BoA chief to forgo pay ahead of retirement

Ken Lewis

When Ken Lewis announced that he would be retiring as chief executive of Bank of America at the end of this year, the move sparked concern over how the banking giant would handle his departure - most notably in relation to a reportedly hefty payout.

Days after the announcement that Lewis would be leaving, it was reported in that he could expect a payout totalling $68.8 million. At the time, it was speculated that that figure was being boosted by a lump-sum pension benefit that was valued at $53.2 million  - at least according to the bank's last public report on his holdings.

Now though reports have surfaced that - following a decision by the US Treasury Department's Kenneth Feinberg, who is responsible for looking into pay at bailed-out firms - Lewis will receive no salary or bonus for 2009.

Lewis, who has been heavily criticised for the management of his firm since the recession hit, will also have to pay back the $1 million he has already received of his $1.5 million annual salary.

Bankers' pay has come under renewed scrutiny this week after a series of Wall Street giants reported impressive earnings for the third quarter. Controversy reigned yesterday after it was revealed that Goldman Sachs is expecting to pay out $10.9 billion more to its workers compared to last year.

For Lewis though, the end of year outlook is now completely polarised to what is happening over at Goldman.

The decision to deny the departing executive his pay would not have been made lightly either: Feinberg, widely known as the US Government's "pay czar," would had to have reviewed the $45 billion in government funding required by Bank of America after the $50 billion Merrill Lynch deal depleted the bank’s cash reserves.

At the time, the fallout from the Merrill Lynch acquisition resulted in accusations that Lewis failed to disclose to regulators and investors the degree of losses and bonuses at Merrill Lynch before shareholders voted to approve the Bank of America acquisition.

As such, in hopes of appeasing the ongoing debacle, according to a spokesman from the firm yesterday, "Lewis felt that it was not in the best interest of Bank of America to get involved in a dispute with the pay master," instead accepting the decision to forgo his pay.

Interestingly, following a full week of Q3 results, Bank of America Merrill Lynch is now expected to reveal its own figures today, sparking speculation that the welcomed decision to not pay Lewis will help soften the blow of reported earnings.

And as banks across Wall Street embrace new regulations, beginning the arduous task of restoring consumer confidence, it seems Lewis is their first victim.

Overall though, we probably shouldn't feel too sorry for Lewis, who reportedly won't really see much lasting damage to his bank balance caused by his pay cut. This is because of fresh reports now speculating that Lewis has accrued around $125 million of retirement benefits over his 40 years at the bank.

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