Countrywide Extends
Employees' Stock Options
By JAMES R. HAGERTY and JOANN S. LUBLIN
November 6, 2007; Page A3
Countrywide Financial Corp. has taken some of
the sting out of a weak share price for several thousand employees by
giving them more time to exercise stock options, making it less likely
the options will prove worthless.
![[Angelo Mozilo]](http://online.wsj.com/public/resources/images/HC-GF401_Mozilo_20051012164349.gif)
Meanwhile, as of yesterday afternoon, senior executives
of the Calabasas, Calif., mortgage lender hadn't reported any purchases
of Countrywide stock at the current depressed level, despite a recent
suggestion from Chief Executive Officer Angelo Mozilo that they were
considering such investments.
Countrywide stock, which was at $14.78 in 4 p.m.
composite trading on the New York Stock Exchange, is down 65% so far
this year amid worries over a jump in defaults and plunging loan volume.
In filings with the Securities and Exchange Commission
late last week, Countrywide disclosed that eight senior executives were
getting one- or two-year extensions on options to buy shares in the
company at prices ranging from about $32 to $39. Some of those options
would otherwise have expired as early as April 2009.
The executives include Sandor Samuels, chief legal
officer, and Andrew Gissinger III, a former pro football player who is
executive managing director, residential lending. The extensions didn't
apply to options held by Mr. Mozilo or David Sambol, president and chief
operating officer. Mr. Mozilo has been a heavy seller of stock he
acquires through options; he sold $130.6 million of Countrywide shares
in the first half of this year through prearranged stock-sale plans.
A Countrywide spokesman said the extensions are aimed
at retaining "valued employees" and apply to nearly all stock options
granted in 2004 and 2005 to several thousand employees.
Countrywide's action is unusual, said Alan Johnson,
managing director of Johnson Associates Inc., a New York executive-pay
consultancy that doesn't advise Countrywide. Extending the life of
options that may prove worthless undercuts the idea that executives
should make money based on a rising stock price, Mr. Johnson said,
adding, "That's the kind of thing that gets you in trouble with
shareholders."
In response to a question on a conference call with
investors and analysts Oct. 26, Mr. Mozilo said "a lot of managers are
contemplating" purchases of the company's stock, according to a
transcript from Thomson Financial. It isn't clear whether such purchases
are still being considered.
Given the bullish outlook for the company outlined by
Mr. Mozilo and other executives during that call, "I believe that
Countrywide shareholders should expect management to put their money
where their mouths are and make significant personal investments," said
Frederick Cannon, an analyst at Keefe, Bruyette & Woods. In a recent
research note, he calculated the book value of Countrywide shares at
$22.18 based on the balance sheet as of Sept. 30 but said a more
realistic value, based on the possible need for further write-downs of
mortgage loans and securities, would be $18.50.
Executives of a smaller lender, Thornburg Mortgage
Inc., have made considerable share purchases in the past three months.
Michael Perry, CEO of large mortgage lender IndyMac Bancorp,
bought 35,000 of its shares for an average of about $29.45 each in
March. IndyMac traded at $12.77 at 4 p.m. on the New York Stock
Exchange.
Write to James R. Hagerty at
bob.hagerty@wsj.com1
and Joann S. Lublin at
joann.lublin@wsj.com2
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