Capping a year in which he faced shareholder fury, regulatory scrutiny and was stripped of his chairman’s post, outgoing Bank of America Corp CEO Ken Lewis will get no salary or bonus for this year under an agreement with the government’s pay czar.
Kenneth Feinberg, the US Treasury Department’s special master for compensation who is scrutinizing pay packages at bailed-out banks, suggested that Lewis should get no pay for the year. Lewis agreed, Bank of America spokesman Robert Stickler said on Thursday.
In fact, Lewis will pay back about US$1 million he has received so far out of a US$1.5 million annual salary.
“He will write a check to the company,” Stickler said, adding that Lewis agreed to the proposal because he felt it was not in the bank’s best interest “to get into a dispute with the paymaster.”
The clawback provision does not apply to Lewis’ previously negotiated retirement package, estimated to be worth tens of millions of dollars.
Wall Street has been eagerly awaiting Feinberg’s decisions about pay for 75 of the highest-earning executives at seven firms that got the most taxpayer money. Other companies under Feinberg’s scrutiny include American International Group Inc, General Motors, Chrysler and Chrysler Financial.
Treasury spokesman Andrew Williams declined to comment on Lewis’ compensation, saying only that Feinberg would seek to “strike the right balance” in setting pay for top executives of firms that received significant government help.
Many had expected that Feinberg would seek to curb compensation levels. But now that Feinberg has set a precedent for a clawback in pay, eyes will turn to the fate of other Wall Street CEOs, such as Vikram Pandit, whose Citigroup Inc also has received US$45 billion in bailout aid.
“The government is proving they are serious about taking money back for poor performance,” said Richard Bove, an analyst with Rochdale Securities, in an interview on Thursday evening.
Mark Williams, a finance professor at Boston University and a former Fed examiner, expects that Citigroup and Wells Fargo & Co executives could also see similar requests from Feinberg.
“It would be inconsistent not to,” he said in an interview on Thursday. Williams said that as Wall Street earnings improve, there is going to be more pressure on the executives making decisions about how the money will be spent.
Lewis, 62, hastily announced last month that he will step down as CEO by Dec. 31, ending a tumultuous year in which Bank of America has faced accusations it misled shareholders about its acquisition of the investment bank Merrill Lynch & Co.
Bank of America had no successor in place, leading many to think that his quick exit had surprised the board. It has said a replacement would be chosen before Lewis leaves.
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