Executives for the five Colorado banks taking a collective $100 million piece of the federal bank-bailout pie face limits on pay, perks and golden parachutes under wording tucked into the new economic-stimulus law.
The top five officers at Denver- based CoBiz Financial Inc., for example, will have to forgo annual bonuses, sometimes surpassing $50,000 a year, regulatory filings show — until the Troubled Asset Relief Program funds are paid back.
And they may see such fringe benefits as health-club membership dues and travel accounts for spouses curtailed under rules requiring policies on “luxury items.”
The banks sought the U.S. Treasury funds to bolster their capital base, allowing them to make more loans and other investments. But terms of their deals were rejiggered by Congress when it put together the stimulus bill.
Backers of the executive-pay curbs stress that they are necessary to prevent bank chiefs from taking excessive risks during the recession.
State banking leaders counter that the limits may backfire by discouraging other institutions from taking TARP money that could benefit the local economy. Or by sending talented executives at TARP banks packing for jobs without federal strings tied to pay.
Under one provision of the stimulus law, the president of Bankers’ Bank of the West of Denver, Bill Mitchell, could find his company car — a 2007 Toyota Avalon — reviewed to determine whether it’s an excessive perk.
“I’d say that car’s a pretty Spartan benefit,” Mitchell quipped, comparing it with the spoils of jet-setting Wall Street executives.
“There’s a real sense of frustration right now — and certainly surprise,” said Steve Bangert, chairman of CoBiz. “It makes you wonder what else lies ahead.”
The strictest limits apply to banks winning the biggest share of funds. Because CoBiz accepted $64.5 million, the largest disbursement in Colorado thus far, it falls within a category barring the five top paid employees from earning “any bonus, retention award, or incentive compensation.”
The exception is through payments of long-term restricted stock, and that amount can’t exceed a third of their annual pay.
Because Bankers’ Bank of the West was awarded $12.6 million, falling within the smallest funding category, only the single highest-paid employee — in this case, Mitchell — feels the pain.
Among the new corporate governance rules causing heartburn:
• Banks must create a policy addressing “excessive or luxury expenditures” per the direction of the Treasury Department, which may cover entertainment, office and facility renovations and transportation.
• They must form an “independent” board compensation committee to review pay packages.
• They must seek shareholder approval — though nonbinding — of executive compensation.
• Banks must not make “golden parachute payments” to a senior executive officer or any of the next five most highly compensated employees while TARP funds are outstanding.
A provision in the new law allows banks to pull out. Both Bangert and Mitchell said the new limits aren’t severe enough for their banks to quit the program.
But they are awaiting guidance from the Treasury Department that will specify all forms of compensation that must be scaled back and what constitutes “golden parachutes.”
Other executives of TARP-funded banks affected by the new standards include: First Western Financial Inc. of Denver chairman Scott Wylie; Columbine Capital Corp. chairman Dave Boyles; and ColoEast Bankshares Inc. chief Steve Sherlock.
Research librarian Barry Osborne contributed to this report.
Miles Moffeit: 303-954-1415 or mmoffeit@denverpost.com
