In a strong indication that banks and thrifts won't give in easily as the industry consolidates, a number of shareholder rights plans have been launched during the past few months.
As the mergers and acquisitions boom rolls on, banks and thrifts increasingly are implementing defensive strategies, like poison pills and share repurchase programs, that make mergers far more difficult.
And at least six of the top 50 banks in the country offer golden parachutes to so many of their executives that it would make an acquisition significantly more costly, said a compensation consultant.
"A lot of companies will try to wrap themselves in any protection because they are afraid of being acquired and afraid of competition," said Stanley J. Bradshaw, CEO of Roosevelt Financial Group Inc. in St. Louis, the nation's 10th-largest thrift and one of the few companies that haven't taken protective measures.
Mr. Bradshaw argued that poison pills are self-defeating because they magnify an institution's weakness and attract acquirers.
More important, he added, shareholders should be able to decide whether new management is the best option, without distortions like poison pills.
Nonetheless, many companies, citing the benefits of independence, implemented programs that allow shareholders to buy stock at a deep discount if a certain percentage of equity is bought by a single party.
In November, Central Fidelity Banks Inc., which has $9.1 billion in assets and is one of the top prizes in Virginia, lowered the percentage threshold at which a poison pill takes effect to 10% from 20%. Thus existing shareholders would be able to buy shares at half price once a would-be acquirer bought only 10% of the shares.
The company's longtime CEO, Carroll L. Saine, died in July, and since then takeover rumors have swirled around the Richmond, Va.-based company. But Central Fidelity has vigorously asserted its independence.
The bank argues that it is merely bringing its plan into conformity with a Virginia law that allows poison pill levels to be as low as 10%, said William N. Stoyko, the bank's senior corporate counsel.
Nonetheless, the bank has clearly made it more difficult for an acquirer to launch a hostile acquisition.
When the acquiring company is willing to stomach the price, the results can be embarrassing.
Three months after BB&T Financial Corp. and Southern National Corp. agreed to a merger of equals, the price of Southern National's CEO Glenn Orr stepping aside became clear in federal filings: a $1.7 million salary for life, moving expenses, a new car, and country-club dues.
All these goodies will be passed on to Mr. Orr's wife if he dies - except the country-club dues.
BB&T announced it would take an $80 million first-quarter charge because of the merger, $13.1 million of which is attributed to Mr. Orr's buyout.
Southern National defended the package, citing the bank's record under Mr. Orr. But whatever the record, the buyout was required under a contact Mr. Orr signed when he joined the bank in 1981.
No one knows how many similar contracts exist or how many banks would be willing to take a major charge to allow one executive to retire in comfort.
Still, cases like Mr. Orr's have been rare in the industry. Compensation consultant Vincent Parro of Sibson & Co., expressing amazement at Mr. Orr's package, said the standard package is three times annual salary.
Nonetheless, compensation packages in the banking industry could pose a problem for potential buyers.
A handful of top 50 banks have committed to golden parachutes, said Thomas Wamberg, a principal with Clarke/Bardes Inc., a benefits consulting firm in Chicago.
Mr. Wamberg would not disclose which banks have the programs, which reward all executives rather than just the top few officials. But he said the programs are often used to ensure loyalty when a bank is on the auction block.
"Often it is a way to motivate the executive team when a bank is rumored to be about to be sold," he said.
Many of the parachutes expire 24 months after a bank is acquired, so if the buyer can wait, the parachutes may not be a problem, Mr. Wamberg said.
"Security has become a much bigger issue in the banking world," he said. "Mergers and acquisitions have really moved many executives to fear for their livelihood."
Mr. Wamberg said the golden parachutes were not designed to ward off acquirers, but they could have that effect.
First Bank System Inc. in Minneapolis, a large midwestern regional that may be a prize acquisition target in a few years, has a golden parachute program.
The parachutes are not a defensive measure, said spokeswoman Wendy Raway, who has one of her own.
Nonetheless, for acquirers looking to buy or merge with the $25.7 billion-asset bank, the parachutes could add to the cost.
Another obstacle to mergers are share repurchase programs, which have swept the industry in the past year.
These programs often are designed to keep acquirers away, but under the guise of improving shareholder value.
Repurchased shares are considered tainted and cannot be used in a pooling-of-interest transaction under Financial Accounting Standard Board rules.
Perhaps the clearest example of this strategy is Michigan National Corp., which announced in December that it would buy back 14% of its shares.
The embattled bank has resisted shareholder pressure to sell for more than a year, and the repurchase is one tactic.
Certainly not all repurchase programs are intended to avoid acquisitions - but they make them more difficult.
And while many shareholder rights plans take the form of poison pills, others take the form of rights offerings, which give existing shareholders special preference in the purchase of stock.
Mr. Bradshaw of Roosevelt Savings scorns his industry for these tactics.
"The companies with management that works the hardest at staying independent jeopardizes independence the most," said Mr. Bradshaw, whose own compensation is set by a committee.
And as institutional money moves into the industry, he added, shareholders simply will not stand for plush compensation packages, poison pills, and obstructionist share repurchase programs.
But, just the same, as the M&A juggernaut gains speed, many institutions will do all they can to stay out of the way.