A union-affiliated pension plan is calling on Countrywide Financial Corp. to take the chairman's post away from Chief Executive Angelo Mozilo amid growing criticism of the company's management and a sharp decline in its stock price this year.
The American Federation of State, County and Municipal Employees sent a six-page letter to the Calabasas-based lender's board late Thursday, citing a long list of shareholder grievances and asking that the board replace Mozilo with someone who is not an executive of the company.
The letter also calls for adding two independent directors acceptable to major institutional shareholders to the board and for the replacement of the members of the board's compensation committee with people "untainted" by the panel's actions.
"Adding new independent directors is a way for stockholders to change an atmosphere that allows a dominant dual-role chairman and CEO to operate without appropriate checks and balances," wrote union President Gerald W. McEntee, who signed the letter in his role as chairman of the pension plan, which represents 1.4 million members and holds Countrywide stock.
"We are looking for structural changes," said Richard Ferlauto, director of pension and benefits policy at the Washington-based union. "The current arrangement has not served stockholders well."
Countrywide representatives did not return phone calls for comment.
The move by the union, which has previously protested Mozilo's pay, comes as Countrywide, the nation's largest mortgage lender, is struggling to deal with the effects of the housing downturn and a credit crunch stemming from the sub-prime mortgage meltdown.
The company's stock tumbled $1.28, or 7.8%, on Friday to $15.23, a four-year low, on a day when the Standard & Poor's 500 index fell 2.6%. Countrywide shares have lost 64% this year.
The Securities and Exchange Commission is said to be informally investigating sales of Countrywide stock by Mozilo, who ramped up his selling of shares late last year before the stock began its decline in the spring. A key Senate leader asked Thursday for the probe to be expanded to include other Countrywide executives who he said might have participated in inappropriate trading or facilitated Mozilo's trades.
Also this week the company announced it would take a $125-million-to-$150-million hit to earnings this year to pay for a corporate restructuring plan that would jettison some 12,000 employees.
Dozens of shareholders have also leveled suits against the company, asserting that it had misrepresented its financial status.
A study by Corporate Library, a research firm specializing in executive compensation and corporate governance, concluded that the company's stock-option granting practices were suspect. An economist who examined Countrywide's option grants said there was a 1-in-978 chance that they could have been as lucrative as they turned out to be merely by chance.
Many of the union's complaints center on Mozilo's pay, which it calls lavish and says can't be justified by the company's performance. Union President McEntee's letter also cites the company's payment of Mozilo's country-club membership fees in Thousand Oaks, Palm Springs and Gainesville, Va.
"We fail to see how this adds to stockholder value," McEntee wrote.