US lawmakers confronted corporate executives on Friday on how they managed to take home hundreds of millions of dollars in compensation while their companies were taking a financial nosedive from the subprime mortgage crisis.
"It seems that CEOs hit the lottery when their companies collapse," House Oversight and Government Reform Committee Chairman Henry Waxman said at the opening of the hearing. "Any reasonable relation between their compensation and the interests of their shareholders appears to have broken down."
Appearing before the panel were Angelo Mozilo of Countrywide Financial Corp, the largest US mortgage lender; Stanley O'Neal, formerly of Merrill Lynch & Co; and Charles Prince, formerly of Citigroup Inc. All three companies have been major losers in the mortgage crisis.
Waxman said Mozilo received more than US$120 million in compensation and sales of Countrywide stock last year while that company recorded losses of US$1.6 billion. Merrill Lynch lost US$10 billion last year, but O'Neal got a US$161 million retirement package.
The House Government Reform Committee in December also looked at large, publicly traded companies that hire compensation consultants who receive millions of dollars from corporate executives whose compensation they were supposed to assess.
Republicans on the committee questioned the need for the hearing, saying it falls outside the panel's primary role of investigating waste, fraud and abuse in the federal government.
"The impact of corporate executive compensation is debatable," said Republican Tom Davis, the top Republican on the committee. "Fine, but that debate ... should not degenerate into a sanctimonious search for scapegoats."
According to the committee, Mozilo received US$250 million in compensation from Countrywide from 1998, when he became CEO, through the end of last year.
It said Countrywide announced a US$1.2 billion loss in the third quarter of last year and then lost another US$422 million in the fourth quarter. By the end of the year, the company's stock had fallen 80 percent from its five-year peak in February. During the same period, Mozilo received a US$1.9 million salary, US$20 million in stock awards contingent upon performance and sold US$121 million in stock.
O'Neal received a retirement package of US$161 million when he left Merrill Lynch last October. But the committee said that if the company had terminated O'Neal for cause rather than letting him retire, he would not have been entitled to US$131 million of that in unvested stock and options. The firm reported US$18 billion in writedowns related to subprime and other risky mortgages last year.
Similarly, Prince of Citigroup received a bonus of US$10.4 million for last year's performance and was allowed to retain almost US$28 million in unvested stock and stock options because Citigroup let him retire rather than terminating him for cause.
Mozilo, in his prepared remarks, told how he had started Countrywide in 1969, sitting in the kitchen of his small New York apartment.
He said his direct compensation and the value of his stock holdings declined substantially last year and he had not received, and will not receive, a bonus for last year and this year.
Mozilo also said he would give up some US$36.4 million in severance pay if Bank of America proceeds with plans to acquire Countrywide.
O'Neal disputed reports of his "so-called" severance package.
"I received no bonus for 2007, no severance pay, no `golden parachute.' The amount discussed in the press consisted mainly of deferred compensation, stock and options that I had earned during the years prior to 2007," he said.
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his