By John J. Sweeney
What happened to the corporate executives who encouraged the lending practices at the root of our home mortgage foreclosure crisis?
Many of them are taking home millions and walking away with impunity.
CEO pay has been a growing outrage. In 1980, CEOs of the large U.S. companies made 42 times the wages of the average worker. As you'll see in the AFL-CIO's revised Executive PayWatch website, by 2006, the gap had widened to more than 364 times.
Over the past several years, CEO pay has soared at companies such as Countrywide Financial and Washington Mutual—companies that played a key role in creating the mortgage mess that is turning the American Dream into a nightmare for millions of working people. Here are just two examples from Executive PayWatch.
- In 2004, Countrywide became the largest U.S. mortgage lender, in part by usingaggressive sales techniques, lowering lending standards and introducing exotic mortgages that allowed borrowers to qualify for larger loans.
In late 2006, CEO Angelo Mozilo and Countrywide reached a lucrative new employment agreement—a base salary of $1.9 million, a $4 million to $10 million incentive bonus, perks, fringes and $37.5 million in severance benefits.But when the company had to be sold at a fraction of its previous market capitalization, even Mozilo had to make some concessions, giving up his $37.5 million golden parachute.
Mozilo, however, will not be leaving Countrywide empty-handed.He is entitled to an enhanced supplemental executive retirement plan with a lump sum worth $22.4 million, a pension plan with a present value of $1.3 million and $20.6 million in deferred compensation. And although Countrywide shareholders have seen the value of their investment fall 85 percent since February 2007, Mozilo will also keep his $414 million in stock options that he exercised between 2004 and 2007 and receive $10 million in stock in Bank of America, which is taking over Countrywide this year.
- Washington Mutual, the nation’s largest savings and loan institution, was so badly burned by the mortgage meltdown that it needed a $7 billion infusion of capital from a private equity firm to stay independent.
Although the Seattle-based thrift may ultimately not survive, Kerry Killinger, its chief executive officer, will do just fine.The board approved a compensation structure shielding senior management from the impact of the mortgage crisis.
Killinger received more than $14 million in compensation in 2006. Although he refused a bonus in 2007 because of the company’s poor performance, the 2008 proxy reveals that Washington Mutual more than made up for that by giving Killinger a hefty grant of stock and options awards valued at close to $13 million. This was on top of a base salary of $1 million, proving that the alignment between pay and performance is completely broken.
Out-of-control CEO pay is a symptom of a disease that is sweeping America—the disease of greed that makes corporations and the rich richer by stomping out the middle class.
It disgusts me to see the heads of companies rewarded after causing so much pain and suffering—and in some cases destroying workers' investments and jobs by overseeing practices that drove their companies into the ground.
If it disgusts you, too, please do these three things:
- Visit the AFL-CIO Executive PayWatch site and learn more about CEO pay, how it relates to the mortgage crisis and what it means to you.
- Tell Congress to pass legislation to help millions of people who have been victims of deceptive lending practices and may lose their homes. This legislation must include:
- An immediate short-term moratorium on home foreclosures.
- Conversion of the low “teaser” interest rates on home mortgages to standard 30-year fixed mortgages.
- Chapter 13 bankruptcy expansion to enable homeowners to shield their primary residence from foreclosure.
- Urge your members of Congress to give shareholders a "say on pay," requiring publicly traded companies to submit executive pay plans to nonbinding shareholder votes each year.
