There's still money in home building

From "KB Home CEO Jeffrey Mezger got $9.6 million in 2008 compensation" at latimes.com today:

The chief executive of struggling housing developer KB Home Corp., Jeffrey T. Mezger, received more than $9.6 million in compensation in fiscal 2008, the Westwood company said Friday.

KB Home, California's largest home builder, lost nearly $1 billion last year as the industry was battered by a glut of foreclosed homes that undercut the prices of new residences and shrank demand. Buyers were also discouraged by the reeling economy and challenges finding loans.

Mezger's compensation was a 41% cut from the nearly $16.4 million he was paid in fiscal 2007, according to a proxy filing with the Securities and Exchange Commission....

Richard Ferlauto, director of corporate governance and pension investment for the American Federation of State, County and Municipal Employees, said Mezger's compensation was too generous and an example of how some corporate executives were overpaid.

"Historically, this company has figured out a way to line the pockets of its already super-rich executives," Ferlauto said of KB Home. "The pay package just shows the continuing deaf ear that compensation committees have to their shareholders and it indicates the degree to which the U.S. compensation model is broken."

KB Home shares lost about 42% of their value during fiscal 2008. The shares dropped 64 cents, or 6.7%, to $8.90 Friday.

It's a tossup. File this one under "how the other half lives" or "nice work if you can get it"?

-- Lauren Beale

Thoughts? Comments?

Photo: KB Home's Jeffrey Mezger in a portrait taken in 2007 at the company's corporate headquarters in  Westwood. Credit: Stefano Paltera / Associated Press

Comments

[syscom3]

Why should Richard Ferlauto be concerned on what a private company pays its executives?

Perhaps Mr. Ferlauto should be more concerned about how his union members live off of public tax moneies that are extremely generous by any measure..

[Paulo]

File it under "We're doomed".

He must be one of those scary talents who needs to be richly compensated, else a competitor may snatch him.

[Nick]

If corporations wanted to align their executives' interests with long-term viability and profitability of the companies they managed, they would be primarily rewarded in long-term stock options, locked up until many years (10+) after the grant. Corporate boards don't do that, which means the shareholders don't care about rewarding the executives regardless of the long-term effects of their actions upon the viability of the companies. Nothing is broken: the shareholder behavior demonstrates a complacent tacit approval of the way executives are rewarded for destroying companies, and nobody should be forcing the shareholders to not throw away their money (it's the right of Americans to throw away enormous amounts of their money, look at our government).

[Steve]

$9.6M for puting out pure crap, what a scam. This is the worse quality home builder on the planet. ie I live by a major new KB project and 10 of the homes that were framed only blew over. The qaulity is os bad owners cannto resale and I ma in a good market, word is out.

[Michael Snyder]

Insanity is defined as doing the same thing over & over hoping for a different result.

[tonylogan]

First, KB is not a private company, it is a public one.

Second, these public companies are doing all they can to bilk money from the taxpayers via tax breaks, incentives, etc to "help stimulate the housing market"

If the companies can afford to pay executives huge salaries, they can afford to operate without taxpayer money.

By the way, a $10,000 tax credit to buy a "new" home in California counts as taxpayer money. It is a clear example of a break aimed at helping homebuilders instead of just helping the housing market (which they also should not do, but I digress).

[Laker]

That is a sham. How can this dude be compensated that much when the company is losing money?
Then you have the taxpayers funneling $10,000 to buyers who buy their crap?
What a disaster....

[BootStrap]

Thank you, Lauren, for the stock tip. When the market opens today, I will be shorting KB stock so I can take advantage of the stupidity of it's board of directors.

[DT]

Disagree completely with syscom3 and agree completely with BootStrap, Laker, tonylogan, Michael Snyder, Steve, Nick, and Paulo.

KB is most definitely a PUBLIC company syscom3. Did you forget to read: "KB Home shares lost about 42% of their value during fiscal 2008. The shares dropped 64 cents, or 6.7%, to $8.90 Friday." The individuals who own the stock are considered the owners of the company, NOT the crook Mezger.

Can't wait to see KB go flat-line in a couple of years. I think all Americans should boycott KB and all of these treasonous (Stealing from the U.S. when we're on the brink of economic collapse can be considered a form of treason) companies to hasten their collapse.

Mezger and the board of KB should be investigated and imprisoned for fraud and theft. Since I probably own KB stock through a mutual fund, I should file a class action lawsuit against them.

[Taylor Ezie]

Maybe it's me, but I don't recall another recession when executives were making this much. I suppose it's legally acceptable for them to be skimming the cream, but there should be some principal behind these decisions, at least from the boards' standpoint. It's just not right.

Where's Lee Iacoca when you need him?

[KB_Investigation]

KB Homes might be in trouble soon.

It seems as though it may have conspired with Countrywide’s appraisal subsidiary, Landsafe, to artificially inflate home prices—leading to unfair home purchase prices and inappropriate mortgages for KB Home owners.

Haven’t homeowners suffered enough? Check out this blog post by the lawyer heading up the investigation www.classactionlawtoday.com.