Troubled Washington Mutual, the nation’s largest savings and loan, has seen its stock price nearly double from its lows over the past month. Takeover speculation has certainly helped, as have the Federal Reserve’s interest rate cuts.
But don’t discount the importance of the message chairman and CEO Kerry Killinger sent when he decided not to take a 2007 bonus that he had earned. Executives at other companies caught in the real estate mess — Countywide Financial and D.R. Horton, for example — have not set the same tone of accountability.
Killinger, who also sits on the board of Safeco, qualified for a 2007 bonus of $1.2 million, about a third of his target level, based on Washington Mutual’s financial performance for the year. His 2006 bonus was $4 million.
President Stephen Rotella and CFO Thomas Casey will receive bonuses for 2007, but Washington Mutual said its executives would forfeit two-thirds of their restricted stock awards for the year.
This week, Killinger estimated that Washington Mutual’s net interest income increases by $150 million for every quarter-point cut by the Fed. Doing the math, the 1.25 points the Fed shaved in January equals $750 million.
More Fed cuts could follow.
In late December, we wrote about how the directors at Washington Mutual were staying the course in troubled times. Five weeks later, that appears to be a solid approach.
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3 Comments
#1. steven copp 02.02.2008
wm is more soild that you think ,in if fact you will see $25.00 stock within 60 day even before the next fed cut .there were push down hard with cfc news now jump on before you miss out
#2. TH 02.02.2008
You need to be more specific. Killinger did not accept a cash bonus; he did accept 3.2 million options that are now worth $24.6 million. There has been zero accountability at WM. Rotella and David Schnieder, both 2005 arrivals to WM, brought the high-yield loan products to the company; loans including low- and no-doc (”liar-loans”), subprime HELs and HELOCs, and subprime conduit. The chief credit officer of WM (Ron Cathcart) signed-off on these products, as did Killinger. These products were socially and economically irresponsible, and lead to the >70% drop in WM’s stock price over the later half of 2007. Yet no one within WM’s executive ranks have been held accountable. WM shareholders are left holding the bag, as the executives reap the benefit of the most recent rebound (the executives announced their equity bonus plan in an 8-K filed in mid-January and their options and restricted stock priced at around the same time). Neither Killinger nor any other executive has accepted blame for the company’s atrocious lending practices. So, please, don’t talk about accountability. Schnieder should have been fired months ago. Since Killinger is clearly unwilling or unable to make the call, the WM Board should step in and begin to replace existing management.
#3. kyla 03.11.2008
WM has been so woefully mismanaged, it is almost criminal. To top off a clueless bunch of execs with a follow the leader, jump on the bandwagon mentality, they are still mucking around with a myriad of internal computer systems and spending good money after bad, on systems that were sub-par at the lending institutions they brought them over from. The upper eschelons of mortgage management are peopled with cronyism over aptitude and the dismal performance reflects the quality of the management in place. Killinger threw out the baby with the bath water when he parted ways with the previous head of the mortgage division and it has been a fast spiral down ever since.
Too bad the stock holders can’t revise their holdings to ensure that they too don’t suffer during the flushing of the corporations name and value!
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