Issues

Countrywide 2006

     RESOLVED, that stockholders of Countrywide Financial Corporation (“Countrywide”)  urge the board of directors to adopt a policy that Countrywide stockholders be given the opportunity at each annual meeting of stockholders to vote on an advisory resolution, to be proposed by Countrywide’s management, to approve the report of the Compensation Committee set forth in the proxy statement.  The policy should provide that appropriate disclosures will be made to ensure that stockholders fully understand that the vote is advisory; will not affect any person’s compensation; and will not affect the approval of any compensation-related proposal submitted for a vote of stockholders at the same or any other meeting of stockholders.

 

SUPPORTING STATEMENT

 

     In our view, senior executive compensation at Countrywide has been excessive in recent years.  In 2004, CEO Angelo Mozilo received a salary of $2,466,667—well over the threshold for deductibility of non-performance-related compensation—and an annual bonus of $17,273,290.  His bonus for 2003 was even larger, coming in at $19,890,455.  In each of 2002, 2003 and 2004, Mr. Mozilo was awarded at least 1.4 million stock options; the options he received in 2004 had a present value on the grant date of $29,806,000. 

     We believe that the current rules governing senior executive compensation do not give stockholders enough influence over pay practices.  In the United Kingdom, public companies allow stockholders to cast an advisory vote on the “directors remuneration report.” Such a vote isn’t binding, but allows stockholders a clear voice which could help reduce excessive pay.  U.S. stock exchange listing standards do require stockholder approval of equity-based compensation plans; those plans, however, set general parameters and accord the compensation committee substantial discretion in making awards and establishing performance thresholds for a particular year.  Stockholders do not have any mechanism for providing ongoing input on the application of those general standards to individual pay packages.  (See Lucian Bebchuk & Jesse Fried, Pay Without Performance 49 (2004)) 

     Similarly, performance criteria submitted for stockholder approval to allow a company to deduct compensation in excess of $1 million are also broad and do not constrain compensation committees in setting performance targets for particular executives.  Withholding votes from compensation committee members who are standing for reelection is a blunt instrument for registering dissatisfaction with the way in which the committee has administered compensation plans and policies in the previous year.

     Accordingly, we urge Countrywide’s board to allow stockholders to express their opinion about senior executive compensation practices by establishing an annual referendum process. The results of such a vote would, we think, provide Countrywide with useful information about whether stockholders view the company’s compensation practices, as reported each year in the Compensation Committee Report, to be in stockholders’ best interests.

     We urge stockholders to vote for this proposal.

Print Version
 

Sheila Hill
Local 1319, Maryland

Sheila Hill

"I've worked hard for my pension, and my union works hard to protect it. We want to ensure that our pension investments keep companies and CEOs honest and our retirement secure."