The board of Cincinnati-based Fifth Third Bancorp -- you know these fellas, the ones who gulped down Old Kent Bank four years ago -- have lavished their top executives with big bonuses for their performance in 2004. Other than the facts that Fifth Third:
- Is at the bottom of the pack of publicly-owned banks,
- Has lost shareholders 17% in return on investment over the past year,
- Is facing a bevy of shareholder lawsuits in federal court,
- Stuck itself with The Boardwalk project and its potential $30 billion in penalties for environmental violations, and
- Its insiders may have abetted a bank fraud,
... why not reward key officers with six-figure bonuses?
We're talking big money here. The Fifth Third board gave President George Schafer Jr. an $825,000 bonus. Even local piker Kevin Kabat, until recently the CEO of Fifth Third Bank-West Michigan, got a $200,000 bonus. One has to wonder what the bank's board is thinking to hand out such rich rewards for objectively poor performance.
One thought is that Fifth Third needs to keep these guys on the reservation. They cannot risk a breach where these executives move on and then speak out of school about the bank's shenanigans over recent years. That could reveal Sarbanes-Oxley violations that would be particular damaging in the wake of the recent Federal Reserve Board investigation of the bank. (Note to those of you have who have better things to do than study arcane federal laws, the Sarbanes-Oxley Act was passed by Congress after Enron went belly up to require managers of publicly-traded corporations to disclose information of possible wrong-doing within company.)
More on this problem later ...