CHARLOTTE/WASHINGTON (Reuters) - Bank of America Corp's BAC.N departing chief executive, Kenneth Lewis, will receive no pay for 2009, but questions still linger about his $125 million retirement payout.
At U.S. pay czar Kenneth Feinberg’s request, Lewis will not receive the $1.5 million salary he was slated to make this year, company spokesman Bob Stickler on Thursday. Lewis will not receive a bonus or any other payments for 2009.
The pay cut comes a day before the bank is to announce its third-quarter earnings. Lewis is retiring by the end of the year as he deals with multiple legal probes into the bank’s purchase of Merrill Lynch & Co. late last year
Lewis agreed to give up 2009 pay because he felt “it was not in the best interest of Bank of America for him to get involved in a dispute with the paymaster,” Stickler said. Feinberg declined to comment.
But the pay czar may still pressure Bank of America to reduce Lewis’ retirement payouts, according to a source familiar with the matter.
Discussions between the company and Feinberg are still in early stages, the source said, speaking anonymously because the negotiations are private.
Stickler declined to comment when asked if there were negotiations over Lewis’ retirement payout, which includes a $50 million pension plan frozen early this decade and deferred compensation awarded in prior years. He said the bank was in “ongoing discussions on a variety of topics” with Feinberg.
An agreement on Lewis’ retirement package could come after the October 30 deadline for Feinberg’s decisions on the 25 highest earners at the seven companies that received exceptional taxpayer assistance.
Lewis received $9.9 million of total compensation in 2008 as a mix of salary and bonuses, according to the company’s proxy statement. The bank reported a $4 billion profit in 2008.
Feinberg may be able to convert lump sum cash payments due to Lewis into stock, or payments made over a longer period of time.
SAY ON PAY
The change to Lewis’ pay is the latest move by the U.S. pay czar to curb what some view as excessive compensation.
Citigroup Inc C.N agreed to sell its energy trading unit, Phibro, as Feinberg pressured the bank to fix the compensation of Andrew Hall, a star Phibro trade expected to make as much as $100 million this year.
Earlier this week, a report by a government watchdog group said Feinberg is pushing American International Group Inc AIG.N to cut big pay incentives that the insurance company claims were needed to keep staff.
The report said Feinberg has informed AIG management that some portion of the “total of $198 million should be reduced,” but does not specify the amount by which it should be cut.
Treasury’s rules governing “golden parachutes” for companies that received taxpayer bailouts gives Feinberg the ability to recoup at least some compensation owed to Lewis, according to an analysis by James F. Reda & Associates.
A breakdown of Lewis’s outgoing compensation shows that he is expecting about $53 million of pension benefits from an account frozen years ago and another $72 million of accrued and deferred stock compensation.
Within that, Feinberg could use rules governing “golden parachutes” to try to take back about $13.5 million of unvested restricted stock grants and deferred stock grants that vest upon retirement.
Paul Hodgson, a compensation expert at the independent research firm Corporate Library, said Feinberg’s decisions will affect the industry because Lewis is one of the first long-term chief executives to leave a company while Treasury has a large stake in the company.
Feinberg may want to send a message that central figures in the financial crisis cannot walk away from the mess with hefty sums.
“There is a precedent here,” he said.
Additional reporting by Steve Eder; Editing by Leslie Gevirtz and Steve Orlofsky
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