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!