Wallace D. Malone Jr. had been the chief executive of SouthTrust Bank, a publicly owned company, for many years, and it was time to retire. But rather than call it quits right away, he initiated a merger with Wachovia, a major financial services company, and convinced his board of directors to sign off on a deal that left 4,000-plus employees without jobs, while guaranteeing Malone a great deal of Wachovia stock and a significantly enhanced retirement package.
The only condition of this deal was that Malone would have to put in some time as Wachovia’s vice chairman. This he did, dutifully showing up to a new office, possibly even doing some work, for a total of fifteen months. Then on Monday of this week, he announced that he’d had enough, said his goodbyes, and took his leave of corporate banking the next day — with over a half-billion dollars worth of Wachovia cash and stock.
Is there something wrong with this picture?
We don’t know. But it does raise some interesting questions about our corporate culture, the role of regulators and the ethics and moral obligations of America’s business elite. It is, in short, a story that should raise a few eyebrows in a press corps infused with skepticism, acquisitiveness, and a healthy sense of outrage.
Alas, we are afraid that these are traits that are no longer universally shared by journalists in this country. Malone’s sweet deal elicited nothing more than a collective shrug from most of the business press.
One exception was the New York Times, which squeezed a lengthy if somewhat anodyne story onto the front page of its business section Tuesday. Referring to Malone’s “lush payout,” the Times noted that, “Corporate governance advocates say that [the] case highlights the need for greater scrutiny and disclosure at the time a merger is approved, not just when an executive walks out the door. Indeed, the Securities and Exchange Commission has just proposed 370 pages of new rules to improve the disclosure of executive pay.”
We’re not sure why the SEC needs 370 pages to do what any journalist could have done in 1,000 words. A single prominent, well-reported story at the time of the merger negotiations might have raised some howls from Wachovia’s shareholders. While it is true that a sizeable portion of Malone’s payout had been promised to him by SouthTrust before the talks with Wachovia began, there is no doubt that Malone wangled a very sweet deal knowing that he’d be around for only a year or so.
The story was of only passing interest to the Wall Street Journal‘s editors, who placed a brief, cursory Dow Jones wire story (subscription required) deep inside the paper on page B8. Malone’s winnings included a $100 million-plus retirement package, including five annual multi-million dollar “termination payments” for departing with “good reason,” and $463 million in stock from the merger deal. The Journal story did not mention the stock, but it did quote a fund manager who seemed sufficiently amazed by the “excessive” payouts for just over a year’s work.
All in all, though, the Journal‘s apparent reaction to Malone’s gilded ride into the sunset was, who cares?
CNNMoney.com, shrugging even harder, didn’t even pick up the phone for its story. In a particularly appalling example of the journalist-quotes-journalist brand of journalism, CNN delivered such clumsy phrases as, “Citing an SEC filing, the Wall Street Journal reported …” and, “In a statement, Malone said he planned to start a charitable foundation, the Journal reported” (by printing a Dow Jones newswire story).
Somewhat better coverage was available from the Charlotte Observer, which was motivated by the hometown angle (Wachovia is based in Charlotte). The paper gave the story front page treatment, calling Malone’s bounty “one of the biggest payouts to a departing Charlotte bank executive.” While executive compensation experts told the Observer “the windfall was largely in line with payouts to other departing executives over the years,” the two other recent examples the paper cited (of $25 million and $102 million, respectively) both represented parachutes significantly less golden than Malone’s. The Charlotte reporters, unlike their colleagues in New York, also noted that 4,800 jobs were lost as a result of the merger.
And where the Wall Street Journal and CNN were lacking, the 144,000-circulation Birmingham News came through with flying colors, scoring an actual interview with Malone. The questions weren’t exactly hard-hitting, but the News did note prominently that Malone’s 2004 merger deal “resulted in the elimination of nearly 1,800 jobs in Birmingham — almost half of SouthTrust’s area work force,” and quoted a governance expert who slammed Malone’s severance package, saying it raises questions about the motives behind the merger: “It is really an embarrassment to American capitalism that you can see these kinds of payouts after someone is gone.”
All in all, a decent effort from the Southerners, while the Yankee papers snoozed. Maybe CJR Daily needs a new headquarters.
Do y’all have bagels down there?
Edward B. Colby was a writer at CJR Daily.