a business be held to any different standard? That they should be allowed to make shady — even unethical — choices that injure their customers AND their shareholders.

As a shareholder, I expect the business to turn a profit and increase the value of my shares. By giving them money, I have signaled only my belief that this is a company that can do that. But I still expect them to conduct business responsibly.

Most shareholders are too far removed from the company to really have a view into how the management team is running the business. We rely on the news, the stock performance and the financials to weigh whether the investment is working. Also, most shareholders really don’t participate in electing the board of directors (or if they do, it’s a rather blind vote).

If you ask me, the board of directors for Countrywide should all be forced to resign along with Mozilo. With no golden parachutes for any of them. Of course, I’m not a stockholder.

Kirk Says:
January 12th, 2008 at 1:48 pm

I agree that the board should also be ousted.

What bothers me about CEO severance packages is they don’t have any risk. The reward should equal the risk. Bill Gates became the richest man in the world with Microsoft, but he wouldn’t have received squat if it went belly up because he founded the company. He assumed the risk. He deserved the reward. The CEOs won’t lose any of their own funds if their company goes belly up. The only risk they face is the lost opportunity cost of taking over a different corporation.

Ernesto Says:
January 12th, 2008 at 2:06 pm

JLP,

Sorry, you ran a article last week about Countrywide where I commented:
“I was a CFS shareholder years ago when I was an admirer of their growth, service and dividends.
This changed when I was reading a quarterly earnings statement outlining how CEO Angelo Mozilo was forgoing retirement, but the board decided to give him his $9 Mill retirement package anyway and then voted him another $9M retirement package when he decided to retire again. This boosted his total comp package for 2005 to around $57 Million. Oh, and by the way we missed our quarterly earning expectation. Better luck next quarter.

This triggered what I call the DCOE factor: the Doushe Bag Chief Executive Officer. I sold the stock (for a decent profit) and haven’t looked at them since. ”

$57 Million in 2005 followed up by $100 Million in 2008 for running a respected company into the ground. Once a DCOE always a DCOE.

I think it’s impertive as investors to study corporate leaders. If one in enriching himself at the expence of shareholders or is in some competition to own the largest yacht, mansion, car collection..whatever, in the world, then running their business is not their top priority. Sell and find a better run company.

mybudget360 Says:
January 13th, 2008 at 11:58 pm

And it gets even better. BofA will be able to write off the losses from Countrywide and avoid paying taxes on some their federal and state taxes. So in essence, we are seeing a back door bailout because BofA which is very profitable will bring in a company with built in losses and use them to offset their earnings. Mozilo gets a nice severance package, BofA gets nice write offs, and we the taxpayers get to foot the bill. Works for me!

Lord Says:
January 14th, 2008 at 4:00 pm

He sold over $400 million in stock and options before this happened. He should have sold out when it was doing well.

Kitty Says:
January 14th, 2008 at 7:02 pm

Mrs Micah, when you figure out how to do it, would you share a secret? I’d love to do it too. I don’t know much about the business, but I am sure my business decisions would be at least as good.

I am curious as to how much Countrywide employees who’ll be layed off will get. Wanna bet nowhere near 110M? Most of Countrywide employees who will loose their jobs weren’t involved in loan business.

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Countrywide’s CEO Will Walk Away With $110 Million