Countrywide Financial Corp. CEO Angelo Mozilo, under fire over the size of his potential payout from the proposed sale of his troubled mortgage company, says he is forfeiting some $37.5 million in severance pay, fees and perks he was scheduled to receive upon his retirement.
Mozilo, however, will still retain retirement benefits and deferred compensation that he has already earned, Countrywide said in a statement being released Monday.
In addition to $36.4 million cash severance payments, Mozilo also walked away from $400,000 per year he was to be paid under an agreement to serve as a consultant to the company following his retirement, and perks including the use of a private airplane, the company said.
“I believe this decision is the right thing to do as Countrywide works toward the successful completion of the merger with Bank of America,” Mozilo said in the prepared statement.
Damon Silvers, associate general counsel of the AFL-CIO, which operates a Web site that tracks executive pay, said that by giving up his severance pay Mozilo “seems to recognize that there’s something wrong with this picture.”
“It would be best if Countrywide and Bank of America froze all of his compensation until a thorough inquiry could be completed as to exactly what happened at Countrywide,” Silvers said, referring to allegations raised in some shareholder lawsuits filed last year that the company failed to warn investors about the depth of its financial troubles.
Calabasas-based Countrywide agreed earlier this month be acquired by Bank of America Corp. for $4.1 billion in stock.
The spread between Countrywide’s stock price and the value of Bank of America’s offer has remained unusually large, a reflection some investors see a significant risk that Bank of America may turn its back on the deal or press for a lower price.
Countrywide shares closed at $6.02 on Friday, 19.5 percent below what each share would be worth in Bank of America stock if the deal was closed based on the bank’s $39.48 closing share price Friday.
Bank of America has maintained its intent to acquire Countrywide.
Mozilo is not slated to receive any cash payments tied to the completion of the acquisition, Countrywide noted.
The chief executive has come under criticism since the deal was announced and media reports suggested he stood to receive a multimillion-dollar payout when he leaves the company.
Mozilo had been in line to receive a package, including his retirement pay and stock holdings, of nearly $66 million, according to estimates by The Hay Group, a compensation consulting company. Other estimates have suggested Mozilo’s payout could exceed $110 million.
Under his employment agreement, Mozilo was entitled to a severance cash payment equal to three times his annual salary of $1.9 million, and three times his incentive cash bonus for the year preceding a change in the company’s ownership or the average of two years’ bonuses.
The size of his bonus depends on how well the company performs. His 2007 employment agreement sets a target of $4 million for his annual incentive compensation bonus and a cap of $10 million.
Now, he’ll leave with a pension plan and supplemental executive retirement plan that totaled $23.8 million as of December 2006, according to the most recent proxy statement the company filed with the Securities and Exchange Commission.
Mozilo also accrued about $20.6 million in deferred compensation, according to the filing.
The executive has sold shares of the company’s stock since last year but still has shares worth around $5.8 million.
Mozilo’s decision to give up some of his pay comes amid increasing scrutiny over the size of pay packages for CEOs at some of the nation’s largest financial institutions, many of which have sustained heavy losses during the mortgage market’s downfall.
He is among several banking industry executives who have been asked to appear next month before the House Oversight and Government Reform Committee for a hearing to examine whether their compensation and severance packages are justified.
Mozilo’s stock trades have also drawn negative attention.
He’s been criticized for cashing in company stock options by switching his trading plans as the mortgage industry’s woes multiplied last year. Some shareholders have called for his removal.
The SEC launched an informal inquiry last fall into his sales of Countrywide stock.
Mozilo has denied making any trading decisions based on material nonpublic information.
Countrywide rose to become the nation’s largest mortgage lender but has been struggling since last year amid rising mortgage defaults, particularly subprime loans to borrowers with questionable credit histories.
The company, which posted a $1.2 billion loss in the third quarter ended Sept. 30, is due to report fourth-quarter and 2007 financial results Tuesday.