Total Lump-Sum Present Value of Pension: $53,251,003

* For an explanation of the different approaches used by the AFL-CIO and the U.S. Securities and Exchange Commission to calculate total compensation, click here.

Workers Lose Jobs, CEO Keeps His After Running Bank Into the Ground

Bank of America Corp. has been propped up by $45 billion in federal funds from the Troubled Asset Relief Program (TARP), plus a guarantee of $118 billion of its assets.[1] That’s $1,400 for every American household.[2] Bank of America and other big financial institutions may be forced to write down more of their loans, leading to more infusion of capital from the federal government.[3]

The bank lost nearly $2.4 billion in the fourth quarter of 2008 due to deeper than expected trading and loan losses. It also cut its dividend down to a penny per quarter.[4] Even after receiving billions of dollars in taxpayer money, the bank plans to eliminate up to 35,000 jobs over the next three years.[5] 

Meanwhile, CEO Kenneth Lewis collected nearly $10 million in 2008, more than 400 times the average amount a bank teller is paid each year.[6] Since becoming CEO in April 2001, Lewis received $134 million in pay, bonuses, stock awards and pension accruals.[7] 

Now, a group of investors, led by SEIU and the CtW Investment Group, wants CEO Ken Lewis to go.[8] Lewis, once hailed as a savior of Wall Street, may lose his job because of his penchant for empire building—acquiring two deeply troubled companies, Countrywide Financial Corp. and Merrill Lynch & Co., in less than a year. 

“I don’t think he survives when this is all said and done,” according to Paul Miller, an analyst at Friedman Billings Ramsey. “He has made some pretty big mistakes over the last couple of months and as conditions inside that bank worsen, he’s going to come under more and more pressure.”[9]

Corporate governance experts fault the bank’s poor compensation practices for encouraging excessive risk-taking by Lewis, prompting him to embark on the acquisition spree that has cost shareholders dearly. Nassim N. Taleb, author of The Black Swan: The Impact of the Improbable, a book that explains how the theories of so many financial "experts" were dangerously flawed, says that such incentive pay “encourages a certain class of risk-hiding and deferred blow-up. It is the reason banks have never made money in the history of banking, losing the equivalent of all their past profits periodically—while bankers strike it rich.”[10] 

The most expensive of these mergers was with Merrill Lynch. By the time the deal closed, the Wall Street firm’s losses turned out to be far larger than expected, and New York Attorney General Andrew Cuomo raised questions about $4 billion in “midnight bonuses” paid to Merrill Lynch’s employees just before the deal closed.[11] Nearly 700 of those Merrill Lynch employees received more than $1 million.[12] Two of the nation’s largest pension funds, the California Public Employees’ Retirement System and the California State Teachers' Retirement System, are suing Bank of America, alleging that it “misstated or omitted” important information about Merrill Lynch’s financial health to shareholders before the merger.[13]

Lewis also raised shareholders’ ire after revelations that John Thain, Merrill Lynch’s CEO who sold the company to Bank of America, spent more than $1.2 million redecorating his office—including $35,155 on an antique French commode and $1,405 on a wastebasket.[14] Shareholders also were infuriated at learning that Thain sought a $10 million bonus for himself, but was turned away by the board.[15]

Ironically, Lewis had expressed disdain for the stratospheric Wall Street pay. According to Fortune magazine, Lewis saw the acquisition of Merrill as an opportunity to banish “the profligate practices he’d long reviled, especially inflated pay and the high-risk trading that had landed Merrill in so much trouble.”[16] 

Lewis’ own compensation is not shabby. Apart from a salary, bonus, generous perquisites and pensions, Lewis and other senior executives at Bank of America receive restricted stock and stock option grants that are intended to help align their interests with the interests of long-term shareholders. Over the past five years, Lewis received stock grants worth nearly $50 million and options valued at almost $15 million.[17] This was intended to tie the personal fortunes of Lewis, who owns more than 4.5 million shares, with that of the bank.[18] 

But much of Lewis’ compensation has been in cash. His guaranteed base salary has been $1.5 million since 2002 when it was raised from $1.33 million, ensuring him each year more than what most people make in a lifetime.[19] Bank of America’s board approved this knowing that non-performance pay in excess of $1 million is not tax deductible.[20] The Corporate Library, a Portland, Maine-based corporate governance research firm, notes that Lewis’ base salary is at the 90th percentile for Standard & Poor's 500 firms, and has expressed “high concern” for Bank of America’s overall executive compensation practices.[21] 

Then there are Lewis’ bonuses. In recent years these have been at least three times as much as Lewis’ salary and as high as $6.5 million in 2006.[22] With Bank of America’s 2008 net income down 73 percent from 2007’s net income and its market capitalization down 62 percent to $70 billion at the end of 2008 from $183 billion at the end of 2007, Bank of America’s directors decided in early 2009 that Lewis and other senior executives would receive no bonus.[23]