Retiring BofA chief Lewis won't get 2009 pay

CHARLOTTE
Outgoing Bank of America chief executive Ken Lewis will receive no compensation in 2009 after a review by the Obama administration's pay czar.

Ken Feinberg suggested that Lewis receive no pay for the year, and Lewis agreed, bank spokesman Bob Stickler said Thursday evening. Lewis "felt that it was not in the best interest of Bank of America for him to get into a dispute with the paymaster," Stickler added.

In ordinary times, boards evaluate a CEO's performance at the end of each year and award payouts accordingly. But the government has a tight grip on executive pay at Bank of America, which is holding $45 billion in government loans, The Charlotte Observer reported

Feinberg is also reviewing the pay of top executives at six other financial firms, including Citigroup. It's likely that he singled out Lewis this week because of Lewis' impending departure. While CEO pay has been under fire in the financial crisis, the decision is likely to stir debate over the government's reach into the private sector.

Feinberg can consider an executive's previous or impending compensation when deciding how much an individual should make. Though Lewis is not getting any special exit payment or perks, as many other exiting CEOs have, he holds accumulated benefits worth tens of millions.

The Treasury Department has said that Feinberg is reviewing Lewis' accumulated benefits, including retirement and stock holdings that he amassed over 40 years at the bank, which he helped build into the nation's largest. By one estimate, the tally is roughly $126 million, including a pension of about $53 million and $57 million in bank stock.

Stickler referred questions about that review to Feinberg's office. A Treasury spokesman declined to comment on the topic.

Lewis received $1.5 million in salary in 2008 but no bonus. He was set to receive a $1.5 million salary again this year but will now pay back what he has received so far.

The bank made the decision voluntarily, a person familiar with the matter said. The bank did not believe the pay czar had the legal authority to "claw back" all of Lewis' salary, the person said.

Feinberg, called the "special master" in Treasury lingo, was appointed by the government this summer and given broad power over the pay of top executives at Bank of America and six other companies receiving "exceptional assistance" from the government.

They are insurer AIG, Citigroup, automakers General Motors and Chrysler, and auto lenders GMAC Financial Services and Chrysler Financial.

Treasury spokesman Andrew Williams said Thursday that companies "will need to convince Mr. Feinberg that they have struck the right balance to discourage excessive risk taking and reward performance for their top executives."

"We are not going to provide a running commentary on that process," he added, "but it's clear that Mr. Feinberg has broad authority to make sure that compensation at those firms strikes an appropriate balance."

Stickler, the bank spokesman, said the bank continues to talk with the pay czar about the compensation of other executives at the bank.

Yale University's Stephen Davis said that Feinberg's decision raises questions about the judgment of the board members who approved Lewis' salary in the first place.

"This is one loud signal to boardrooms ... particularly in the financial services area," said Davis, who works for Yale's Millstein Center for Corporate Governance and Performance.

The idea of executives at troubled companies working practically for free gained traction late last year, as the heads of big automakers went to Washington to ask for government for money.

Vikram Pandit, CEO of Citigroup, said in February that he would work for $1 a year until his embattled bank returned to profitability.

At a shareholder meeting in Charlotte last December, one investor brought up the topic, asking Lewis if he'd work for $1 a year.

"No," he replied.

Lewis has long been one of the highest paid executives in the Carolinas and in the financial services industry. In 2006, Lewis brought home $97 million, counting $77 million in gains from exercising accumulated stock options. The bank posted record profits that year of $21.1 billion.

Lewis has spent much of 2009 in legal and regulatory battles over his Jan. 1 Merrill Lynch acquisition.
In particular, regulators are probing bonuses paid to Merrill employees and the bank's lack of disclosure of fourth-quarter Merrill losses.

In the first half of the year, Bank of America made $5.2 billion (including preferred dividend payments) after reporting a rare quarterly loss at the end of 2008. The bank reports third-quarter earnings today.

The bank's stock is up 28 percent this year, closing Thursday at $18.10. But the bank's shares are down 46 percent since the Merrill deal was announced.