Associated Banc-Corp's Golden Parachute Loophole

Associated Banc-Corp announced that its former COO Lisa Binder will receive a $1.65 million "non-compete" payment on her resignation from the company which the bank thinks it can get away with even though it has received CPP funds under TARP and there is a prohibition on “golden parachute” payments unless they are for services rendered.

So, what is a non-compete payment? In the words of the agreement it is “Consideration for Services Rendered.”

Let’s have a look at these services then.

They include:

• she "must not use her extensive knowledge..."
• she "will not, directly or indirectly...own, operate, manage, control, etc, etc."
• she "will not...solicit or attempt to solicit..."
• she "agrees not to make any oral or written statement that disparages..."
• she "represents and warrants that...she has returned or will return all property and documents..."
• she "waives any reinstatement..."
• she "agrees not to sue..."

Well, apart from returning the company’s computers, all of those seem like agreeing NOT to do something rather than rendering a service, and the return of company property doesn’t seem like much of a service so…?

This is not a termination for cause or without cause, or without good reason, it is simply a resignation, so it should not and did not generate any severance payment. Nevertheless Associated Banc-Corp has attempted to circumvent the prohibition by describing the payment as a non-compete award.

As a not-so-tacit admission that this arrangement may fall foul of the law, the company goes on: "The Company is not permitted to make any “golden parachute payment” to Ms. Binder in connection with such termination of employment pursuant to the terms of the Company’s participation in the United States Treasury’s Capital Purchase Program under the Troubled Asset Relief Program (the “CPP”), which has been duly acknowledged by Ms. Binder...." Indeed she promises to pay it all back if the agreement is found to contravene the prohibition. But this waiver only applies – as the agreement also makes clear – “during the period that the UST owns any Purchased Securities or any equity in the Company acquired through such Purchased Securities.” So even though it’s prohibited now it’ll be paid as soon as the Treasury funds are paid back?

It is difficult to see how this arrangement would not contravene the rules prohibiting golden parachutes. These services are services of omission rather than commission.

The Treasury may think otherwise, but I don’t. And as I said to ProPublica when they asked: “That seems to me to be cheating.”

Paul Hodgson — Senior Research Associate