Wachovia's executives could make $98.1 million in severance news
25 November 2008

The top 10 of Wachovia Corp's executives might end up making almost $98.1 million in severance pay once the bank is acquired by Wells Fargo & Co.

Wachovia, which lost $33 billion during the last two quarters, made the declaration in a US Securities and Exchange Commission (SEC) filing. It said that the executives would receive severance under their employment agreements, if the merger was to close by 31 December 2008, as is expected. Wachovia said its shareholders are scheduled to vote on the merger on 23 December.

However, the top 10 list of these executives does not include Robert Steel, the current CEO of Wachovia who stepped into the shoes of Ken Thompson in July, as ostensibly he does not have an employment agreement. Wachovia said a closing would entitle 11 executive officers, including CEO Steel and chairman Lanty Smith, to $2.5 million in equity-based awards under stock incentive plans.

However, the executives' stock options are worthless, Wachovia said. The bank's spokeswoman Christy Phillips-Brown said the real amount in severance payments following the closing should be lower than $98.1 million, as two of the 10 eligible executives have accepted positions at Wells Fargo. She said "several others" were in talks.

Wachovia had to scramble to find a merger partner when its losses spun out of control on a $118.7 billion portfolio of option adjustable-rate mortgages that it had taken on when it acquired California's Golden West Financial Corp in 2006. The Charlotte, North Carolina based bank took a body blow from the credit crunch, with its loan portfolio home to a large number of problem mortgages.

On 3 October, Wells Fargo agreed to acquire Wachovia for $15.1 billion in stock, outdoing a lower bid by Citigroup. As of 21 November, the value of the merger had fallen to around $9.3 billion, given the falling value of Wells Fargo stock.


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Wachovia's executives could make $98.1 million in severance