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KENNETH D. LEWIS ± CEO & PRESIDENT

Õ His basic annual guaranteed salary since 2002 has been $ 1.5million

Õ His total compensation in 2006 was $ 25,649,566, in 2007 it was less $16,432,999, while

in 2008 it dropped to $9,959,076 which still more than ³most people make in a lifetime´

(AFL-CIO, 2009).

Õ The difference in the compensation was created by absenting bonuses and non-equity

incentive compensation in 2008 due to company¶s bad financial position

JOE L. PRICE ± CFO

Õ ÿnfortunately, we have only data for year 2007, when his salary was $800,000 and

altogether the total compensation equaled $ 5,633,987. It is still more than some people

earn in their lifetime.

BARBARA J. DESOER ± sort of COO (Global technology and Operations Executive)

Õ Her basic salary was the same in both 2006 and 2007 $800,000

Õ However, her total compensations in those years differed, logically, due to different

financial performance and stand of the company, while in 2006 she received more, i.e. $

11,179,663 and in 2007 only $7,495,119

Õ The main difference was in lower amount of Stock awards and Non-equity incentive

compensation

6
  
   
 

Õ As our book say ³compensation has 3 primary purposes: to attract, help develop, and

retain talented performers.´ (Plunkett, Attner, & Allen, 2008, p. 349) ± so these should be

the reasons for the compensation of CEO as well

 Õ Compensation for CEO and other workers as well is being set by Boards of directors and

is considered to be crucial for ³to the creation of long-term corporate value´ (AFL-CIO,

2009)

Õ Process used for establishment of compensation package is job evaluation, which includes

examining the job in respect to ³the responsibility, education, skills, training, experience,

and working conditions´ (Plunkett, Attner, & Allen, 2008, p. 350).

Õ poreover, when designing a compensation package, one should consider factors such as

equitability, ³meeting legal and strategic requirements, and linking compensation

philosophy, to various market forces´ (Plunkett, Attner, & Allen, 2008, p. 350).

6       


KENNETH D. LEWIS ± CEO & PRESIDENT

Õ However, despite being one of the banks receiving ³money through the federal

government¶s Troubled Asset Relief Program´ (AFL-CIO, 2009), according to a survey

of New York Times Lewis was found to be among the 200 top-paid CEOs in 2008 ±

paradoxical and suspicious for an organization with such financial difficulties.

Õ While losses were almost $ 2.4 billion in the 4th quarter of 2008, Lewis collected almost $

10 million anyway which reveals a very poor and dysfunctional compensation practices in

the company

Õ Obviously, in this case as in many others executives ± CEO (Lewis) were awarded

compensations much higher than necessary for their attraction and retention which

resulted into ³the proliferation of poorly designed executive compensation packages that

reward executives for decisions that are not in the long-term interests of companies, their

shareholders, their employees and the wider economy´ (AFL-CIO, 2009).

 Õ poreover, CEO should be paid on ³pay for performance´ basis, which acts like 2-edged

sword where executives have ³nothing to lose by taking on huge risks to create the

illusion of profits´ (AFL-CIO, 2009). In case of Lewis, this might be observable in his

³prompting to embark on the acquisition spree that has cost shareholders dearly´ (AFL-

CIO, 2009), especially the merger with perrill Lynch.

Õ The pay of CEO is the highest from the organizational structure, as the CEO has the

biggest responsibility, he¶s well-educated graduating from Georgia State ÿniversity and

Stanford ÿniversity, has a rich experience in banking and finance sector (working for

various organizations such as North Carolina National Bank, NCNB International

Banking Corporation, NCNB ÿ.S. Department, NationsBank, and in Bank of America

since 1999) and he finally obviously possesses some valuable skills as he was awarded

Named Banker of the Year, by American Banker newspaper in 2002 and named Top

Chief Executive Officer, by ÿ.S. Banker magazine in 2002. (Behnke, 2009). All this

made him quite applicable and eligible for such a high salary.

Õ However, taking into consideration the compensation and market forces together with the

financial position of the bank, it is clear that the compensation for Lewis was not

appropriate, but unnecessary and undeserved -too high.

JOE L. PRICE ± CFO

Õ ÿnfortunately, we miss the compensation for the year 2008 or 2006 for comparison and

observation of pay development, which could show how the pay was adjusted to the bad

financial situation of the bank

Õ However, I believe that the compensation was supposed to reflect the high degree of

responsibility of this position being responsible for the company¶s financial resources and

their allocation as well as his experience and skills in the field of finance
BARBARA J. DESOER- COO (Global technology and Operations Executive)

Õ ÿnfortunately, again we miss the compensation for the year 2008 which could show how

the pay was adjusted to the bad financial situation of the bank

Õ However, we can see that the compensation was adjusted from 2006 to 2007, so

hopefully, it reflected both the financial situation and market forces as well as her

performance in company

Õ Her compensation is derived from highly responsible and crucial role in company,

heading the Operations which primarily create company¶s earnings and profit, as well as

her skills and experience in this field.

 Reference

The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO). (2009).

’
 
 . Retrieved Novemeber 5, 2009, from

http://www.aflcio.org/corporatewatch/ paywatch/pay/index.cfm

The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO). (2009).

c  Retrieved November 5, 2009, from

http://www.aflcio.org/corporatewatch/

paywatch/retirementsecurity/case_bankofamerica.cfm

Behnke, P. C. (2009).   Retrieved November 5, 2009, from Answers.com Web site

http:// www.answers.com/topic/kenneth-lewis

CompanyPay.com. (2009). Bank of America Corp: executive salaries, bonuses, stock options,

and other compensation. Retrieved November 4, 2009, from

http://www.companypay.com/executive/ compensation/bank-of-america-

corp.asp?yr=2008

Plunkett, W. R., Attner, R. F., & Allen, G. S. (2008).   

  (9th ed.). Cincinnati, OH: South-Western.