Why Bank of America's Ken Lewis Will Take Home More Than Peers

Why Bank of America's outgoing CEO will see more retirement pay than his peers.

October 7, 2009, 3:45 PM

Oct. 8, 2009— -- Outgoing Bank of America CEO Ken Lewis' nearly $64 million retirement pay puts him ahead of most, though not all, fellow major bank CEOs who have left their institutions during the financial tumult of the last two years.

The $53 million pension and $10.6 million in deferred compensation -- previous years' compensation that has been delayed until retirement -- for which Lewis is eligible make his exit pay second only to the $161.5 million collected by former Merrill Lynch CEO Stanley O'Neal, according to compensation analysis performed for ABCNews.com by Equilar, a California-based executive compensation firm.

O'Neal's payout came long before the government officials began taking actions to limit executive pay, including the appointment of Obama administration pay czar Kenneth Feinberg. Treasury officials have yet to say whether Feinberg will trim Lewis' package.

The Equilar analysis included a review of compensation for former CEOs of AIG, Citigroup, Countrywide, Merrill Lynch, Wachovia and Washington Mutual who resigned or retired from the firms in the last two years.

According to Equilar, Lewis is eligible to receive nearly as much as Citigroup's Charles Prince ($31.5 million), Washington Mutual's Kerry Killinger ($18.3 million) and Wachovia's Ken Thompson ($14.3 million) combined. Both Killinger and Thompson left their banks before the struggling institutions were purchased by JPMorgan Chase and Wells Fargo, respectively.

Other financial firm heads who saw smaller paydays were Angelo Mozilo ($41.3 million) of controversial mortgage giant Countrywide -- which was acquired by Bank of America during Lewis' tenure -- and Martin Sullivan ($17.5 million) of AIG, the embattled insurance behemoth that has seen some $170 billion in government aid.

Equilar's analysis did not include any stock holdings outside of pension and deferred compensation.

When Lewis' other Bank of America investments are taken into account, he will leave the bank with $125 million in total compensation, said David Schmidt, a senior consultant at James F. Reda & Associates, also a compensation firm.

It could have been even more -- enough to rival O'Neal's retirement pay -- if Lewis had left Bank of America before financial stocks took a beating, as O'Neal did in October 2007, experts said.

As with many of his peers who stepped down in the wake of the financial crisis, Lewis' exit, announced last week, came at a dark time for his employer. Both he and Bank of America, which has received $45 billion in federal bailouts, are under investigation by federal and state officials for the bank's merger with Merrill Lynch and the dispersal of bonuses at that firm as it was merging with BofA.

Still, Schmidt called Lewis' exit pay "fair."

"Everything that he's receiving is stuff that he earned way before the financial crisis and at a time when Bank of America was a premier financial services company," he said.

'As Much Money That God Could Give'

Supporters of Lewis, when discussing his impending departure, said that even before his ascent to CEO in 2001, he was key to helping Bank of America grow into one of the country's largest financial institutions.

Lewis joined the bank in 1969, when it was then known as North Carolina National Bank, and after rising through the ranks to become its head of operations, he helped ensure the companies it acquired stayed in the black, said Richard Bove, an analyst at Rochdale Securities.

"The guy devoted his life to the business," Bove said.

The extraordinary length of Lewis' tenure and the size of Bank of America -- with more than $2.2 trillion in assets, it is the largest bank holding company in the country, according to the Federal Reserve -- helps explain why Lewis will out-earn many of his peers when he leaves his desk, experts said.

But that's not the only factor.

"What we're talking about is a pay package that was constructed in an era when it was felt by boards that CEOs should get as much money that God could give them," Bove said.

Lewis' participation in a now-frozen Bank of America executive retirement program, known as a supplemental executive retirement program or SERP, is what accounts for most of his $53 million pension. The bank froze the program in 2002 in favor of offering more performance-based compensation, but not before Lewis accumulated tens of millions.

"It's always been one of the largest retirement packages in the S&P 500," said Paul Hodgson, senior research associate at the compensation research firm The Corporate Library.

Hodgson is a critic of supplemental executive retirement programs -- which have been used by many companies over the years -- and said that the Bank of America board should have eliminated its SERP completely.

"If the board had been true to its colors in terms of saying we're going to move away from fixed pay to performance related to pay, they would have terminated the plan," Hodgson said. "They could have said, 'Given the amount of stock you own, we don't think you need a pension.'"

Will the Feds Cut Lewis' Pay?

It's unclear whether the federal government will rein in Lewis' retirement compensation through the powers granted to executive pay czar Kenneth Feinberg, who is reviewing pay packages for top executives at seven companies that have received "exceptional assistance" from the federal government, including Bank of America.

An Obama administration official indicated to ABC News Wednesday that while any compensation Lewis received after June 15 will be subject to Feinberg's review, the verdict is still out on Lewis' retirement benefits, which were accrued largely before the bailouts began.

"Regarding those, [Feinberg] is currently reviewing all Bank of America arrangements, including Mr. Lewis', and is in the course of determining how to address those arrangements in his forthcoming determinations," the official said.

ABC News' Matthew Jaffe contributed to this report.

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