Angelo Mozilo fits central casting’s version of the modern CEO. Always tanned, his white hair contrasting against dark business suits, the co-founder and chief executive of Countrywide Financial has been powerful and domineering. Yet, his behavior and that of his board has led to what corporate governance experts believe is one of the biggest company train wrecks in recent memory, Chief Executive magazine reports.
Mozilo jumped into adjustable rate mortgages and subprime lending when the market was hot about four years ago. Now his firm is being bought by Bank of America and faces probes by the U.S. Department of Justice and the FBI. As Countrywide was sinking, Mozilo and some of his directors were quickly selling off their shares of stock. Mozilo unloaded $129 million from 2006 to 2007 as prices started to tank. That’s under probe by the U.S. Securities & Exchange Commission.
Meanwhile, the nine-member board throttled shareholder cries for examination of Mozilo’s oversized compensation. Instead of taking charge itself, the board pawned off the job to outside consultants on two occasions. Chief Executive asked a number of governance experts about Countrywide. Some of their responses:
Nell Minow, editor and co-founder of the research group Corporate Library: “If the board’s No. 1 job is risk management, it’s fair to say they’ve failed miserably. . . In general, CEOs should not be allowed to hire competing consultants on the shareholders’ dime when they do not agree with what the comp committee’s consultant recommends.”
Eric Pan, Assistant law professor, Cardozo School of Law: “Boards spend too much of their time deferring certain decisions to outside consultants.”
Larry Mitchell, founding director of the Institute for International Corporate Governance and Accountability at George Washington University Law School: “Under the circumstances, the board ought to have at least seriously considered removing the CEO.”
John F. Sandy Smith, partner Morris, Manning & Martin: “You would think that by hiring another consultant, you’re meeting your fiduciary duties, you’re covered as the audit committee. But to me it says they couldn’t stand up to Mozilo.”
Dan Dalton, Professor, Kelley School of Business, Indiana University: “He (Mozilo) cost the shareholders hundreds of millions of dollars, and yet after all that walked away from the enterprise with what most of us believe is a fortune.”
What’s your view?
