PNC Financial CEO gets $3 million stock bonus

February 18, 2009 4:23:25 AM PST
PNC Financial Services Group Inc. said its top five executives will receive 2008 bonuses valued at about $7 million, albeit mostly in restricted stock, bucking a trend among bank executives to forego bonuses amid increased scrutiny over Wall Street paychecks.

The awards are about $1.4 million less than the bonuses paid out to the same executives in 2007, according to regulatory filings.

Chairman and Chief Executive James E. Rohr will receive an award of restricted stock valued at $3 million, according to a regulatory filing made on Friday. In 2007, Rohr received a bonus of $3.5 million, the majority of which was in cash.

President Joseph C. Guyaux will receive a bonus of $1.3 million, including a cash award of $250,000.

Other awards include $1.2 million in restricted stock for Senior Vice Chairman William S. Demchak; a $785,400 bonus to Vice Chairman Timothy G. Shack, of which $250,000 was in cash; and a $710,000 bonus to Chief Financial Officer Richard J. Johnson.

Taxpayers have become critical of executive compensation amid reports that $18 billion in bonuses have been doled out to employees of financial firms that got money from the government's $700 billion bailout fund. Pittsburgh-based PNC received a $7.6 billion investment from the government last fall.

Bank spokesman Brian Goerke said the payout decision by PNC's board "takes into account PNC's strong relative performance and the challenging circumstances facing our industry and the economy." Goerke noted that PNC used business revenues to pay the bonuses, not government money.

David Wise, senior consultant for the Hay Group, a management consulting firm, said that the fact that the bonuses were primarily paid in restricted stock "should give shareholders some comfort that the value of the bonus will ultimately be linked to shareholder value down the line."

"Historically, it's not a large bonus amount," Wise said, "but that does not change the fact that some shareholders will question the payment of bonuses at all."

Other CEOs of major financial companies have opted to go without 2008 bonuses, including Morgan Stanley's John J. Mack, former Merrill Lynch CEO John Thain, Goldman Sachs' Lloyd Blankfein and six of his top lieutenants, and Citigroup's Vikram Pandit.

PNC reported a fourth-quarter loss due to increased credit costs less than two weeks ago and announced plans to cut 5,800 jobs.

According to the filing, the amount of each bonus was determined by certain corporate performance metrics, including earnings per share, as well as corporate performance as measured against the bank's peer group.

The board's personnel and compensation committee believed awarding bonuses was "reasonable and advisable, particularly in light of PNC's strong relative performance and management's avoidance of many of the poor decisions and business strategies that have weakened many financial institutions and have caused others to fail or be acquired," the filing said.

PNC became the first bank to use government money to make an acquisition, buying up troubled Cleveland bank National City Corp. for $5.6 billion in December.

President Barack Obama has instigated $500,000 pay caps for executives of firms that receive "exceptional assistance" in the future. The restriction does not apply to such firms as Bank of America, American International Group Inc., Citigroup Inc., and the three major auto makers that already have received such help.

PNC shares fell $1.80, or 6.4 percent, to $26.40 in afternoon trading amid a broad decline in the market.

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