Our New Paymaster
Executive Pay: Bank of America CEO Ken Lewis is working for peanuts this year. No, less than peanuts - he's working for nuttin'. Why? The government says so, that's why. There's something profoundly wrong in that.
The Treasury's Orwellian paymaster, bureaucrat Kenneth Feinberg, isn't happy with Lewis. BofA lost money in the third quarter, so Feinberg - like that famously fascistic dispenser of soup in "Seinfeld" - says, "No pay for you!"
Some might think that's a good idea. About time those greedy CEOs got their comeuppance, right? Not so fast. Sure, the heads of big banks are not very popular these days. So the government can pretty much do what it wants and the public will applaud lustily.
This is an old tactic: Divide and conquer. What about when they come after you? If someone in the Treasury or the White House decides you make too much, whatever it is you do, or your chosen profession suddenly falls out of favor, your pay might be next on the chopping block. After all, a precedent has now been set.
CEOs like Lewis are an especially easy target. Even though he's forfeiting $2.5 million in pay this year, he has pulled down $165 million over five years, and when he leaves his job later this year, he'll get as much as $120 million in a payout. So he'll manage.
Even so, CEO pay in this country has never been determined by the government. Nor should it. CEOs don't work for the government - they work for the shareholders.
Some shareholders are still righteously angry at BofA for buying Merrill Lynch, which soon suffered deep losses. Of this, two points need to be made. One, Treasury basically twisted BofA's arm to consummate its deal to buy Merrill Lynch. Two, Lewis made it work: Today, Merrill Lynch is very profitable.
That said, shouldn't shareholders still be angry? After all, Lewis was at the helm during the banking industry's excesses, so he deserves a ration of the responsibility. And in the third quarter, BofA reported a loss of $2.2 billion.
All true. But right now, BofA's not doing too badly for its real owners. On Feb. 20 of this year, the company's shares bottomed at $2.53. On Thursday, they topped $19.
That's a gain of 650%. Based on the stock's float, Lewis could be credited with restoring $142 billion in shareholder value. IBD's own database shows that, as of Friday, BofA had outperformed three of every four stocks in the market.
Hate Lewis all you want, but it's shareholders who own Bank of America Corp., and they should decide his pay - not some "czar" in Washington. What in the world has come over this country?
