At the hearing titled, “Executive Compensation II: CEO Pay and the Mortgage Crisis”, the Oversight Committee reviewed information relating to the salary, stock, retirement, and severance packages of Mozilo, O’Neal, and Prince – all who were deeply involved in the mortgage crisis.

The Oversight Committee wanted to know how these compensation packages were determined and on what basis they were approved.  Specifically, the Oversight Committee wanted to know why these executives received millions of dollars when their companies failed to perform.

In an opening statement, Oversight Committee Chairman Henry A. Waxman said, “There seem to be two different economic realities operating in our country today. And the rules of compensation in one world are completely different from those in the other. Most Americans live in a world where economic security is precarious and there are real economic consequences for failure. But our nation’s top executives seem to live by a different set of rules.“

Countrywide, Merrill Lynch, and Citigroup all suffered huge losses last year.  Countrywide lost $1.6 billion while both Merrill Lynch and Citigroup lost $10 billion.  The stocks of all three companies plummeted.   Despite these gigantic losses, Mozilo, O’Neal, and Prince profited greatly.

O’Neal and Prince have resigned and Mozilo is expected to also resign if Bank of America buys Countrywide.  Waxman stated that O’Neal walked away with a $161 million retirement package; Prince got a $10 million bonus, $28 million in unvested stock options, and $1.5 million in annual perquisites; while Mozilo’s total compensation was over $120 million.

“I think there’s merit to pay for performance,” said Waxman.  “But it seems like CEOs hit the lottery even when their companies collapse.  Any reasonable relation between their compensation and the interests of their shareholders appears to have broken down. As the financial columnist Allan Sloan put it - even if you flame out on Wall Street, you still get to keep the money.”

Mozilo, O’Neal, and Prince were all present at the hearing in addition to the chairs of the compensation committees at Countrywide, Merrill Lynch, and Citigroup.  The following witnesses testified:

• Dr. Susan M. Wachter, Richard B. Worley Professor of Financial Management, The Wharton School, University of Pennsylvania
• The Honorable William F. Galvin, Secretary of State, the Commonwealth of Massachusetts
• The Honorable Brenda L. Lawrence, Mayor, City of Southfield, MI
• Dr. Anthony Yezer, Professor of Economics, The George Washington University
• Nell Minow, Editor and Co-Founder, The Corporate Library
• Charles Prince, Former Chairman and CEO, Citigroup
• Richard D. Parsons, Chair, Personnel and Compensation Committee, Citigroup
• Stanley O'Neal, Former Chairman and CEO, Merrill Lynch
• John D. Finnegan, Chair, Management Development & Compensation Committee, Merrill Lynch
• Angelo R. Mozilo, Founder and CEO, Countrywide Financial Corporation
• Harley W. Snyder, Chair, Compensation Committee, Countrywide Financial Corporation

Mozilo, O’Neal, and Prince fired back during their testimony saying their compensation packages were deserved based on past performance and exaggerated by the media.  Mozilo said,” Today I remain one of the company’s largest individual shareholders, because I believe in Countrywide.  In short, as our company did well, I did well. But when the company last year experienced the unanticipated and unprecedented seizing-up of the capital and credit markets, we suffered a loss for the first time in 30 years. As a result, my direct compensation and obviously the value of my own Countrywide stock holdings declined substantially, which is as it should be. I have not received, and will not receive, a bonus for 2007 or 2008.”

“There have been reports that I stood to collect $115 million in severance,” Mozilo continued.  “While those numbers were grossly exaggerated, I have voluntarily elected to forego the specific severance payments that had been included in my contract in the event of a transaction like the one with Bank of America. I will give up approximately $36.4 million in severance payments, and an additional $1.1 million in future consulting fees and other perquisites, for a total amount foregone of approximately $37.5 million.”

In his testimony, Prince also said he received the bulk of his compensation in stock – so he was rewarded when Citigroup prospered, and suffered personal financial losses alongside the company.

“Citigroup executives are required to take and hold substantial portions of their annual compensation in stock awards,” explained Prince.  “The primary purpose in mind when we imposed this requirement was to tie our executives’ long-term personal financial interests with those of the company and its stockholders. Now well-recognized as a corporate compensation best practice, Citigroup has had this requirement in place for more than a decade.”

O’Neal’s remarks were consistent with his peers.  He said, “There has been some press about my so-called ‘severance package.’ These stories are inaccurate. The reality is that I received no severance package. I received no bonus for 2007, no severance pay, no ‘golden parachute.’ The amount discussed in the press consisted mainly of deferred compensation, stock and options that I had earned during the years prior to 2007, in part reaching back several years to 2000 and earlier. In fact, if I had received all of my compensation in cash during my tenure, I would have received no ‘payout’ at all upon retirement."

"By having given me a significant part of my compensation in stock and options, the Board ensured that my personal financial interest was closely aligned with the shareholders of the Company," continued O'Neal.  "If the shareholders did well, I would do well too. And to the extent that Merrill Lynch stock has decreased in value since my departure, so too has the value of the consideration I received. My interests and the interests of Merrill Lynch’s shareholders remain entirely aligned.”