Congress Grills Financial-Sector CEOs over Pay Packages
Mar 10th, 2008 • Posted in: NewsLawmakers wonder how they could make millions when their companies lost billions
WASHINGTON
The ethics of alleged excess in the business world played out in a hearing before the U.S. Congress last week, with Wall Street executives defending their whopping compensation packages while lawmakers faulted them for losing billions for their shareholders and employees.
Bloomberg reports that Countrywide Financial Corp. chairman Angelo Mozilo, former Merrill Lynch head Stan O’Neal, and former Citigroup CEO Charles Prince appeared before a House Oversight and Government Reform Committee hearing to say that their compensation packages were justified.
According to Forbes, the three were collectively paid $460 million over five years, as calculated by the committee. During the same period their companies lost more than $20 billion after the subprime mortgage industry imploded.
“The pay they received from their companies and their stock sales was extraordinary,” charged committee chair Henry Waxman (D-Calif), according to a report from MarketWatch. “Any reasonable relation between their compensation and the interests of their shareholders appears to have broken down.”
Mozilo admitted that he fared well in the agreement to sell his failing mortgage firm to Bank of America, but insisted that reports about his compensation were “grossly exaggerated,” according to MarketWatch. O’Neal said his compensation was determined through “a rigorous and independent process” and was in line with other pay packages in the financial services industry. Prince said his compensation was in line with his company’s performance, increasing only when Merrill Lynch performed well.
At the core of the debate, according to an analysis from BusinessWeek, is the underlying allegation that a cozy relationship between CEOs and boards of directors has allowed pay to skyrocket without adequate grounding in results.
“I get the feeling, it’s you scratch my back, I’ll scratch your back,” said committee member Rep. Edolphus Towns (D-N.Y.), according to BusinessWeek.
Sources: Bloomberg, Mar. 7 — MarketWatch, Mar. 7 — BusinessWeek, Mar. 7 — Forbes, Mar. 6.
For more information, see: Related Newsline story, Nov. 5, 2007 — Related Newsline story, June 18, 2007 — Related Newsline story, May 29, 2007 — Related Newsline story, Mar. 12, 2007 — Related Newsline story, Jan. 16, 2007.
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