Milk Your Money

Got Money? Milk the most from it…

  • Home
  • About Us
  • Advertise
  • Archives
  • Links

Subscribe via Email

Why Do CEO’s Fail and Receive Millions in Return?

Posted by Frank
March 8, 2008

Stumble it Digg it Add to Mixx! RSS del.icio.us Add to Technorati Favorites Leave a comment

Yesterday, top financial executives from the likes of Countrywide Financial and Citigroup, were asked by Congress to explain why they made so much when their companies and customers were hit with not only losses to their wallets but to their homes. It was quite certain from the start of this hearing that there just isn’t a good explanation for making millions when your company is losing billions. Countrywide Financial is considered one key reason why our economy is where it is. Countrywide is the biggest home lending institution and was considered an “innovator” with it’s sub-prime lending products like ARMS, which is now considered a bad word. Let’s take a look at what exactly these CEO’s make…

Countrywide Financial
Angelo R. Mozilo, Countrywide’s Financial Chief Executive, started the lending giant many years ago. Although he started the company and in my opinion has the right to make as much as he wishes, he gave up this right when he decided that his company should be publicly traded. When a company lets the public take ownership, they are essentially saying that everyone is a co-owner, thus, in my opinion gives the shareholders a right to approve executive pay packages. Mozilo led his company to billions of dollars in losses last year but walked away with over $120 million in compensation. This sounds ridiculous, but it is increasingly becoming more common.

Citigroup
Charles O. Prince is the former Citigroup Chief Executive that left the company last year with a $10 million bonus, $28 million in stock and options and $1.5 million in other perks. Keep in mind that while Prince is relaxing in his vacation home, shareholders are taking it on the chin, as Citigroups shares are down 58%! This is another classic case of an executive who made poor business decisions and is rewarded for leaving. Shareholders should be up in arms! Although some companies now allow shareholders to submit a vote dealing with CEO pay packages, it needs to become the norm. I understand the philosophy that high pay attracts the brightest and best, but there is a limit, and it has been reached.

How Is Pay Set?
Have you ever heard of executive compensation consultants? These consultants are hired by a company to come up with appropriate and competitive salaries for employees including CEOs. At the surface, this looks like a good idea, however, it exposes a major problem of conflict of interest. In many cases, like with Countrywide, Mozilo is hiring and paying a consultant to decide what his pay should be. If he doesn’t’ like the outcome he can fire the consultant and hire somebody else until he gets a figure he wants. In addition, these consultants do other work for the companies. This means that its is in the best interest of the consultant to decide the CEO and board members receive hefty pay packages, so that he can continue to get paid to do additional work with the company.

While I don’t have a problem with CEO’s making major dollars, because they deserve it for taking chances and making decisions that many of us would hate to be faced with. But when these CEO’s are making millions while their company they oversee and the customers they are dealing with are losing their homes, retirement savings, and lives, I do have a problem.  $



Related articles you might be interested in:
What is the First Time Home Buyers Tax Credit?
Second Chance at 2008 Stimulus Check
What Will I Receive in the New Stimulus Bill?
Why Didn’t I Receive My Economic Stimulus Check?
Still Time to Qualify for Saver’s Credit at Tax Time

Banking, Borrowing


Stumble it Digg it Add to Mixx! RSS del.icio.us Add to Technorati Favorites Leave a comment

If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader or email.

Comments

No comments yet.

Leave a comment

(required)

(required)


Search

Archives

  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009
  • July 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009
  • January 2009
  • December 2008
  • November 2008
  • October 2008
  • September 2008
  • August 2008
  • July 2008
  • June 2008
  • May 2008
  • April 2008
  • March 2008
  • February 2008

Categories

  • Aisle19
  • Annuities
  • ARS
  • auction rate securities
  • Bailout
  • Banking
  • Borrowing
  • Budgeting
  • coupon
  • Credit Cards
  • credit score
  • debt
  • DIY
  • Economy
  • Employment
  • entertainment
  • Fees
  • financial literacy
  • Frugal Things To Do In…
  • Gas
  • General
  • Getting Started
  • Income Replacement Funds
  • Insurance
  • Investing
  • Lunch
  • Mailbag
  • money
  • Rate Cuts
  • real estate
  • Rebates
  • reverse mortgage
  • Reviews
  • Saving
  • Scams
  • Shopping
  • stimulus
  • taxes
  • Uncategorized
  • windfall

27 Great Tips for Around the House

The 8 Worst Habits for Saving Money

Become a Millionaire in 30 Years with your Current Salary


Family Blog Builder

Milk Your Money @ Twitter

  • Tools

    • Become a Millionaire with the Following Saving Tactics
    • Broker Check
    • Guide to House Hunting
    • Light Bulb Comparisons
    • Loan Repayment Calculator
    • Low Interest Rate Credit Cards Guide
    • Monthly Budget
    • Mutual Fund Expense Analyzer
    • Savings Calculator
  • Tag Cloud

    401(k) ARMs Banking bills Borrowing budget Budgeting cars common sense compound interest credit credit card debt Credit Cards credit score debt DIY Economy entertainment expenses Fed Fees frugal Gas General groceries Insurance interest rates Investing IRA money mortgage real estate rebate recession retirement Saving savings scam Scams Shopping stimulus stocks student loans taxes windfall






Top 100 Blogs Award


Milk Your Money
  • Home
  • About Us
  • Advertise
  • Archives
  • Links


Copyright 2012 | Milk Your Money | All rights reserved

A World of Personal Finance Bloggers Personal  Blogs - Blog Catalog Blog Directory Add to Technorati Favorites Top Finance blogs See blogs and businesses for USA