WASHINGTON - Wall Street executives defended their compensation against criticism from lawmakers, who faulted them for pocketing hundreds of millions of dollars while shareholders lost billions on subprime mortgages.
Countrywide Financial Corp. chief executive Angelo Mozilo, and former CEOs Charles Prince of Citigroup Inc. and Stan O'Neal of Merrill Lynch & Co., appearing yesterday at a House Oversight and Government Reform Committee hearing, said the pay packages justly reflected their performance.
Congress is scrutinizing executive compensation after the world's largest banks and securities firms reported $188 billion in losses linked to subprime mortgages since the start of 2007. Prince and O'Neal stepped down after reporting losses last year. Mozilo agreed in January to give up $37.5 million in connection with Bank of America Corp.'s proposed takeover of Countrywide.
"As our company did well, I did well," Mozilo said yesterday, noting Countrywide's stock price rose 23,000 percent from 1982 through April 2007. Since the company suffered its first loss in 30 years last year, "my direct compensation, and obviously the value of my own Countrywide stock holdings, declined substantially, which is as it should be."
Countrywide's board "adopted a compensation policy that aligns the interests of top executives with shareholders by making compensation largely performance based," Mozilo, 69, told the panel. He earned $121.7 million last year selling Countrywide shares.
"There seem to be two different economic realities," said Representative Henry Waxman, the California Democrat who heads the oversight panel. "Most Americans live in a world where economic security is precarious. But our nation's top executives seem to live by a separate set of rules."
O'Neal, 57, defended Merrill's pay practices. "The compensation of senior management at Merrill was determined through a rigorous and independent process, and consistent with pay levels in the industry," O'Neal said.
He noted that the company's revenue rose to $32.7 billion in 2006 from $18.3 billion in 2002. "As a result of the extraordinary growth at Merrill during my tenure as CEO, the board saw fit to increase my compensation each year."
O'Neal lost the confidence of investors and directors after delivering a $2.24 billion third-quarter loss last year. Merrill has said O'Neal's stock awards were granted before 2007, and he didn't get a bonus last year or severance.
Citigroup, the largest US bank by assets, "worked hard to align management's interests with the interests of shareholders," Prince said. Prince, 58, who left Citigroup in November, came under pressure after the bank reported $6.5 billion in write-downs and losses in the third quarter.
