Bank of America (NYSE: BAC) continues to face the scrutiny of the White House pay czar, as the bailed out institution recently announced more pay cuts to the executive management team.
Kenneth Feinberg has approved the compensation changes, which will become effective immediately. In addition to other cuts announced earlier this week, we now learn that Chief Financial Officer Joe L. Price and mortgage unit President Barbara J. Desoer will earn less salary in 2009 than they did in 2008, as required by the office of the special master for TARP Executive Compensation. This information was disclosed in a Securities and Exchange Commission regulatory filing.
As the bank received $45 billion in bailout funds from the Treasury Department’s $700 billion financial rescue package, the firm remains under scrutiny, particularly on pay packages. Although their rivals have announced pay back plans for the TARP funds, no such statement has been released by Bank of America yet. As investors and the treasury department remain concerned over this fact, the firm’s paycuts could be seen as a step in the right direction.
Desoer, President of Bank of America mortgage, home equity, and insurance services will also see her salary cut to $500,000 from $800,000 last year. Her 2009 stock awards will total $3.95 million, compared to $2.3 million in awards, and $1.53 million in options last year.
In addition to salary and stock, executives regularly receive other compensation as well, normally on things like the use of corporate aircraft, insurance premiums, tax preparation, and for the matching of charitable contributions. In 2008, Price had received a total of $41,000 in such perks. Desoer, meanwhile, received $2.66 million in perks, with the largest portion of this being $1.5 million in relocation benefits for moving from Charlotte to Calabasas, California, to take over the home lending and insurance business.
While these pay cuts are necessary for compliance reasons, they come at a very bad time – while the firm is seeking a new leader. With the impending departure of Ken Lewis, the Chief Executive’s seat will soon be vacant, as he has announced plans to retire at the end of 2009. With the deadline fast approaching, coaxing any viable leader to join a firm in such dire straits will be challenging, to say the least. Any compensation package for the new CEO will require approval by the pay Czar.
