) -- What may be
Bank of America's
most difficult task in finding a new CEO is about to get a little tougher.
Word emerged on Tuesday that the Obama administration's pay czar, Kenneth Feinberg, is about to earn his title by forcing financial firms to slash cash salaries. More pay would be in the form of stock that can't be redeemed for a number of years.
The decision is meant to align the interests of top executives and top earners with those of the shareholders whom they ultimately serve. Instead of making risky moves that carry big short-term payoffs but disastrous long-term effects, executives would have to consider the potential impact of their decisions further down the line.
The rules would directly apply to only the seven financial firms Feinberg oversees, but the administration is hoping to set the standard in the financial industry while the
hammers out its own rules regarding executive compensation. Feinberg has already scrutinized pay packages at troubled banks like
and BofA, and implemented the rule at
American International Group
, with more than half of new CEO Robert Benmosche's $7 million salary granted in the form of stock that can't be vested for five years. Others, like
, stayed ahead of the curve and put in place similar rules on their own.
The decision creates additional stress for BofA, which is scouring a
for its top job in a tight time frame of just a few months following the surprise announcement last week of CEO Ken Lewis' impending departure at the end of the year.
In effect, the board must find a person who is capable of running the largest financial services provider in the country with a diverse array of businesses; who is detached enough from the
deal to avoid ill will from the public and an array of investigators; who can keep the bank strong and profitable enough to weather the downturn competitively and repay more than $45 billion in public assistance; and who can get along well enough with regulators that he or she doesn't mind having every decision second-guessed.
Oh, and the pay isn't that great.
While the financial industry at large is going through a colossal shift in culture, BofA is still at a major disadvantage. Its decisions and salaries will face more scrutiny than competitors like
, which have already repaid bailout funds, as well as others like Wells Fargo, which haven't but don't owe as much.
That's not to mention banks overseas
, that have charged in to snap up top talent with more lucrative pay packages, or those in the hedge fund and private equity industries doing the same.
For example, one man who might have been a contender for the BofA CEO spot is John Kanas, the former CEO of North Fork, with a reputation as a top operator. He is now running what used to be called
for a consortium of private equity firms. Another superstar banker, David Moffett, who was once the CFO of
, might have also been in the running if not for his experience at
earlier in the crisis. Appointed by the government to lead the troubled mortgage giant in September 2008, he left to return to the private sector after six months due to frustrations in dealing with regulators. One can assume BofA, while in far better shape than Freddie, is a less private venture than Mr. Moffett would like to pursue, especially if the pay is restricted.
Though the board could be criticized if it chooses an insider candidate, given the circumstances, loyalty may be the only incentive for a top banker to take the job. As the hunt for a replacement continues, BofA's board is reportedly mulling putting an emergency CEO in place who can assume Lewis' responsibilities on short notice in case he has to depart early due to legal matters related to Merrill. The company may also select an interim CEO for a couple of years to give in-house executives a chance to duke it out for the top spot.
In 1997, before he was CEO of the country's largest bank, Lewis told the Charlotte
News & Observer
some oddly prophetic stories of his early days in the job market.
He said he turned down a finance job at
, despite higher pay, and took a position at BofA's predecessor, North Carolina National Bank, because of a better culture and work environment. In high school, he sold women's shoes based strictly on a commission of 6%, which offered just 12 cents to 36 cents per deal.
"You had to sell a lot of shoes," Lewis told the paper.
BofA may not have the cheerful, provincial work environment that lured Lewis into his first job in 1969, but whoever takes his place had better be ready to sell a lot of shoes.
-- Written by Lauren Tara LaCapra in New York