Payback Time for Ken Lewis

By Matt Koppenheffer
October 16, 2009 | Comments (13)

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For those who caught my original call for the ouster of Bank of America (NYSE: BAC) CEO Ken Lewis, or my more recent reaction to his stepping down, it's painfully obvious that I have no love lost for this banking chief.

So you might think I'd be cheering to hear that the White House's "pay czar" has decided that Lewis should get nothing for 2009. Oh, you didn't hear? That's right, Kenneth Feinberg, who is playing Big Brother on pay packages, has said that Lewis should treat 2009 as a year of volunteer work. That, of course, means no bonus, but it also means that Lewis has to pay back some $1 million in salary compensation he's already received.

Great news for Lewis haters, right? Maybe, but this thunderbolt has far bigger implications.

I'm all for Lewis having to suffer financial consequences for the abysmal performance of the bank he's been overseeing, but this is no way to go about it. What's next? Will execs at fellow government ward Citigroup (NYSE: C) face the same fate? Will Uncle Sam decide that he likes being the decider so much that he'll start sticking his pudgy hands further into the economy ... into, say, healthier banks like Wells Fargo (NYSE: WFC) and (shudder) Goldman Sachs (NYSE: GS)?

Please tell me this is all a very bad dream. You just don't do this. How can private businesses be expected to operate efficiently and attract talent when they not only have to deal with government regulations, but also live in fear of take-backs on previously agreed-upon compensation?

Don't get me wrong, Uncle Sam has his place in all of this. After all, he's part-owner of Bank of America, and an even larger stakeholder in AIG (NYSE: AIG), Fannie Mae (NYSE: FNM), and Freddie Mac (NYSE: FRE). But let's be sensible about this, and teach those folks in Washington how business really works.

Want to have C-suite compensation linked to real measures of performance? Want to make sure that blind risk-taking isn't rewarded? That's great! But this needs to happen through new compensation packages that reward executives for executing on a sober, long-term strategy. This business of retroactively deciding that somebody should have received no salary for a year of work, well that's just … that's just ... well, it's malarkey (pardon my French).

But what can I say? I guess it's just a mad, mad, mad, mad world.

For Foolish thoughts on other government meddling check out Brian Orelli's article on trying to have your health-care cake and eat it, too.

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Fool contributor Matt Koppenheffer owns shares of Bank of America, but does not own shares of any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool. The Fool’s disclosure policy decorates wedding cakes for fun and profit.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 16, 2009, at 1:11 PM, verdure wrote:

    The thing is that we, US citizens, are significant owners of BAC. The lesson to others is -- don't screw up and require bail-outs if you want to keep your craftily aquired earnings potential. Think of it as a stockholders revolution. ;)

  • Report this Comment On October 16, 2009, at 1:25 PM, Fool wrote:

    I can see not receiving a bonus for a poor performance but paying back your salary already paid sounds like it should be illegal.

  • Report this Comment On October 16, 2009, at 1:32 PM, EAllahverd wrote:

    So what..He is getting his 69 Million Dollars retirement package isn"t HE..

  • Report this Comment On October 16, 2009, at 3:12 PM, ByrneShill wrote:

    You're right. He should keep his milion base pay, but receive no bonus.

    On the other hand, tar and feathers shouldn't be out of the question. A good old public lynching once in a while might very help CEOs keep things straight.

  • Report this Comment On October 16, 2009, at 3:14 PM, thepage wrote:

    "...teach those folks in Washington how business really works"

    You have GOT to be kidding me! You did hear about the financial meltdown that destroyed millions of lives and nearly destroyed everyone, right? And of BAC's not inconsiderable part in it? As long as BAC has billions in taxpayer money shoring it up, I am glad that someone in Washington is looking after my involuntary investment, even if way too late to prevent the worst consequences.

  • Report this Comment On October 16, 2009, at 5:38 PM, kgeechee wrote:

    Hang 'Em High,

    Feed their Bones to the Buzzards,

    CEOs,

    Brokers,

    Money Managers,

    Analysts

  • Report this Comment On October 17, 2009, at 7:11 AM, Global10 wrote:

    I'll second that motion and let the revolution begin!!!!

  • Report this Comment On October 17, 2009, at 5:44 PM, multi007 wrote:

    "verdure wrote

    The thing is that we, US citizens, are significant owners of BAC. The lesson to others is -- don't screw up and require bail-outs if you want to keep your craftily aquired earnings potential. Think of it as a stockholders revolution. ;) "

    What's next? A welfare revolution with tanks driven by food stamp recipients down Beverly Hill Drive knocking down gates and doors to take what they think is right? Oh yea, thats kind of what is happening right now... the hunt for free health care for the poor.

    Funny how it takes an appointed high paid "Czar" who is paid over six figures a year to shake his finger at high paid wall street execs and exclaim how how pay will not be tolerated. (Reminds me of Michale Moore's press coverage this week doesnt it?)

  • Report this Comment On October 17, 2009, at 5:48 PM, multi007 wrote:

    "I'll second that motion and let the revolution begin!!!!"

    It already has - you'll may be getting your free health care soon. Thanks to Robin Hood -er, Obama.

    Unless Nottingham, er, the Republicans can stop them.

  • Report this Comment On October 17, 2009, at 5:51 PM, multi007 wrote:

    FYI - BAC saved this country from a depression. They bought Merill and Countrywide. If ML and CW went bankruptcy like BearSterns, Lehman, etc. we would be in a Depression and unemployment would have hit 20% or more. Yes, this was bad, but it could have been worse.

  • Report this Comment On October 18, 2009, at 7:04 AM, Fififoe wrote:

    It seems odd that Merril produced a profit which offset BAC loss this quarter, what is really going on who saved who?

  • Report this Comment On October 18, 2009, at 12:20 PM, warrenrial wrote:

    Some of your biggest thieves are in

    Washington.

  • Report this Comment On October 18, 2009, at 3:06 PM, multi007 wrote:

    "warrenrial wrote: Some of your biggest thieves are in

    Washington."

    Its not theft if it's legal.

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