One of the things that has clearly outraged Americans everywhere is the disgusting spectacle of CEOs legally looting their companies with pay and pensions that are absolutely outrageous. For a long time, a collective Marie Antoinette cry from the CEO suites spilled out that, while a few CEOs pocket massive amounts of money, workers should just eat cake--if they can get it at a low enough price at Wal-Mart--rather than expect wages that keep pace with inflation, decent health care and pensions. Now, things may be shifting--just a tad.
Yesterday, Gretchen Morgenson had a good piece in The New York Times catching up on a story that I had followed for a couple of years that had even made my jaw drop (By the way, I often give a lot of grief to reporters working for traditional media outlets because of the poor job they do when writing about labor or economics but Morgenson is regularly an outstanding reporter). In November 2005, Delphi Corporation was in the process of filing for bankruptcy, having demanded from its union workers that they accept a wage cut that would drop their pay from $25 per hour to--get this--$9 an hour. The company had lost more than $6 billion over the previous seven quarters, wiping out a huge chunk of shareholder value.
So, having wiped out the value of the company and demanding that workers drop to wage levels that would put them in Wal-Mart pay territory, what did the top dogs do? They allocated, in the bankruptcy plan, $21.8 million for cash bonuses to executives during the first six months of bankruptcy, which would, then, be followed by payouts of an an additional $87.9 million for 486 U.S. executives who would, as Morgenson reported back then, "receive 30% to 250% of their salaries once Delphi emerges from bankruptcy."
Huh. Ain't America great? Well, some Americans in positions of power do care about greed gone wild. Morgenson's piece on Sunday reports on a hearing on the company's bankruptcy filing (it took this long to rattle through the legal system because of the United Auto Workers and CWA had challenged the bankruptcy plan):
During the hearing, Judge Drain, who spent roughly an hour on the terms of the payouts and the compensation consultant who devised them, said he would approve Delphi's bankruptcy exit plan only if the $87 million in incentive pay slated for management was reduced sharply, to $16.5 million. Delphi agreed to the cuts.Judge Drain's ruling is a service to every shareholder who feels ripped off by executives and the compensation consultants who serve them. His discussion of the packages brings a pragmatism to the topic of executive pay that is sorely lacking in corporate boardrooms. Let's hope it is also noted by the compensation committees of public companies' boards...
[snip]
IT was not that the executives operating Delphi in Chapter 11, led by the chief executive, Robert S. Miller, did not deserve an award, the judge said. Rather, it was the amount of the cash award and the matter of an "equivalence of sacrifice" that led Judge Drain to his conclusion.
So, this judge did a favor to the company's shareholders and its workers: he tried to leave a little money in the hands of the shareholders and the people who really make the company run.
I thought that this was probably an anomaly. Well, turns out that we've got a trend--maybe. The Wall Street Journal reports today on its website that:
Angelo Mozilo, chairman and chief executive officer of Countrywide Financial Corp., is giving up $37.5 million of severance pay, fees and benefits in the face of pressure from politicians who have berated him for continuing to collect large sums from the mortgage lender even as millions of Americans face the threat of foreclosure.
In a statement released late last night, Countrywide said the 69-year-old Mr. Mozilo will forfeit severance pay, fees and perks that he was to have received upon his retirement, according to the Associated Press. Mr. Mozilo is expected to step down when Bank of America Corp. completes its planned $4 billion acquisition of the Calabasas, Calif., mortgage lender. The sale is due to be completed in the third quarter, though some investors say it may fall through if Countrywide's business continues to deteriorate.
Don't feel to bad for Mozilo: he's not giving up retirement benefits and deferred compensation that he has already pocketed, which will give him many millions of dollars on top of the $414 million he salted away when he sold Countrywide socks from 2004 to 2007--at the very time that it was clear that we had a serious mortgage problem and people were going to face financial ruin.
Frankly, I think that Mozilo should go to jail. It's unlikely to happen. And the money leeches like Mozilo and Miller have socked away will allow them to live in leisure and opulence for the rest of their lives--while tens of thousands of others people face ruin because of their actions. But, it's nice to see that at least a couple of these creeps take a hit.