Why did the nation’s largest pension fund take a strong stance against Citibank’s excessive CEO compensation, but then turn around and vote for Bank of America’s lesser, but still outrageous, pay plan?
The California pension fund, CalPERS, was among the 92 percent of shareholders who went along with Bank of America in an advisory vote on CEO compensation earlier this week. In Wednesday’s vote, CalPERs did vote for measures that would have required disclosure on B of A’s lobbying activities as well an independent review of the bank’s foreclosure actions.
While But Bank of America CEO Brian Moynihan faced noisy protests and pointed questions at the bank’s annual meeting in Charlotte, N.C, both of those initiatives, like say on pay, were defeated.
In their nonbinding “say on pay” vote, Bank of America shareholders approved a $7 million 2011 pay package for Moynihan. Last month, 55 percent of Citibank’s shareholders, including CalPERS, voted against a 15 percent pay hike for their CEO, Vikram Pandit, who had been getting along on $1 a year in 2009 and 2010 while Citibank floundered.
CalPERS’ position this week is strangely at odds with its previous positions.
In the past, CalPERS has been has been particularly tough on Bank of America. In 2010, it cast an unusual vote against all of the bank’s directors, including then-CEO Ken Lewis.
Asked for comment on Wednesday’s Bank of America CalPERS vote, a spokesperson referred me to the pension board’s 79-page governing principles, specifically the provisions covering executive compensation. CalPERS declined to answer any questions about why the pension fund voted for Moynihan’s compensation fund, but against Citibank’s.
True, Moynihan’s pay is less ($7 million) than Pandit’s ($15 million), but that doesn’t make either of them acceptable, much less understandable, by anything but the tortured logic of the too big to fail, government-coddled banks.
To approve Moynihan’s pay, shareholders had to overlook mountains of evidence that the bank is on the wrong track. Back in October, the bank retreated on a scheme to soak its customers for a $5 a month fee on debit cards after President Obama blasted it. The bank, which Bloomberg News estimates received more than $1.5 billion in federal bailout aid, has repeatedly been the target of criticism for underperforming in voluntary government loan modification programs. Earlier this year, B of A was among the big banks that settled foreclosure fraud charges with the feds and states attorney general. Though it was touted as $25 billion settlement, it actually only cost the banks $5 billion. But the bank fraud it highlighted was real.
Richard Eskow of Campaign For America’s Future outlined Moynihan’s dark career trajectory, from B of A general counsel to head of its retail division to CEO, while the bank completed its disastrous $2.5 billion acquisition of slimy subprime lending king Countrywide. When Moynihan joined senior management the bank’s stock traded around $52 a share. Today it trades around $7 or $8 a share.
Tallying the eventual costs of the Countrywide acquisition, Eskow includes a massive $8.4 billion settlement with states over illegal behavior, $600 million to settle a class action suit, $335 million to settle a discrimination suit and $50 to $55 million for its part of lawsuits against Countrywide’s former CEO.
One bank analyst, Michael Mayo, recently ranked the worst CEOs. Moynihan was at the top of the list (with Citibank’s Pandit not far behind). Mayo cited the stock slide along with the debit card fee debacle and the bank’s failure to stem its foreclosure fraud and mortgage servicing problems.
Eskow hits the nail on the head when he asks: By what standard does Moynihan still have a job, let alone a multimillion-dollar salary?
And by what standard does he merit a vote of confidence by CalPERS, which less than a month earlier had taken a strong stand against excessive pay for another failed bank executive, Pandit?
Especially after the pension fund’s chief investment fund officer, Joe Dear, vowed after the Citibank vote to get even more activist. “Excessive CEO pay is not in the interest of the shareowners and not in the interest of companies,” Dear told CNNMoney.
CalPERS has long been an advocate for improved corporate governance, but its credibility has sagged after it suffered staggering losses in the financial collapse and was caught in its own sleazy “pay to play” scandal.
CalPERS’ Bank of America’s vote leaves unanswered questions about the pension fund’s claims to increased activism. Did CalPERS single out Citibank because that was the only too-big-to-fail bank to fail its latest government stress test, as U.S News and World Report suggested?
Or could the vote have something to do with the confidential settlement last November of a lawsuit CalPERS and 15 other institutional investors filed against Bank of America? Could CalPERS officials have agreed to back off their previous hard line against the Bank of America board as part of a secret deal the public will never see?
Of course, we don’t know details – the settlement is sealed.
Was Citibank a publicity-grabbing one-off, or did the pension fund give Bank of America a bye? We’ll have to wait and see just exactly what CalPERS means by activism when it comes to challenging the pampered, powerful titans of the nation’s too big to fail banks.
For now, all we can do is paraphrase the classic film portraying of the lack of accountability of corrupt power, `Chinatown’:
“Forget it Jake, it’s Wall Street.”