BankAmerica in ‘Driver’s Seat’ as Merger Unfolds : Banking: Executives have taken steps to steer the deal with Security Pacific clear of trouble. But the question of which workers to keep and which to fire may not be handled as easily.

A recent question-and-answer flyer given BankAmerica Corp. and Security Pacific Corp. customers included the following basic questions: “Did Bank of America purchase Security Pacific? What’s the name of the new institution? Who will run the new institution?”

The answers are that BankAmerica is merely merging with Security Pacific, BankAmerica’s name will survive and that directors and managers of both firms will run the new bank.

All of the answers are technically correct. But make no mistake, this has been BankAmerica’s deal since the two banks stunned the industry in their Aug. 12 announcement that they agreed to combine. Not only does BankAmerica’s name survive, but apparently most everything else will as well, down to key technological systems such as its Versatel automated teller network. More important, the majority of slots on the key executive committee running the bank go to BankAmerica executives.

As a result, it has been BankAmerica executives who have handled virtually all of the maneuverings needed to steer banking’s biggest merger through any hurdles. As the combination heads into the final stretch, they are being lauded for deftly taking a number of key steps to head off trouble.

“Clearly, BofA is in the driver’s seat. And what has happened in the merger procedures so far has been shaping up to be textbook,” said Donaldson, Lufkin & Jenrette banking analyst Thomas K. Brown.

On Thursday, shareholders of both banks will meet simultaneously in Los Angeles and San Francisco to give what is expected to be their blessing of the merger. Neither bank is saying much pending the shareholders vote.

After that comes approval from the Federal Reserve Board, which has been working closely with the bank for months and is expected to clear the merger. Also needed is the Justice Department’s approval, a more difficult procedure that will require sales of a large number of branches and deposits, mostly in Washington and Arizona, to ease antitrust concerns.

One of the savviest moves BankAmerica has made has been to aggressively head off major opposition to the merger from community groups.

BankAmerica disclosed a $12-billion commitment to low-income and minority lending programs, eased its home lending standards in low-income areas and last week pledged $70 million to create low-income rental units in the West. In addition, Chief Executive Richard M. Rosenberg has made himself available to community groups and is emerging as an outspoken supporter of federal Community Reinvestment Act programs designed to prod banks into making more loans available to low-income and minority groups.

Although community groups have yet to give their official backing to the merger, and are unhappy at what they say are delays in giving them data on BankAmerica lending activity, various representatives acknowledge that the bank’s actions have clearly defused controversy.

BankAmerica also reacted quickly when Los Angeles Mayor Tom Bradley raised questions last month about the impact the merger will have on job losses, branch closings in low-income areas and lending practices in the city. Security Pacific Chief Executive Robert H. Smith and Donald Mullane, who heads BankAmerica’s programs for low-income and minority loans, were quickly dispatched to meet with the mayor.

Last week, Rosenberg sent an 18-page report to Bradley that included promises such as: No branch will be closed if the office is the only provider of services in a low-income area; there will be 120-days’ notice when a branch is closed in a low-income area, and women and minority employees will not suffer a disproportionate number of layoffs. The mayor’s office has not responded but is believed to want an extension in the regulatory proceedings until the merger impact can be studied more.

The bank has also worked behind the scenes to grease the regulatory approvals. BankAmerica has kept Fed officials up to date in far more detail than required. As an example, senior Fed officials were notified about a week before the merger was made public. Four days before the merger was announced publicly, BankAmerica officials conducted a special presentation for a group of regional officials with the Federal Reserve Bank of San Francisco.

BankAmerica also has dealt with concerns by investors about the large number of troubled loans inherited from Security Pacific by disclosing that it will spin off some $4 billion in problem loans into a “bad bank,” an institution set up to manage and dispose of problem assets.

But not everything has gone smoothly. One major development has been the increased concerns about California’s anemic economy since the merger was first announced.

Although most analysts and investors are still enthusiastic about BankAmerica’s acquisition because it is expected to result in $1.2 billion a year in cost savings, their unabashed euphoria that greeted the initial announcement has faded somewhat.

Indeed, BankAmerica’s stock last week traded at about $33 a share, more than $10 a share less than what it was trading at in October. Security Pacific’s was trading at about $27 a share, down from more than $35 in August.

Another problem has been the embarrassing disclosure in public documents that 21 top Security Pacific or affiliated executives will receive a cash windfall of about $13 million for free stock they received less than two years ago in an incentive program.

The news has angered some people, including many employees who could to be among the 10,000 to 20,000 workers expected to lose their jobs in the merger.

“There seem to be two categories of employees at Security Pacific: Those who are paid off and those who are laid off,” said Graef S. Crystal, one of the nation’s best-known executive compensation experts.

The controversy stems from the granting of “restricted” shares, a widely used but increasingly controversial incentive tool utilized by companies to keep managers from moving to other jobs.

The way it works is as follows: An executive is given shares that can’t be sold right away. In return for staying with the company for a certain number of years, the executive each year can sell an increasing percentage of the shares until all of the restrictions are lifted.

But Crystal, an outspoken critic of the use of restricted shares, argues that they amount to a gift for executives that is not pegged to performance standards. “All you have to do is breathe in and out 17 times a minute and stay on the company payroll,” he said.

With Security Pacific, for example, Smith, the chief executive, received 40,000 restricted shares in early 1990, according to Securities and Exchange Commission filings, and could sell all of the shares by 1996. He is expected to receive about $2 million, which will also cover any taxes he would have to pay.

Security Pacific has defended the restricted stock as a “very common form of incentive compensation,” and its overall compensation programs as conservative. It adds that the purchase of the stock will result in “more equalized ongoing long-term benefits for key executives.” It also notes that 11 out of the 12 top banks in the country give restricted stock to employees.

One of the most difficult tasks has been choosing which employees will keep their jobs--especially difficult for BankAmerica because it must try to counter the widespread belief among Security Pacific employees that they will suffer the worst of the layoffs. Publicly, BankAmerica says it is looking at all employees and selecting the best workers. But various Security Pacific sources grumble about a “housecleaning” of Security Pacific employees. And executive recruitment firms say that the number of Security Pacific employees seeking assistance far outnumber those from BankAmerica.

Some analysts believe, however, that it is unfair to portray BankAmerica as favoring its own.

Analyst Brown of Donaldson, Lufkin & Jenrette said he has been told some key positions will go to Security Pacific executives and that some prominent executives with BankAmerica will leave. He cited as an example the reported departure of Allen W. Sanborn, a BankAmerica vice chairman of commercial markets and a key figure in BankAmerica’s mid-1980s turnaround.

One of the more intriguing questions for observers is what kind of “culture” is emerging in the BankAmerica. The answer is that it probably will not be all that different from what it has been. Both BankAmerica and Security Pacific have moved toward a tightfisted style that banks everywhere are having to adopt to survive. Both have made the West a priority, and both have put special emphasis on building their retail banking operations.

Much of that was bred into the executives at notoriously tightfisted Wells Fargo & Co. A large number of BankAmerica’s top executives, including Rosenberg, joined the bank after long careers at Wells Fargo. In addition, a good number of Security Pacific executives who have been given roles with the new bank--such as Vice Chairman Jerry A. Grundhofer--are Wells Fargo alumni. Some suggest that the new BankAmerica may resemble even more closely its big San Francisco rival than it has in the past.

“You wonder, is it going to be the BofA culture or the Security Pacific culture? It’s really going to be the Wells Fargo culture,” said bank analyst Donald K. Crowley with Keefe, Bruyette & Woods.