An investment fund affiliated with an employee union will force Bank of America to ask investors to approve or reject a policy of making executives whole for real estate losses incurred in connection to corporate relocations.
The controversy began when Bank of America disclosed that it had agreed to reimburse mortgage chief Barbara Desoer for any loss on the sale of her home. Desoer was moving from North Carolina, where Bank of America is based, to California to run Countrywide, the mortgage company the bank had acquired.
Change to Win, an investment group affliliated with the Service Employees International Union, is asking shareholders to bar any similar executive benefits in the future. The bank tried to have this excluded from its proxy, claiming that the union was micromanaging its compensation policy, but the SEC rejected this argument.
Regardless of the legal merits of Change to Win’s position, it is clear that the union group is not advocating this position as an ordinary shareholder. The overall cost of relocating Desoer and making her whole on her home sale loss isn’t even a blip on balance sheet of Bank of America.
What’s really happening here is a complex dance between Bank of America’s management and the union—at the expense of shareholders. Unions want more say on how executives are compensated so that they can better negotiate the pay of their members. The basic deal is: raise union employee pay or we’ll make it difficult to pay your executives.
The loser in all this is the ordinary shareholder of Bank of America.
Executives will be paid, union workers will be paid, and shareholders will see a smaller dividend.
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