Takeover Case Study: Chase and WaMu, Part II

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One of the most difficult activities for a Cubicle Warrior to do is understand the dynamics within a company, especially where the company is being bought by another. When a company is purchased, everything that employees believe about the company is now up for examination. This creates uncertainty, even fear, about their job, job security, and future work with the company.

Yet, the ability to make critical decisions about what will happen with a company purchased by another gives the Cubicle Warrior an advantage to others. Should you stick it out with the company? Is my job lost and it is just a matter of time? Are there more opportunities if I stay? All of these are critical questions.

With banks and investment companies being purchased left and right, I’d like to take the example of Chase and Washington Mutual and use this case study as a model to show how you can evaluate your career after a company is purchased. Though I once worked for Washington Mutual, I’m only going to use publicly available records for the events that happen there in the evaluation. This case is also a good one to use because Chase had done some preliminary investigative work to offer a purchase, but then abandoned the effort – until the Office of Thrift Supervision took over and brokered the sale to Chase.

Let’s get to the case study.

The second question most people ask after determining their job status is: What about my benefits?

When I worked for Ameritech, a regional phone company, and it was purchased by SBC (now the “new” AT&T…), the law required that benefits had to stay the same inside Ameritech and if there was a difference in benefits with SBC, only the better of the two benefits could be selected for ALL employees. Makes sense in that you keep employees whole or improve their situation.

Now, with Chase and WaMu, that is not the case. Chase bought the “banking operations” but not the WaMu Holding Company. What does this mean? It means lawsuits are the holding company’s problem. It means the pension is at the holding company. It means that Chase is not obligated to provide a severance plan.

So part of the measure of a takeover company is what they do with benefits in this type of situation. And, in my opinion, what Chase has done has gone above and beyond:

For the rest of employees, Scharf (handling the transition for Chase…Scot) said the company is not changing salaries, medical and dental plans, vacation benefits, pensions or the 401(k). For those employees who are laid off, JPMorgan Chase put in a new severance plan that matches what WaMu had; employees who are asked to stay on temporarily will get enhanced severance.

A piece of news that many employees were awaiting was the fate of a deferred compensation plan, into which many employees had put thousands of dollars each. “We are going to keep everyone whole, whether they’re current employees or retired employees,” Scharf said. “People will not lose money because of that.”

Pension-plan assets were not included in the transaction because they were part of the parent holding company (which has since filed for Chapter 11 bankruptcy court protection) and not the banking operations that JPMorgan Chase bought. “We will be going to the bankruptcy judge to move that over,” Scharf said. “Our intention is to replace the obligations in the pension plan so people don’t lose money.”

In addition, they are not treating corporate executives with dollars if they can help it:

JPMorgan Chase isn’t taking on all of WaMu’s compensation programs, such as additional pension benefits and change-of-control retention payments for upper-level executives.

But WaMu stock is a different story. If you lost money on WaMu stock like shareholders lost money, you are on your own. That makes perfect sense: if you were not smart enough to get out of WaMu stock as an employee (who should really have known better…), then you won’t be rewarded.

Conclusion: JPMorgan is being more than fair with WaMu employees and this is just the public stuff. You can infer a lot about a company with what they do to keep employees whole on benefits, pension, severance, and compensation. It is your first indication of the culture of the company and whether or not it makes sense to stay.

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