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CEO gets retirement benefit without retiring

Countrywide promises Angelo Mozilo millions to make up for pension pay he'll be giving up.

October 25, 2006|Kathy M. Kristof | Times Staff Writer

By agreeing to stay at the helm of Countrywide Financial Corp., Chief Executive Angelo R. Mozilo will get an unusual sweetener: as much as $10 million to compensate him for the pension income he would have earned in retirement over the next three years, according to a regulatory filing Tuesday.

Patrick McGurn, executive vice president of Institutional Shareholder Services and a critic of rich executive pay plans, said he had never heard of such an arrangement in years of scrutinizing corporate proxy filings.

"This is the ultimate in CEO moxie -- a CEO demanding that in addition to being paid for his service, he gets reimbursed for the retirement income that he would have received if he were retired," McGurn said. "He made the decision to forgo retirement payments because he's being paid to work.... This borders on the ridiculous."

Countrywide officials declined to comment on the pay plan. But there were few complaints on Wall Street.

During an earnings conference call, analysts hailed Mozilo, 67, for creating a company that now has a shareholder value of more than $22 billion. Analyst Brandon Bond of TCW Group welcomed the "move to keep Angelo Mozilo involved." Shares of Calabasas-based Countrywide rose $2.12, or 6%, to $37.33, despite tepid growth in earnings that missed expectations.

Mozilo's pay emerged as an issue this year when the pension plan for the American Federation of State, County and Municipal Employees sponsored a resolution at Countrywide's annual meeting that would have given shareholders an advisory vote on executive pay.

The measure, which was narrowly voted down, was prompted by Mozilo's 2005 pay, which included $45.2 million in salary, bonus and the estimated value of stock options granted that year. Mozilo, who co-founded the lender in 1969, also earned $119 million in 2005 by exercising options granted in previous years.

"The company continues to be outrageous when it comes to giving away shareholders' money to Mozilo and they don't seem to get the message that shareholders have had enough," said Richard Ferlauto, director of pension and benefits policy for the government workers union, in response to Mozilo's $10-million retirement payment.

Ferlauto said the union would again sponsor a shareholder resolution for Countrywide's next annual meeting demanding that the company's stockholders be granted an advisory vote on pay packages.

He said Mozilo's employment agreement might fuel enough outrage to push the pay proposal over the top.

According to the terms of Mozilo's employment "extension agreement," he will receive base pay of at least $1.9 million each year for the next three years. In addition, he can earn a bonus of $4 million to $10 million annually, depending on the company's return on equity and net income.

And, he'll get stock or "stock appreciation rights" -- compensation tied to Countrywide's share price -- that under the contract should be worth $10 million when it is granted.

That means Mozilo could earn $22 million for running the company for the next year -- and that doesn't include the compensation for the forgone pension income. The actual amount won't be known until Countrywide files its proxy statement in the spring.

The $10 million Mozilo would get for not retiring would be paid over three years, and only $5 million is guaranteed. To get the full amount, Countrywide's shareholder return has to rank in the 50th percentile or above its peer group of lenders.

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