Not Everyone Loses In A Housing Bubble - KB Home Chief Executive Jeffrey T. Mezgerā€™s $6,000,000 Bonus for Job PerformanceNow, the cynical may ask: in a year when people who bought new homes with great incentives and discounts are now being undercut by the new home builders who sold them their homes… What job was performed? Are Kaufman & Broad Homes (KB Homes) saying that essentially defrauding new home buyers and artificially inflating home sale prices marks a bonus-worthy achievement?

I don’t want to put words into anyone’s mouth. But I must say that this appears to be the case for many of us.

If that isn’t enough, how about the fact that KB Homes posted some of their largest losses as a company in the fourth quarter of 2007? Or that their shares plummeted more than 9 percent as a result. If a publicly held company’s goal is to provide profits for the shareholders, one might assume that if the shareholders lose money, if the owners of KB Homes’ new home construction properties lose money, that the CEO may not deserve a multi-million dollar bonus.

But then, the laymen is probably just not educated in the complexities of such.

However, I can’t imagine that this short term benefit for the CEO will translate into long-term trust for KB.

It’s definitely a good time to be the man in charge.

LOS ANGELES (AP) – KB Home Chief Executive Jeffrey T. Mezger has been awarded a $6 million bonus for his job performance in fiscal 2007, according to a regulatory filing Friday.

The company’s compensation committee also designated bonuses ranging from $350,000 to $450,000 for three other senior executive officers, according to documents filed with the Securities and Exchange Commission.

KB’s committee also determined that any fiscal year 2008 incentive compensation for Mezger and three other executives will be tied to performance goals based on pretax income or loss by the company.

The filing did not specify the performance goals.

KB Home, one of the nation’s largest homebuilders, has been battered by the U.S. housing slump.

In its fiscal year 2007, ended Nov. 30, the company lost $929.4 million, or $12.04 a share, versus a profit of $482.4 million, or $5.82 per share, a year earlier.

Revenue dropped 32 percent to $6.42 billion from $9.38 billion in 2006.

Mezger warned earlier this month that 2008 would be another tough year for the homebuilding sector.

KB’s shares fell 7 cents, or less than 1 percent, to $23.65 on Friday.

Maybe today is opposite day?

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Comment by Rudy
2008-02-24 16:10:06

Does it surprise anyone that KB Home is giving out bonuses when their stock holders are taking a beating and their homeowners are loosing their shirts….does it suprise anyone that KB Homes Top Exective got caught backdating stock options…as if a few hundred million wasnt already enough….does it surprise anyone that they pick Martha Stewart a convicted felon as their marketing spokesperson…Would it suprise anyone if KB goes belly up before the end of 2008? It wouldnt suprise me at all….infact im counting on it!

Comment by MG
2008-02-24 18:11:11

In this market it wouldn’t be too surprising. I remember when I was looking at my first house back in 01 or 02 or so. I visited a KB Home development and the workers were on strike. It obviously didn’t sell me on buying a home from them if their contractors and employees were already disgruntled.

And that was during a GOOD market!

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