Shareholders Press BankAmerica on Wage Gap & More After Merger

Press Release
For Immediate Release - April 26, 1999
Contact:Betsy Leondar-Wright
(617) 423-2148 x13

Shareholders Press BankAmerica on Wage Gap, Golden Parachutes and Layoffs After Merger

    " We would like BankAmerica to provide leadership in controlling executive compensation costs by restoring a link between the compensation of leaders and those whom they lead...By imposing the financial discipline of a pay cap, we hope our company can help reverse a long standing trend that is neither good for business nor society. "

    - Shareholder Resolution

A group of BankAmerica shareholders is challenging the company's Board of Directors to set a maximum ratio between the pay of the CEO and that of the lowest-paid worker in the company. They cite the disparity after the merger with NationsBank between the lavish severence deals for executives and Board members and the large numbers of layoffs for non-executive employees.

BankAmerica shareholders will vote Wednesday April 28 in Charlotte, NC, on the shareholder resolution, which is part of a national campaign addressing the wage gap that was profiled in the April 8 Wall Street Journal. Members and supporters of Responsible Wealth, a project of United for a Fair Economy, have introduced shareholder resolutions about wage inequities between CEOs and average workers at nine U.S. corporations so far this year.

The resolution will be presented at the meeting by Kristin Barrali, a BankAmerica shareholder and a staffperson at United for a Fair Economy. (See enclosed resolution and statement.)

Resolution filers point to the exorbitant severance package given to former CEO David Coulter, who left the company after its merger with NationsBank: $19 million worth of stock and a pension of $5 million for life. Eighteen former board members who lost their seats in the merger received "gifts" of $300,000 each. In contrast with these lavish payoffs, employee layoffs from the merger are expected to total 18,000, 10% of the bank's workforce. Current CEO Hugh L. McColl Jr. earned $3.5 million in salary and bonus in 1998, 40% more than the median for large financial companies, according to the Wall Street Journal.

Resolution proponents were prompted to act by the threat that the growing wage gap poses to working Americans and to the nation's economic well-being. According to Business Week, CEOs at large companies now earn an astounding 419 times the pay of average blue-collar workers, up from 42 times in 1980.

In addition to BankAmerica, the Responsible Wealth resolutions have been introduced at AT&T, AlliedSignal, BankBoston, Citigroup, Computer Associates, General Electric, Huffy and R.R. Donnelley. Most of the resolutions ask the company to set a reasonable ratio between CEO pay and the lowest-paid full-time employee in the company. One resolution asks the company to report on this ratio. Another resolution asked the company to conduct a pay equity study by race and gender.

The first of the resolutions, on gender and race pay equity, at the Chicago-based R.R. Donnelley & Sons on March 25, garnered a surprising 16.2% vote, or 13 million shares. This is a very strong showing given voting procedures that favor management positions on proxy resolutions; double-digit votes are rare. The Huffy resolution received 8.34% of the vote, the BankBoston resolution 4.83%, the General Electric resolution 5%, and the Citigroup resolution 8%.

"Many Americans now see CEO pay as out of control. Even Federal Reserve Chairman Alan Greenspan has publicly criticized such lavish compensation and severance packages," according to Scott Klinger, director of the Responsible Wealth project of United for a Fair Economy.

United for a Fair Economy (UFE) is a national nonprofit organization that spotlights growing economic inequality and advocates shared prosperity. UFE recently published Shifting Fortunes: The Perils of the Growing American Wealth Gap.

Responsible Wealth, a project of UFE, is a growing network of over 400 business people, investors and affluent individuals in the top 5 percent of income and wealth working together to reverse the trend toward growing economic inequality.

Remarks of Kristin Barrali at BankAmerica Annual Meeting -- April 28, 1999

Good morning, my name is Kristin Barrali. In addition to being a BankAmerica shareholder, I am also a member of Responsible Wealth, a nationwide network of business leaders and investors who have joined together to address the growing economic divide in America. This year, my fellow Responsible Wealth members have introduced nine shareholder resolutions on economic inequality with U.S. corporations, including BankAmerica.

There is growing belief in America that executive compensation is out of control. Earlier this year, Federal Reserve Chairman Alan Greenspan testified before Congress that shareholders were wasting their money on lucrative CEO compensation and severance packages. Mr. Greenspan concluded, however, that there was little the government could do to address this concern. While the government's hands may be tied, shareholders' hands are not.

During the 1995 to 1997 period, a time when BankAmerica's predecessor companies eliminated the jobs of more than 10,000 employees, the company's top officers were rewarded with increases in their compensation ranging from 51% to 134%. Within the last year BankAmerica offered lavish severance payments to already well-paid leaders who were displaced as a result of the merger, while more than 8,000 employees who also lost their jobs received severance payments that were spartan by comparison. Our company's former president David Coulter received $29 million after leaving his job, while 18 former directors were rewarded with $300,000 each, payments which Mr. McColl announced to the Board members with a note proclaiming: "the Board has approved a gift for you."

This past year -- 1998 -- BankAmerica's executive pay practices seemed to have taken a new turn. Our CEO Mr. McColl saw his compensation decline 22% in the wake of a disappointing financial performance and still more employee layoffs. As shareholders, we are left to wonder which pay policies will guide our company in the future. Will officers be rewarded while employees sacrifice or will all employees share in the rewards and sacrifices in an equitable fashion? How we answer this question will shape the future of our company and our society.

Large discrepancies between corporate leaders and those they seek to lead create obvious problems within the corporation. When some part-time Board members are lavished with envelopes announcing six-figure parting gifts, while thousands of their colleagues receive envelopes containing pink slips, morale is damaged. Pay practices which encourage disloyalty to workers foster worker disloyalty in return.

Wide disparities in wealth also create social instability, which in turn harms the business climate. BankAmerica shareholders know first hand the losses that can result when highly wealth-stratified economies such as those in Russia, Indonesia, and Brazil crumble. For a time, wealth concentrated in the hands of the few can paint a false picture of growing national prosperity. It is, however a picture that is not sustainable.

It's time for a change! It is time to re-think the incentives we offer leaders of our corporation. It is time to look at the large option grants offered our leaders who already have options worth millions of dollars, and ask "how much incentive is enough?" It is time that we refute the "great person theory of shareholder value" that one person is responsible for the vast creation of wealth. It is time that we openly discuss the effects of concentrated wealth on our company, on the economy and on our democracy. Our proposal offers one simple solution to engage this discussion. We ask that BankAmerica establish a ratio between highest and lowest paid workers. It asks that the success of our company's leaders be linked to the success and security of their colleagues, the co-creators of value for shareholders, customers and society.

America stands at an important crossroad. Will we head into the next century as a nation divided by two sets of economic values: one that operates on a "winner takes all" principle, the other founded on the deeply seated American dream that all people who work hard deserve economic security and the opportunity to improve their lot in life? The answer to this question is up to us -- as people-- as citizens -- and as shareholders.

Please vote "FOR" item number six. Thank you.