Countrywide CEO Angelo Mozilo told a House committee this morning that his huge compensation reflected the performance of the mortgage giant. "In short, as our company did well, I did well," he said (here's a copy of his prepared remarks). The problem, of course, is that Mozilo continued to do well as Countrywide stock began to tank – thanks mainly to the stock options he had accumulated. From this morning's LAT story:
Mozilo made $48.1 million in salary, bonuses and stock-based pay in 2006, the most recent year available. As the mortgage industry swooned in late 2006 and 2007, he cashed out stock options valued at about $140 million. Countrywide's shareholders, meanwhile, have lost nearly $23 billion in equity since February 2007, when the Calabasas-based company's share price hit a $45.02 peak. On Thursday, the shares fell 50 cents to $5.20.
Mozilo points out that he wasn't some hired gun brought into an already established company, but rather one of the two guys who actually started the company. "We shared a dream to create the first national mortgage banking company focused on providing homeownership opportunities to all Americans, including families who had been largely left behind by traditional mortgage lenders," he said. "I raised the $100,000 I needed to help start the company by using all of my assets which amounted to $25,000 and borrowing the rest."
With respect to Countrywide’s compensation philosophy, the Board has adopted a compensation policy that aligns the interests of top executives with shareholders by making compensation largely performance based. That philosophy guided my compensation. From 1982 through April 2007, our stock price appreciated over 23,000%. As a result, earlier in this decade, I received substantial income from performance based bonuses earned under a formula based on earnings per share. This bonus formulation was approved on at least two separate occasions by the company’s stockholders. Over the years, a significant portion of my compensation was in the form of stock options rather than cash. As the stock appreciated, the value of my own holdings also increased in value.
What Mozilo fails to point out is that he controlled the board when it came to his compensation - and no worry about shareholder revolts either, because there were nowhere near enough votes to overturn a Mozilo-supported measure. Heads I win, tails you lose.