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AMCORE's timing 'couldn't be worse' with bonuses

Wednesday, March 18, 2009  
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By Melissa Westphal

Mar 18, 2009 @ 01:56 PM

ROCKFORD — The $1.2 million in retention bonuses awarded to AMCORE Financial’s top five executives is the “best example of the worst thing you could do” in this economy, business experts say.

“It’s really something that does not look good on the surface,” said Mason Carpenter, a professor of management and human resources at the University of Wisconsin-Madison.

Public outrage over executive compensation has reached a fever pitch lately, with companies like American International Group and Bank of America being called upon to justify billions of dollars paid to their executives for 2008.

But there’s a difference between those companies and AMCORE. Bank of America and AIG, along with dozens of others, have received hundreds of billions of dollars in taxpayer money through the federal Troubled Asset Relief Program. And their bonuses were largely based on company performance — in a year that wiped out Wall Street as well as any number of banking companies across the country.

In AMCORE’s case, the bonuses were not based on performance, but to ensure its top executives remained with the bank, which has not received any taxpayer money.

“The idea behind retention bonuses is paying someone to do things in the stockholders’ or employees’ best interest,” Carpenter said. “The company is saying that these people are the most important for the company’s survival and future prosperity. It’s like an insurance policy.”

Under the bonus plan, CEO William McManaman received $526,417, Chief Financial Officer Judith Carre Sutfin was given $190,625, Chief Operating Officer Donald Wilson received $250,833, and Executive Vice Presidents Richard Stiles and Guy Francesconi received $132,916 and $125,666, respectively.

The five are also eligible for an additional $485,215, to be split among them, in retention bonuses this year, provided that they remain with the company through Jan. 31.

“Based on the immediate and significant issues the bank faced, it was determined that short-term compensation over a three-year period was the best method to address the objectives that needed to be achieved,” Katherine Taylor, vice president of corporate communications and investor relations, said in a statement earlier this week. “The retention bonus was ... to ensure that key executives were retained to lead the company through very difficult times.”

Still, local business experts agreed that the timing couldn’t be worse.

“People are probably feeling like those executives need to share in the pain that everyone else is feeling right now,” said Stephen Kadamian, an assistant economics and business professor at Rockford College. “This is why people are so upset with the banking industry as a whole.”

Steve Wong, a marketing professor at Rock Valley College, said the move could hurt morale among employees, and questioned whether AMCORE’s executives required the bonuses to guarantee their staying with the company.

“Companies are worried about their top executives leaving, but far fewer are leaving, especially during tough economic times,” he said. “Companies owe it to their employees and consumers to look at all the options, especially when they’re cutting raises and 401(k) contributions for everyone else.”

UW-Madison’s Carpenter agreed.

“It’s unusual in a time when lots of consolidation is happening in the banking world, and there are lot of good people on the street without jobs in banking,” he said

The retention plans were approved in April 2008, but the first installment of bonuses was paid by Jan. 31, according to a filing with the Securities and Exchange Commission. This month, the company decided to freeze wages of all 1,300 employees and suspend a 3 percent cash contribution to employee retirement plans.

The retention bonuses are payable in three installments. The other two installments are payable on or before Jan. 31, 2010, and Jan. 31, 2011.

AMCORE lost $97.8 million in 2008, a loss based on rapidly declining revenues and rising levels of failing loans.

And experts were quick to point to the company’s board of directors, which should bear the responsibility for the bonuses.

“The board members have a fiduciary responsibility,” Kadamian said. “As it looks, the chicken coop is wide open, and everybody is getting all they can get.”

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