Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, April 10, 1990 TAG: 9004100134
SECTION: BUSINESS PAGE: A7 EDITION: STATE
SOURCE: Los Angeles Times
DATELINE: SAN FRANCISCO LENGTH: Medium
"I think they're on the cutting edge," said John A. Fischer, a principal in the Los Angeles office of Sibson & Co., a human resources consulting firm. "We're going to see a lot more sensitivity about executive compensation."
Elimination of the 3 1/2-year-old provision was quietly disclosed last week in the proxy of San Francisco-based BankAmerica, parent of Bank of America. The document said officers covered by the plan "voluntarily surrendered their rights to receive benefits . . . and the board terminated the plan."
The golden parachute program was adopted in August 1986 when the institution was drowning in red ink because of bad loans and was under siege by a hostile suitor, First Interstate Bancorp. It provided for payments equal to three times an officer's annual cash compensation, plus the value of some stock, should the executive be fired or leave after a change of ownership. BankAmerica Chairman and Chief Executive A.W. Clausen's cash compensation for 1989 was typical: $1.7 million.
Such programs sprang to life during the 1980s takeover wave and were adopted by scores of U.S. companies. Shareholders criticized them as costly provisions that tended to insulate management and dissuade suitors; rank-and-file workers said management could walk away in comfort after a takeover whereas they were left hanging out to dry.
Given BankAmerica's dire straits at the time, the plan was viewed as necessary. Since then, however, BankAmerica has staged an awesome turnaround. It reported a record 1989 profit of $1.1 billion.
"Management insulation mechanisms" have increasingly come under fire, said Donald Crowley, a banking analyst in the San Francisco office of Keefe, Bruyette & Woods, a brokerage house. A sampling of compensation experts said they did not know of other companies planning to eliminate golden parachutes, but all agreed that companies would be wise to consider it.
"Institutional investors are increasingly taking the position that they won't support companies [with those plans]," said Sibson's Fischer.
by CNB