The Wall St. Journal reported that compensation seems to be the primary obstacle between Bank of America Corp. (BAC) and their pursuit of a successor for outgoing CEO Kenneth Lewis.
According to sources close to the negotiations, Robert Kelly, the 55-year-old chief executive of Bank of New York Mellon Corp., has emerged as the front-runner to succeed Mr. Lewis, who is set to retire at year-end.
Officially, Mr. Kelly hasn’t been offered the top job at Bank of America, which is the largest U.S. bank as measured by assets. But the gap between him and the bank’s board “is down to compensation now,” said one person familiar with the situation. “If they can reach some level of comfort around compensation, he will take it,” this person added.
On Friday, Bank of America received approval to repay $45 billion in federal bailout money, freeing it from pay limits and scrutiny by Treasury Department official Kenneth Feinberg.
As of Sunday night, the negotiations were fluid, and a person close to Mr. Kelly cautioned that it might not be possible to reach an agreement with directors of the Charlotte, N.C., bank.
Directors involved in the hiring process are reluctant to offer Mr. Kelly anything that could stir up a public outcry, people familiar with the situation said. In 2008, Mr. Kelly made $13 million, including stock and deferred compensation and $20 million in 2007, according to securities filings.
He owns Bank of New York Mellon shares valued at about $11.8 million, plus unvested restricted, deferred shares and performance-based shares valued at $8.6 million.
It is common for companies to buy out stock options and other unvested compensation that newly hired executives received from their previous employer.
In contrast, Mr. Kelly doesn’t want “to be made whole” for compensation he would leave behind at Bank of New York Mellon, according to a person close to the situation. “He is very sensitive to the world around him.”
Another complicating factor is that Bank of New York Mellon directors want Mr. Kelly to stay, said people familiar with the situation.
In fact, Mr. Kelly was first approached about the CEO job in October, but appeared to slam the door in a Nov. 4 email to executives at Bank of New York Mellon.
“I am not interested,” he wrote. “I look forward to crafting the future with you.”
Mr. Kelly reconsidered his interest after Bank of America was approved earlier this month to repay its federal bailout funds. Last week, Mr. Kelly informed his board about new conversations with Bank of America’s board, which was ready to hire an internal candidate but then decided to look again at outside executives.
The Canadian-born Mr. Kelly has deep experience in retail banking and capital markets. He also is well-known in Washington, New York and Bank of America’s hometown. He spent five years in Charlotte as chief financial officer at First Union Corp. and Wachovia Corp., which merged in 2001.
