SunTrust CEO Accepts Bailout, Pay Raise

By Mike Schuster Feb 26, 2009 1:50 pm

Brief scrutiny of today's headlines.

Comment

Here's yet another firm that refuses to believe that executive compensation should reflect company performance: Prior to accepting federal bailout money, SunTrust Bank (STI) granted CEO James M. Wells III a massive pay raise.

According to a proxy filed this Monday with the Securities and Exchange Commission, the company's board of directors raised Wells' total compensation over 75%, to almost $8.1 million.

Last year, Wells' base salary jumped 7.7%, to roughly $1.1 million; he also received stock options worth $2.1 million and restricted shares totaling $4.7 million.

Given the fact that SunTrust stock dropped 54% in 2008, and an additional 63% since the new year, company spokesperson Mike McCoy assured USA Today that the proxy overstates the current value of Wells' compensation. The stock options and restricted shares were granted a year ago, when shares were fetching $64.58.

Attemping to put a positive spin on the situation, McCoy stated, "Obviously, our stock has declined significantly since then."

It's true: The $4.7 million worth of restricted shares are estimated at $560,012 as of last week, according to the Associated Press. However, the company's profit and return on equity didn't reach year-end goals in 2008 and earned less than half of 2007's $4.55 per share - thus putting the justification of any base pay hike into question.

The heads of Ford (F), Citigroup (C) and Aflac (AFL) have all implemented slashed salaries, citing lower stock values.

Apparently, both Wells and SunTrust think they're a bunch of cowards.Twitter: @mcs212