The media has struggled to understand why thousands of protesters have occupied Wall St for days and seem to have no plans to leave. It is simple on one level: the protestors read the papers. The Bank of America announced last week that it paid $11 million to departing executives Sallie Krawcheck and Joe Price who were fired as part of a management shake-up by Chief Executive Brian Moynihan. The severance was announced at about the same time Moynihan was in a fight to defend the new $5 per month debit card fee that the financial firm will charge its customers.
The disclosures of the severance packages were required under SEC regulations. And, it was impossible to avoid the payments, since these millions were part of the two executives’ employment contracts. The $5 fee is another matter entirely. Obviously, the bank does not have a contractual obligation to charge customer fees, as it did to pay departed executives.
Moynihan said that his company should be allowed to make a profit. He reacted to negative press coverage about the fee when he stated it is “an inherent duty as a CEO of a publicly held company to get a return for my shareholders.” Yes, it is. But, the revenue from the $5 fee can hardly offset the cost of the large numbers of mistakes he has made. These are mistakes that have decreased his company’s share price from over $15 a year ago to $5.50 recently. Bank customers protest that they should not have to pay a new charge to make up for Moynihan’s poor stewardship.
The protestors want banks to change their habits. They do not appear to understand there is no noblesse oblige among the financial executives on Wall St. The public sees banks lose billions of dollars created by bad decisions made by America’s largest financial companies. These decisions can cause bank executives to be fired or to resign. Even in these economically difficult times, these managers insisted on their severance of millions. Why shouldn’t they. The severance payments are their right.
People are even more enraged because neither the financial companies nor Washington will address the fees consumers must pay their banks for the privilege of keeping money in them.
What the protesters do not want to admit is that Moynihan is within his rights. He has the right to make nearly endless mistakes if they do not violate federal or state regulations. Of, course, people who are unhappy with the bank can withdraw their money. Shareholders who get poor returns can sell their stock. Moynihan will be remembered as one of the worst CEOs of the last several decades, but he has the right to make poor judgements. The only comfort that shareholders and customers have is that he will lose his job soon—and get millions of dollars when he leaves
Douglas A. McIntyre