BofA CEO's pension may run afoul of pay czar
NEW YORK |
NEW YORK (Reuters) - Kenneth Lewis should be looking forward to sailing off into the sunset with a retirement package worth $125 million, but first he may face a reckoning with the U.S. government's pay czar.
Although Lewis became chief executive of Bank of America Corp long before taxpayers bailed out the company, the pay czar, Kenneth Feinberg, may have a say on whether he cashes in on retirement benefits and accumulated compensation.
Lewis, under siege from prosecutors and politicians for months over his handling of Bank of America's acquisition of Merrill Lynch & Co, on Wednesday announced that he would step down by the end of the year.
The agreements governing Lewis's severance package pre-date Feinberg's appointment by President Barack Obama in June. But Congress gave the pay czar broad authority to issue advisory opinions that could impact Lewis.
Feinberg, who declined to comment, is reviewing pay packages for the 25 highest-paid employees at seven companies that needed extraordinary government assistance, including Bank of America. He is expected to begin releasing a first wave of pay rulings by mid-October.
To many, Lewis is a poster child for the crisis that struck Wall Street banks last year, nearly collapsing the financial sector and resulting in taxpayers spending hundreds of billions of dollars to bail out firms like Bank of America.
"The Obama administration has to use every tool at its disposal to fix the pay problem, particularly the golden parachute for failed executives," said Richard Ferlauto, director of corporate governance and pension investments for the American Federation of State, County and Municipal Employees, one of the largest U.S. labor unions.
Lewis' severance package includes $53.2 million in retirement benefits, mostly from a program frozen years ago, and $72.8 million in accumulated stock and other compensation, according to an analysis by consultant James F. Reda & Associates.
At retirement, top executives also typically receive perks such as consulting agreements, secretarial services, cars and health care coverage. It is unclear what perks Lewis might receive, if any.
Some argue it is too late and simply inappropriate for Feinberg to try to tackle Lewis' retirement package.
"A fair reading of the situation would be he is getting what he is entitled to and game over," said Alan Johnson, a Wall Street compensation consultant.
Despite the pay czar's broad authority, the legality of his powers is still largely uncharted territory, especially as it pertains to his ability to change contracts.
"Does the pay czar have the ability to overturn a contract?" asked Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "The answer is no, I would guess. If it ever gets litigated, it will be interesting to see what a pay czar can do."
Lewis' retirement package is on a par with what other ex-Wall Street CEOs have received.
Merrill Lynch & Co Inc's Stanley O'Neal left with $161.5 million, and Citigroup Inc's Charles Prince left with $39.5 million in stock, options, bonus and perks.
The fact that Bank of America needed a $45 billion taxpayer bailout complicates the question of whether Lewis should receive such a generous package.
His 2008 compensation was $9.95 million, according to regulatory filings. Over the past three years, he received more than $62 million.
"Given the problems the bank is now going through, it is quite a bit of money," said Elson. "He was well paid."
(Reporting by Steve Eder; Additional reporting by Joe Rauch; editing by John Wallace)
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