Bank CEOs Defend Personal Windfalls

"In short, as our company did well, I did well," Angelo Mozilo, founder and chief executive of Countrywide Financial Corp., said in prepared remarks before the House Committee on Oversight and Government Reform.

Charles Prince, the former chairman and CEO of Citigroup, said the company's executive compensation plans were fair and aligned with the interests of shareholders. He cited the fact that Citi executives are required to receive large portions of their annual pay in the form of stock options.

"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," Mr. Prince said in his prepared testimony.

Mr. Mozilo, Mr. Prince and former Merrill Lynch & Co. Chairman and CEO E. Stanley O'Neal have come under fire from the panel for the compensation and retirement packages they received from their respective companies. Committee Chairman Henry Waxman (D., Calif.) has raised questions about whether the outsized compensation received by the executives during the current market turmoil was in the best interests of shareholders.

Mr. Waxman noted Friday that Mr. O'Neal received a $161 million retirement package when he left Merrill Lynch, Mr. Prince was awarded a $10 million bonus and $28 million in unvested stock options from Citigroup, and Mr. Mozilo has received more than $120 million in compensation and the sale of Countrywide stock.

That compensation was received while the three companies were reporting billions of dollars in losses and shares of their stock were seeing significant declines.

"Any reasonable relation between their compensation and the interests of their shareholders appears to have broken down," Mr. Waxman said in his opening statement. He asked, "How can a few executives do so well when their companies do so poorly?"

William Galvin, secretary of the commonwealth of Massachusetts, said Congress needs to "hold the promoters of these exploitative financial arrangements responsible."

"Many of these investment banks reaped enormous profits from the rampant mortgage lending and securitization .. and their executives have been handsomely rewarded," Mr. Galvin said in his testimony. "We, however, are now left sorting out the ongoing damage that is ripping through our financial system."

Mr. Mozilo, whose company is being acquired by Bank of American Corp., noted that he was giving up his severance package in order to ensure the deal goes through. "I voluntarily gave up these benefits because I did not want this issue to detract from, or in any way impede, the important task of completing the Bank of America transaction," he said.

The panel's top Republican, Rep. Tom Davis of Virginia, decried the hearing as a "sanctimonious search for scapegoats."

"Punishing individual corporate executives with public floggings like this may be a politically satisfying ritual -- like an island tribe sacrificing a virgin to a grumbling volcano," Mr. Davis said.

-- Michael R. Crittenden, Dow Jones Newswires