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 Bank of America CEO, Kenneth D. Lewis 
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While CEO of Bank of America in 2007, Kenneth D. Lewis earned a total compensation of $20,404,009, which included a base salary of $1,500,000, a cash bonus of $4,250,000, stocks granted of $11,065,798, and options granted of $3,376,000. In 2008, he earned a total compensation of $9,003,467, which included a base salary of $1,500,000, stocks granted of $4,255,012, and options granted of $2,973,330. Lewis was sharply criticized for his purchase of Merrill Lynch in January 2009 after it was revealed he knew of massive losses before the deal closed and declined to inform Bank of America shareholders. Merrill recorded an operating loss of $21.5 billion in the Q4 2008, requiring an additional $20 billion cash infusion from the U.S. government, bringing the government's total investment to $45 billion. The Bank's stock price fell 78% from $33.74 on September 12, 2008 (the last trading day before the deal was announced) to $7.18 on January 16, 2009 (the day the Bank's earnings were released), eliminating $108.2 billion in market capitalization. The stock price declined further ($3.93 on February 19, 2009) in the following month. The Bank now expects Merrill Lynch to dilute earnings for at least two years. One issue is whether Ken Lewis and team performed adequate due diligence on the complex portfolio on Merrill's balance sheet during the weekend of September 13-14, 2008, when the deal was conceived and announced, or in the following two months leading up to the shareholder vote on December 5, 2008. The Bank took pains to convince its shareholders it performed appropriate analysis and also cited extensive work by J.C. Flowers to evaluate Merrill's operations and assets. Also in question is the Bank's decision not to inform shareholders of the extent of Merrill's losses before the deal closed, and how much Lewis knew about the deteriorating situation by December 5, 2008. The fixed income markets suffered major dislocations in October and November, ahead of the shareholder vote, but Lewis claimed on the January 16 earnings call that the problems only surfaced in mid to late December. Kenneth D. Lewis : Google Images |
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