How Bank of America Protects Top Execs -- If Not Customers -- Against Sinking Home Prices
There are companies with poor public relations -- then there is Bank of America (BAC), which appears to actively seek out opportunities to humiliate itself. And I'm not even talking about bailouts and robo-signing. No, it's the company's laugh-out-loud blunders, like desperately trying to scrub the Internet of URLs that might tarnish the company's rep. Or touting its efforts to help struggling homeowners... by fobbing them off on ill-trained loan staff in Mumbai.
How does a company know its brand sucks? When its PR team uses the corporate Twitter feed to highlight the big fine it just paid the IRS for violating federal rules. I'm sure Tony Soprano is impressed. The latest gaffe involves a special program B of A is defending under which it guaranteed the home of mortgage unit chief Barbara Desoer against any loss in value when she relocated in 2009.
When Desoer and her husband sold their house in Charlotte, N.C., B of A paid a total of $2.6 million toward the purchase of a new place in California. The beauty part:
The fine print included a promise by Bank of America to eat any losses if Desoer's house in Charlotte was sold at a lower price.
On Nov. 20, 2009, Weichert sold it for $930,500 -- a 36 percent decline in just six months, property records show. Bank of America's loss: roughly $533,500.SEC to B of A: Let shareholders decide
Californians, I know what you're thinking -- no WAY she got an Olympic-sized jacuzzi and molten-chocolate fountain in the front yard for a measly $2.6 million. I'm with you. Still, that's a sweet deal for any exec, let alone one employed at a bank with the worst record in the industry of helping embattled homeowners avoid foreclosure and that is implicated, along with the rest of Wall Street, in the greatest housing crash in history.
It's also the kind of deal that shareholders hate. Institutional Shareholder Services, an influential proxy advisory firm, has taken corporations including Microsoft (MSFT), Wal-Mart (WMT) and Electronic Arts (ERTS) to task for offering so-called home-loss protection benefits. Other companies, such as Delta Air Lines (DAL), have banned the practice.
Over B of A's objections, the SEC ruled this week that the bank must let shareholders vote on whether to eliminate home-loss subsidies for execs at the company's April annual meeting. The proposal, backed by labor group Change to Win, will now be included as part of the company's proxy. Said William Patterson, director of CtW Investment Group, which works with union-related pension funds to improve corporate governance, in a statement:
The payment of these perquisites by a home mortgage lender in the midst of a national foreclosure crisis is not just bad compensation policy, it is extraordinarily laden with reputational risk. The attempts mounted by the bank to keep the proposal off the proxy betrayed a callous disregard to customers and a continuing tin ear to reputational risk.On other hand, what's the point of PR if you've got no rep left to protect?
Thumbnail from Flickr user Zhov
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