When you picked up your morning paper, you probably noticed the screaming headlines about how Washington Mutual, one of America’s largest banks, had imploded, with JP Morgan Chase scooping up the remains:
Washington Mutual, the giant lender that came to symbolize the excesses of the mortgage boom, was seized by federal regulators on Thursday night, in what is by far the largest bank failure in American history.
Regulators simultaneously brokered an emergency sale of virtually all of Washington Mutual, the nation’s largest savings and loan, to JPMorgan Chase for $1.9 billion, averting another potentially huge taxpayer bill for the rescue of a failing institution.
But if you want a snapshot of just what kind of business practices got us into this mess, consider this bit of info buried deep in the New York Times’ story — WaMu CEO Alan H. Fishman, who has held that position for less than three weeks, will walk away from the wreckage of the company somewhere between seven and twenty million dollars richer:
[T]he seizure and the deal with JPMorgan came as a shock to Washington Mutual’s board, which was kept completely in the dark: the company’s new chief executive, Alan H. Fishman, was in midair, flying from New York to Seattle at the time the deal was finally brokered, according to people briefed on the situation. Mr. Fishman, who has been on the job for less than three weeks, is eligible for $11.6 million in cash severance and will get to keep his $7.5 million signing bonus, according to an analysis by James F. Reda and Associates.
I bet WaMu’s shareholders — whose holdings have been completely wiped out — were thrilled to find that out. Especially when he told them on a conference call when he took the reins that
“I share the board’s confidence in WaMu’s underlying strength,” Fishman said during the conference call. “I know that we can and will manage the issues we face today.”
Whoops!
And what of Fishman’s predecessor, Kerry Killinger, who led the bank on the “mad acquisition spree” (as one analyst colorfully described it) that put it in its precarious position? Well, WaMu fired him when they brought Fishman on board — but when they did so, they told the SEC that it wasn’t Killinger’s fault he’d been fired:
For purposes of each employment, equity compensation or benefit agreement, plan or arrangement of the Company and its subsidiaries to which Mr. Killinger is a party or otherwise participates, Mr. Killinger’s departure constitutes a termination other than for “cause” (as such term is defined in any such applicable agreement, plan or arrangement).
Why is that important? Because it meant that Killinger could keep his severance package — a benefit he wouldn’t be able to claim had he been fired for cause. And that severance package totaled nearly $18 million:
Most of it — $16.5 million — comes from a clause in his employment agreement that promises him a lump sum payment of three times his annual compensation if he was terminated without cause and without the company being acquired.
The rest, about $5.8 million, comes from the immediate vesting of restricted stock he’s been awarded over the years.
Of course, the annual report was written a while ago, and it assumes those shares are worth $13.61 each. Killinger, like other shareholders, has been hurt by the stock’s fall: Washington Mutual shares closed today at a mere $2.83.
That suggests his restricted stock is worth something closer to $1.2 million, which would mean Killinger’s actual walking-away money is closer to $17.7 million.Still, not bad money when added to the deferred compensation and multiple pensions for which the 58-year-old executive is entitled.
Where is the accountability in modern corporate America?
I’d suggest asking Alan Fishman and Kerry Killinger — if you can get them to take a break from counting the millions they collected while running their company into the ground.