At KB Home these days, Karatz's replacement, Jeffrey Mezger, presides over a mess. The real-estate market has collapsed, as has the company's stock price. A KB Home shareholder who bought $1,000 worth of shares five years ago has seen their value slip to around $290.
Mezger, like his predecessor, is also entitled to a portion of KB's pretax, pre-incentive-pay profits. But the company posted a $929 million loss in fiscal 2007, so this bonus amounted to nothing.
The CEO is still OK, though. His board awarded him a "discretionary" bonus of $6 million, and he ended up with total compensation of $16.4 million for the year.
In 2008, KB's board created a new standard for Mezger's performance awards, promising he'd get as much as $10 million if he just kept the company's losses below $300 million, according to documents filed with the SEC on Friday. KB's loss widened to $976 million in 2008. Mezger walked away with $9.6 million, including a $2.7 million bonus and $4.6 million in stock.