Smith Has No Guarantee Of Heading BankAmerica
SAN FRANCISCO - Robert H. Smith, chairman of Security Pacific Corp., has received no assurance that he will eventually succeed Richard M. Rosenberg as head of BankAmerica Corp. after the two companies merge, with the recently announced merger accord.
But BankAmerica has committed itself to paying Mr. Smith a multimillion-dollar "golden parachute" if he is not selected as chief executive officer when Mr. Rosenberg retires, the sources added.
Pivotal Date: 1995
A golden parachute provides handsome compensation to a senior executive as part of a severance agreement. It probably would not apply if Mr. Smith did not stay with the company until Mr. Rosenberg departs.
Mr. Rosenberg is 61 and would be expected to retire as chairman and CEO in 1995. Mr. Smith, who is 55, will have the title of president and chief operating officer when the merger is completed.
Mr. Smith's succession agreement is in the form of a contract to be spelled out in merger disclosure documents, the sources said.
While the exact value of Mr. Smith's golden parachute could not be learned, investment bankers say such benefits ordinarily equal three years' salary. Mr. Smith received cash pay of $789,000 in 1990. His compensation at the merged BankAmerica is unknown, but investment bankers estimate his golden parachute would be worth $2 million to $3 million.
Board to Make Crucial Decision
Spokesmen for the two companies declined to comment. But at a news conference when the merger was announced last month, Mr. Rosenberg said his successor would be chosen by BankAmerica's board when he retires.
Mr. Smith said he hoped "to be selected when the time comes."
An Unusual Arrangement
Merger experts say it is common for a senior executive of an acquired bank to get money in exchange for power. But usually such agreements are oral and informal.
"I have never seen an agreement [that says] if someone is not promoted they get a golden parachute," said a California investment banker.
The arrangement is seen as a practical way of dealing with Mr. Smith's status following the merger.
"There are several executives at BankAmerica who are candidates to succeed Dick Rosenberg," said David M. deWilde, a San Francisco-based executive recruiter. "This keeps Rosenberg's options open and keeps up the enthusiasm of the candidates."
Signal of Uncertainty
In earlier merger talks between Security Pacific and Wells Fargo & Co., Mr. Smith was reportedly promised that he would be recommended to the board as chief executive of the combined organization following the retirement of Wells' current chief, Carl E. Reichardt, 60.
The fact that Mr. Smith received no such assurances from BankAmerica is viewed as a sign that he does not have an edge over other potential successors.
But the golden parachute promises to reward him financially.
"It signals that it is far from certain that he will be promoted," said an investment banker.
Seen as most likely to succeed Mr. Rosenberg are two BankAmerica vice chairmen, Lewis W. Coleman, 49, and Frank N. Newman, 49. Mr. Coleman, chief of BankAmerica's world banking unit, will oversee international banking, private banking, and subsidiaries in the Pacific Northwest after the merger. Mr. Newman is keeping his job