You might think giving up $37.5 million in pay would win a businessman a little favor from the media. As far as CNN’s “American Morning” goes – not this time.
Countrywide Financial’s Angelo Mozilo is stepping down as the beleaguered mortgage lender’s CEO. Mozilo is giving up $37.5 million in severance pay because he said he felt it was the “right thing to do.”
But “American Morning” hosts didn’t see it as such. Mozilo is projected by CNN to get $40 million in compensation upon his departure – a deal agreed to by a board of directors elected by shareholders. The deal was agreed to long ago.
The media have consistently harped on this issue – what they refer to as “golden parachutes,” or how ABC “World News” anchor Charles Gibson referred to it on Jan. 3, 2007: “CEO compensation appears to be out of control.”
“It’s another disconnect with Main Street,” “American Morning” anchor Kiran Chetry said Jan. 28, 2008. “Because most people don't get rewarded when things go wrong at their job, and this is what we see with these CEOs.”
“Over and over and over again,” CNN’s personal finance editor Gerri Willis said.
But it isn’t quite as simple as Chetry stated. Mozilo co-founded Countrywide (NYSE: CFC) 40 years ago and grew it to the nation’s largest mortgage lender. On January 11, Bank of America Corp. (NYSE: BAC) announced it agreed to acquire Countrywide for roughly $4 billion in stock and Mozilo was to step down as part of the deal.
Willis also echoed Chetry’s sentiment about CEO pay and used other CEOs as examples. However it wasn’t clear what Willis and Chetry thought these CEOs should do with compensation they rightfully earned.
“[L]et’s take a look at other CEOs, as a matter of fact, who have gone through the same thing,” Willis said. “Poor performance, they get rewarded. They forego severance. People like Stanley O'Neal who ran Merrill Lynch (NYSE: MER) walks away with $161.5 million. Charles Prince, similar story here, Citigroup (NYSE: C) taking big losses – he walks away with $29.5 million. All three of these fellows forego severance, but still walk away with lots of money and I think it’s a big question for folks out there – pay for performance? Maybe not.”
“Yeah, it doesn’t seem fair,” Chetry added.
As Washington Post columnist Allan Sloan pointed out when Home Depot CEO Bob Nardelli was fired early in 2007, “The time to have the debate over CEO compensation isn't when the CEO is fired. It's when he’s hired.” That’s a point too often missed when the media exhibit consternation over previously negotiated pay packages.
“Maybe someone will learn something from the Nardelli fiasco and companies will be more careful about what they agree to pay newly hired outsider CEOs,” Sloan wrote. “But I'll bet that when the cycle turns, companies will bid up the market for star CEOs again.”
Mozilo has taken a lot of heat from the media in recent months. In October, Mozilo received criticism from the media for deciding to sell some of the stock he owned in Countrywide, part of a prearranged measure known as a 10b5-1 trading plan.