Countrywide’s CEO Angelo Mozilo forfeited a severance pay of $37.5 million and an annual $400,000 he was to be paid as a consultant post-retirement, according to Yahoo News today. He will also forfeit post-retirement perks such as the use of a private airplane. He will, however, retain retirement benefits and deferred compensation he has already earned. sounds fair enough?
Not quite. What about a clawback?
For those who don’t know what I am talking about, clawback is when a company takes back the commission paid to a sales agent, should the customer cancel the transaction within x number of months. This is deducted from current earned income.
What is good enough for the bottom of the heap should be good enough for those at the top, right? Shouldn’t rules apply to those who make them or at least, signed them off? After all, these clawbacks reduced sales costs and added back to the bottom line. I am not sure if Countrywide practises clawback, but perhaps it’s time this was introduced for CEO’s of large corporations.
CEO’s should be held accountable for bad decisions and not just generously rewarded for good ones.
“But he lost his job.” you may say.
True, though I wouldn’t mind losing my job if I carried away millions in my pension and retirement plan, deferred compensation and stock options.
Which will not be the case for the majority of employees who risk losing their jobs should there be a future company re-organisation. What about loses sustained by shareholders of Countrywide and any fund that invested in Countrywide, including pension funds. Hey, you could be getting a smaller return on your pension fund because Mr Mozilo made a blunder. So why should you lose and he doesn’t?
Think about it.
Clawbacks should extend back a few years for CEO’s because there’s time lag between a bad corporate strategic decision and the end result, for example, much of the current batch of bad debts are on subprime mortgages initiated three years ago. Since performance bonus is a factor of company revenue, clawback should be a negative factor of company revenue dating back x number of years. A clawback for Mr. Mozillo should add quite a few dollars back to Countrywide’s bottom line, benefiting those who trusted in his decisions – his employees and shareholders.
Tags: Angelo Mozilo, Countrywide
