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As the government slashes pay for Ken Lewis and other executives at Bank of America, one key player at the bank gets to keep a perk valued at more than $1 million last year - abundant personal use of company-provided airplanes.
That privilege goes to Chad Gifford, an influential director who is helping lead the search for the bank's new chief executive. Last year, Bank of America spent $947,682 on his flights, according to regulatory filings. It spent another $281,307 to help him pay for the accompanying taxes.
Gifford was the CEO of FleetBoston Financial Corp. when Bank of America bought it in 2004. It's not uncommon for executives of his level to get big perks when they retire, including country club dues and home security systems. But use of the company jet or company-chartered jets in retirement is one of the most expensive and exclusive perks.
As a board member, his perks don't fall under the government's heightened scrutiny of bank executives.
"Of all the perks that a CEO hates to give up, it's the corporate jet," said Ray Groth, co-founder of the Directors' Education Institute at Duke University. "It's a great benefit - not having to go through lines and security."
But in the past year, public anger - coupled with billions in government loans to the banks - has led to radical questioning of the big paychecks and other perks that have been the norm for top bankers. Because it holds $45 billion in government loans, Bank of America is under the scrutiny of a "pay czar" appointed by the Obama administration this summer, with authority to oversee executive pay at the bank and a handful of other firms.
The pay czar, Ken Feinberg, ruled last month that the bank should not pay more than $25,000 per year in perks for each top executive. That could include personal flights on company planes. He also questioned the need for providing such extras for executives who are already highly compensated. "...(E)xecutives - and not companies - should generally cover the costs of personal expenses," his ruling said.
A Treasury spokeswoman said Feinberg picked $25,000 as the measure because it "struck the right balance between the need to retain talent, reward performance and curb excesses."
Board directors are not subject to Feinberg's rulings. A board is supposed to act as a check-and-balance on a company's management, representing the interests of shareholders and overseeing the CEO.
According to regulatory filings, Gifford entered a five-year retirement agreement with Bank of America in 2005. Under that agreement, he gets use of "company-provided" aircraft for up to 120 hours per year, office space for as long as he requests, and secretarial support. He also gets $50,000 annually for providing "consulting services," including advising the bank how to direct its marketing and charitable efforts in the Northeast.
In 2008, the bank paid more than $225,000 in "office and administrative support" for Gifford, more than $947,000 in flights, and more than $281,000 to help him pay taxes on the flights. He is by far the most highly compensated member of the board - excluding Lewis, although Lewis is not receiving any pay for 2009 under Feinberg's direction.
Like the other directors, he also receives at least $240,000 each year in cash and restricted stock for serving on the board.
Like Lewis, Gifford is not deemed an independent director, because he was once employed by a bank predecessor and receives such a hefty compensation package.
Gifford's retirement agreement will be up for renewal in January, though it's unclear how or if it will change. The agreement does specify that his plane use will be limited to 100 hours per year in any renewed contract.
A bank spokesman declined to comment on the matter. Gifford, who turns 67 on Sunday, did not return a call seeking comment.
Gifford is on the board's six-member committee leading the search for a new CEO. He and two others on the committee have roots with Fleet, and critics have raised questions about whether they'll swing the vote to former Fleet executive Brian Moynihan without thoroughly vetting outside candidates.
It's expected that Gifford, along with Moynihan and others, will be asked to testify Nov. 17 before the House oversight committee, which is investigating Bank of America's Jan. 1 purchase of Merrill Lynch & Co.
Gifford has also gained attention recently for e-mails he wrote that were released by the House committee, where he expresses frustration with the Merrill deal and the bank slashing its dividend payout to shareholders. "Unfortunately it's screw the shareholders!!" he wrote in a January e-mail to Thomas May, another director from Fleet.
Gifford also served as Bank of America's board chairman for 10 months after the bank bought Fleet.
Groth, from Duke's Directors' Education Institute, said he didn't think the flights would affect Gifford's judgment as a director. He and Charles Elson, another expert on corporate governance, also pointed out that such perks are not uncommon for retiring executives, or at least they weren't before the recession hit. Jack Welch's huge package of fringe benefits, which he got when he retired as General Electric's CEO in 2001, was made famous when it was disclosed during his messy divorce. That included not just use of a company plane, but also company-subsidized flowers and dry cleaning.
Groth and Elson both said it would probably be in the bank's best interest for Gifford to give up the flights.
"It's a lot to give up," said Groth, who is also a managing director at Fennebresque & Co. in Charlotte, "but I'd rather have him as an independent director."
Elson, who runs the Weinberg Center for Corporate Governance at the University of Delaware, said Gifford's arrangement "was troubling when they gave it to him, and it's still troubling today."
"I would hope that as a director he would forgo such a privilege," said Elson, who is also a bank shareholder. "It ties him to management. In this day and age, it isn't helpful to the bank."
