Inside Financial Services

$11 Million in Severance? For Sallie Krawcheck and Joe Price?

The world has gone mad

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It’s one PR triumph after another for Bank of America. Now comes word the company (which is in the process of cutting 30,000 jobs, by the way) will pay a combined $11 million in severance to Sallie Krawcheck and Joe Price, both of whom were ousted in a management shuffle last month.

I don’t mean to come off as naÏve, but why in the world should BofA (or any big company) cut fat severance checks to high-level departing executives? Bloomberg reports that in return for the money, “the executives agreed to release Bank of America from claims, and to refrain from competing with the firm, soliciting employees or luring away customers for one year.”

They’re kidding, right? BofA is really so worried about the prospect of having to compete against Sallie Krawcheck and Joe Price that it’s willing to pay the two $11 million in order to put off that dreaded day for a year? I don’t think so. And what “claims” are BofA so eager to be released from? There surely can’t be any that are serious or material-certainly not $11 million worth. If not, things are farther gone down in Charlotte than anyone imagines.

The fact is that these severance payments, which have become standard practice at large companies, are payoffs to prevent departing executives from bringing spurious but potentially embarrassing litigation. Which makes them doubly crazy for BofA now. First, the company is beyond embarrassment lately. Anything bad that Price or Krawcheck have to say about it will likely be drowned out in the rest of the ocean of lousy publicity the company has lately had to endure. So let ‘em sue: any litigation expense and any possible settlement would almost certainly come to just a fraction of what the company is paying out.

If Krawcheck and Price had been ousted from a bank that had, say, $1 billion in assets rather than $2.3 trillion, severance payouts of even a small fraction of this size would have been unthinkable. But BofA and big companies like it are so large that severance payments this size are thought not to matter. That’s nuts. It’s the shareholders’ money. BofA would be better off using it to reward those exceptional (and too often, overlooked) mid-level executives at BofA who had to endure years of Krawcheck’s and Price’s mediocre management.

What do you think? Let me know!

24 Responses to “$11 Million in Severance? For Sallie Krawcheck and Joe Price?”

  1. disgusted

    I think you’re absolutely right. Ridiculous. Look at the severance package Hewlett Packard just gave its CEO ater just 11months!! These large corporations are taking advantage of shareholders.

  2. Fuel for the Fire

    This is why we have people protesting on Wall St. As long as big companies continue to reward fired or inept executives (ala Chuck Prince, Bob Nardelli, John Thain etc) the general population will continue to see corparate America as greedy fools and Obama’s class warefare tirades will continue to find sympathetic ears.

  3. Inquiring Minds Want to Know

    Why do you bash B of A with a hammer in one hand and dole out your hedge funds’ money to buy B of A shares with the other? You can’t have it both ways. Oh, I forgot. This is the way Wall Street works these days. My bad.

  4. Inquiring Minds Want to Know

    Why do you bash B of A with a hammer in one hand and dole out your hedge funds’ money to buy B of A shares with the other? You can’t have it both ways. Oh, I forgot. This is the way Wall Street works these days. My bad.

  5. Dude

    How many jobs has Sallie had where she actually performed?

  6. Jonathan Finger

    Tom, thanks for highlighting another waste of shareholdrs money. You are correct, large companies justify ridiculous payouts simply because they are large companies. Joe Price should pay Bank of America $5MM for all the destruction of shareholder value that he has been complicit in at the company.

  7. cybertinman

    I thought Ken Lewis was an idiot, but the stupidity continues.

  8. puredakota

    Rational people generally do what is in their self-interest. I’m torn between (1) the notion that there is a reasonable basis for BOA’s to make these payments, and (2) the possibility that Brian Moynihan is irrational.

  9. John Tschohl

    Tom I agree. With the increase in fees Bank of America is trying to copy Netflix. They lost 63% in market value in the last 3 months.

  10. Shareholder

    They should be paying BAC shareholders for their role in Countrywide, CMOs and Merrill Lynch.

  11. wahoomurf

    Well said. Gotta wonder what the BOA Brahmins will give Moynihan when he’s cashiered ( the over and under in Las Vegas is 8-1/2 months) as a Sayonara gift? An ugly precedent has been set.

  12. fair & balanced

    Sally Krawcheck was a savy, respected and principled leader at Citi. She spoke for the brokerage unit and was cut loose over there when Pandit (“The Bandit”) threw that unit under the Morgan Stanley bus for cash. That she is now leaving Bof A should be a warning shot across the bow of Merrill Lynch. You guys may well see some uncomfortable changes coming, and right soon!

  13. Bill

    Don’t worry, they’ll make it back in a few months with that stupid $5 debit card fee. Then they can drain the fund again when another two or three BAC incompetents leave with a golden parachute.

  14. Mary

    If you ask me, whoever’s handling PR there should be fired.

  15. exBofA

    I agree. Not only should such huge payments be ended, we need to end the huge payments given to mediorcre CEO’s! And if they don’t, the entire board of directors at the banks need to be fired. It is the mid level bankers that drive the banks toward success, not these blowhards who don’t even deserve a fraction of what they are getting. With these CEOs freezing their worker retirement plans and making the bank staff pay for most of their health coverage, i think it’s time for all bank employees to take to the streets with banners reading “take back our banks”!

  16. Ben Graham

    Sallie Krawcheck has played corporate America like a violin. It’s not as if she’s the second coming of Warren Buffett. All she has ever been is a glorified asset gatherer and she hasn’t done even that very well. She got career breaks for being female and parlayed brief stints into job-hopping advancement. It’s a helluva a poor example for anyone trying to stop the revolving-door culture that is partly responsible for the crack-up originally ordained by the lunacy of McColl and perfected by Lewis.

  17. Don't Bank On America

    I think that the CEO and other remaining execs at Bank of America might view the large payouts to fired execs as greasing the way for their own “termination bonuses”. At some point, the whole lot of them will likely be out of a job–either as a result of Federal political pressure (similar to GM’s former executives) or as a result of a new severe recession plus mounting litigation claims that push the company over the cliff.

    This company needs to be put out of its misery once and for all. Imagine if Washington Mutual had been saved by the bailouts. Like Bank of America, Washinton Mutual would now be dying a slow death and luring in new investor victims with each step toward their ultimate destination (receivership).

  18. I know Price

    I know Price, very well. Mediocre management? I think not. Your understanding of anything…mediocre, at best.

  19. Scoob

    I wonder what sort of severance package the 30,000 soon-to-be fired employees will receive?

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