First Bank System Inc. said it will pay each full-time employee a $750 bonus for enduring the company's failed attempt to acquire First Interstate Bancorp.
The money, totaling about $11 million for 13,000 people, will come out of the $200 million breakup fee that Minneapolis-based First Bank negotiated at the outset of its "white knight" approach to First Interstate.
Wells Fargo & Co. eventually made the winning bid of $11.6 billion for the Los Angeles-based company.
First Bank System has indicated that it intends to funnel the remainder of its windfall - $179 million after the bonuses and other First Interstate-related expenses, or about 70 cents a share - to shareholders.
But community activists want the entire $200 million be put into a foundation that would fund economic development and job creation initiatives in Minnesota and California.
"It's an unearned corporate windfall, and there's no reason for that to go into corporate coffers," said Anthony Reese, associate director of the Greenlining Institute in San Francisco. "That $200 million is coming out of Wells Fargo's hide, which means that ultimately it is coming out of our community."
First Bank chairman John F. Grundhofer, responding to a letter from the activist group, said the company will not set up a separate foundation but will continue its efforts through its existing FBS Foundation.
"First Bank System will use its $200 million breakup fee to benefit (all) of its constituencies, including shareholders, employees, customers, and communities," he wrote in a Jan. 31 letter.
Mr. Grundhofer could not be reached for further comment. His gesture toward employees appears uncharacteristically magnanimous for a man whose cost-cutting - beginning with a 1990 restructuring that reduced the payroll by 2,000 - earned him the label "Jack the Ripper."
"There were relatively few people who worked directly on the transaction," Mr. Grundhofer wrote in a memo to employees this week. "Most of you continued to do what you've been doing for the past several years - you handled the uncertainty, and delivered results to the customers and shareholders."
"It was your hard work and dedication," he added, "that put our $33 billion (asset) bank in a position to even make an offer on a $60 billion bank."
"It's like Christmas in February," said one branch worker, who can expect a check later this month.
Though there were rumors that an acquisition of First Interstate could cause a reduction of jobs and perhaps removal of its headquarters to Los Angeles, there were no protests by First Bank workers like those staged by First Interstate employees against the Wells bid.
Mr. Engen is a freelance writer based in Minneapolis.
MINNEAPOLIS - William F. Farley announced his resignation Tuesday as vice chairman of First Bank System.
Mr. Farley, 51, was responsible for retail and community banking across an 11-state territory with more than 300 branches.
"I am pleased to have been a part of FBS and its successful turnaround," he said. "Given the events surrounding the First Interstate transaction, now is the time for me to move on to other opportunities."