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Noble guy that he is, Washington Mutual ceo Kerry Killinger has agreed to forgo his $1.2 million bonus for last year. Wamu is the nation’s largest savings and loan, and one of the largest mortgage lenders. It’s been hit hard by the credit crunch, with the stock down nearly 70% in the past year.
Hat’s off to Mr. K for not accepting that money at a time when he’s laying off thousands of workers because of the bank’s poor performance. But some sacrifices are easier to swallow than others. Wamu’s compensation committee just awarded Killinger 3.2 million stock options at today’s low, low price of $14.77.
The committee explained in a filing with the Securities and Exchange Commission that it wanted to give Killinger—and other senior managers who got similar awards— incentive to boost the stock price. What the award really means is that if Wamu’s stock rises just $1 a share over the next four years, Killinger gets $3.2 million. If the shares merely go back to the $45 price they traded at one year ago, Killinger makes $96 million.
Hot Property has another, modest suggestion to the compensation committees of the world. Mr. Killinger already owns 1.4 million shares of Wamu stock and options on another 5.6 million. Why not price the new options at the stock’s former high price? That should be enough incentive to get the stock up.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.