Bank of America CEO to Get No Salary for 2009
Friday, October 16, 2009
NEW YORK, Oct. 15 -- Kenneth D. Lewis, Bank of America's outgoing chief executive, will take no pay in 2009 under an agreement negotiated with the government that will require him to return roughly $1 million in compensation to the bank.
The agreement comes after Kenneth R. Feinberg, the Obama administration's special master on compensation, who has the authority to set pay of the top executives at seven companies receiving large amounts of federal aid, proposed that Lewis not be paid a salary or bonus in 2009. Lewis agreed, believing that it was "not in the best interest of Bank of America to get into a dispute with the paymaster," said Robert Stickler, a spokesman for the bank.
Lewis, who has a base salary of $1.5 million, will write a check of about $1 million to return wages already received, the bank said.
That the government would ask an executive of a Fortune 100 company to take no salary was shocking to Wall Street, compensation experts and even activist shareholders who have pushed for Lewis's resignation. But it is unlikely that Feinberg will require other executives under his purview to take no pay when he formally issues his rulings on pay packages later this month.
Lewis's pay decision was largely based on the fact that he is leaving the bank at the end of the year, and is eligible for a significant retirement package, according to sources familiar with the matter who spoke on the condition of anonymity because the deliberations were private. As of the end of last year, Lewis was entitled to receive $53 million in pension benefits and deferred compensation of about $11 million, according to Equilar, an executive-compensation research firm.
Feinberg does not have authority over the retirement package, which was accumulated over the 40 years that Lewis worked at the bank, although he could issue an advisory opinion on its appropriateness.
Under guidelines issued by the Treasury Department in June, Feinberg is to consider multiple factors in making his pay decisions for 2009, including the need to retain key employees. The six other firms subject to his review are American International Group, General Motors, GMAC Financial Services, Chrysler, Chrysler Financial and Citigroup, whose chief executive, Vikram Pandit, declared earlier this year that he would work for $1 a year until the bank returns to profitability.
While the negotiations were cordial, Bank of America did not immediately agree to the zero pay, sources said, adding that there were discussions over whether Feinberg had authority to make Lewis return his entire 2009 salary.
In an interview with the Charlotte Observer earlier this year, Lewis was asked whether he has considered taking a symbolic $1 salary, as Pandit had done.
"No," Lewis replied. "But I've said before that I didn't make $800 million selling my hedge fund to the company, so I'm in a different category than Vikram."
Staff writer Binyamin Appelbaum contributed to this report.