Consider this a service to anyone out there at a TARP bank, trying to figure out how to send your executives packing with a fat suitcase full of cash.
See, technically you’re really not supposed to pay golden parachutes out while your sucking on the government teet. In practice, well, you have to be creative.
Investigative reporting site ProPublica discovered that tiny Associated Banc-Corp recently paid out $1.65 million to departing COO Lisa Binder, even though it hasn’t paid back TARP yet. That’s odd, right?
Here’s how they did it:
Binder’s severance agreement, filed last week with the Securities and Exchange Commission, acknowledges the ban on golden parachutes. But Binder’s payment isn’t a golden parachute according to the agreement: It’s compensation for “services rendered.” Those services? Not competing with the bank.
Binder has agreed not to work for a company that is headquartered in Illinois, Wisconsin or Minnesota, or to otherwise help any company compete with Associated for one year. In other words, it’s money for not doing something.
“That seems to me to be cheating,” Paul Hodgson of the Corporate Library, a corporate-governance research firm, told ProPublica.
The agreement anticipates that the arrangement might not fly with government officials. According to the agreement (see Page 6), if the Treasury Department or the bank’s regulators determine that it breaks the ban on golden parachutes, the bank will try to work something out – either by tempering the agreement to conform to compensation restrictions or getting a waiver to break them. If that doesn’t work, the agreement says Ms. Binder will just have to wait until the restrictions are changed or the bank pays back the TARP funds. Then she’ll get her money in a lump sum.
So get with it, big TARP banks. Don’t let the little guys show you up.