Jan. 13, 2008— -- Some banks are quietly helping their executives to six-figure awards -- some object to the word "bonus" -- even as they take many millions in taxpayer bailout funds, a review of business filings shows.
First Horizon Bank in Tennessee gave its incoming Chief Financial Officer a $350,000 award in mid-November, according to a filing with the Securities and Exchange Commission. Just three weeks earlier, the bank announced it would take $866 million from the Treasury Department's Troubled Assets Relief Program.
The award was a signing bonus for the new CFO, William C. "BJ" Losch III, who had just joined the Tennessee bank, according to its filing. John Daniel, executive vice president of human resources for First Horizon, explained Monday the amount was not a bonus, but meant to compensate Losch for money and stocks he forfeited when leaving Wachovia Bank , his previous employer.
First Horizon executives would forgo performance bonuses this year, Daniel said, although "it's conceivable" that certain executives could receive other cash awards or stock, to keep them from leaving the bank.
On Capitol Hill, Rep. Elijah Cummings, D-Md., has led the charge in Congress against cash awards for executives at bailed-out banks. He says these banks "need to be suspending these bonuses."
"When folks come to the government for money, I want them understanding they have to live by new rules, or don't come at all," said Cummings. "This is a time when all of America must come together to sacrifice. . . Everybody, all of us, needs to be a part of that sacrifice."
That message isn't meant just for First Horizon. Virginia-based Hampton Roads Bankshares handed out nearly $1 million in cash to two top executives at the end of last year. Hampton Roads took $80.3 million in TARP funds in early December; on Dec. 31, it announced it had awarded signing bonuses to two executives of a bank it had bought.
D. Ben Berry, who was chosen to be president of Hampton Roads, received $500,000 in "consideration" for signing a non-compete agreement, according to the filing and the bank's general counsel; David R. Twiddy, who signed on to remain a top executive of the subsidiary bank, received $425,000. The payments were first reported by the business blog footnoted.org.
Bonuses and Other Perks Are Burning Issues for Shareholders
Douglas Glenn, executive vice president and general counsel for Hampton Roads Bankshares, said the payments "were not bonuses in any way, shape or form," but compensation for signing the employment agreements.
Bonuses, awards, "consideration" -- executive pay and perks are a burning issue for shareholders, the Wall Street Journal reported Monday. Shareholder activists are preparing to push limits on executive compensation far stricter than what the Treasury has built into its TARP program.
The prevalence of executive bonuses among bailed-out banks isn't yet clear, say experts. Nell Minow, co-founder of the independent research group the Corporate Library, says banks don't report typical executive bonuses – awarded at years' end – until March or April at the earliest. And even then, says Michelle Leder of footnoted.org, they will only be required to report bonuses for their top five officers.