B of A Executive Severance Plan Is Announced
BankAmerica Corp. said it adopted a plan providing a generous severance pay package for about 885 executives in the event they lose their jobs in a merger or takeover.
Although analysts said there is a trend among large banks to insulate top management from some of the effects of banking consolidation, the BofA plan--approved by directors last month--is unusual for the large number of people covered and for the fact that the “golden parachutes” could be triggered even in a deal where BofA is the acquiring bank.
San Francisco-based BofA, which acknowledged having preliminary merger talks last year with giant NationsBank Corp. of Charlotte, N.C., described the plan in a proxy statement released Monday for the company’s May 23 annual meeting.
The proxy also detailed the pay package of outgoing BofA Chairman Richard M. Rosenberg, who received an estimated $13.8 million in salary, bonus, stock options and long-term incentive pay, a category tied to stock price and other performance measures.
Graef Crystal, a San Francisco-based compensation consultant, said that Rosenberg “has been associated with very good success” in his six years at the helm of the nation’s second-largest banking company, and it is not unusual for retiring chief executives to get a “last hurrah”--a big final payday.
Still, Crystal said, Rosenberg has been paid competitively over the years, and the amount of the long-term incentive payment--$7.3 million--seems high.
According to the proxy statement, Rosenberg’s base pay for 1995 was $841,666, a 13% increase over the previous year’s figure. His $3.7-million bonus was up 54% from $2.4 million in 1994. Rosenberg also received stock options that Crystal valued at $1.8 million, $129,667 in “other compensation,” plus the $7.3 million in long-term incentive pay.
A BofA spokesman pointed out that a surge in the company’s stock price last year added $9 billion to its total market capitalization, which affects long-term incentive pay.
The next level of BofA executives also fared well, including former Vice Chairman Louis W. Coleman, who left the company for an investment banking job after being passed over as Rosenberg’s successor. Coleman received $6.2 million in salary, bonus and long-term compensation, plus a $5-million lump-sum severance payout.
Rosenberg’s successor, David A. Coulter, received $3.98 million in salary, bonus and long-term compensation.
Meanwhile, Paul Hazen, chairman of San Francisco-based rival Wells Fargo & Co., received a $5.6-million pay package for 1995, while Citicorp Chairman John Reed earned $5.5 million.
BofA justified the golden parachutes for the 885 executives--down to the level of vice president--by saying it would “help assure that executives give impartial consideration” to a proposed bank merger, even if they stand to lose their jobs.
Also, BofA said it wanted to make its plan more competitive with those of other financial institutions and Fortune 500 corporations and to reduce the legal expense and management time that could be tied up with contested terminations.
