The stock market’s fall last winter, and its impact on 860 employees of Philadelphia’s largest locally run bank as it prepares to disappear, shows a downside to getting paid in stock instead of cash. It also shows how stock ownership doesn’t always tie bosses’ and workers’ fortunes closer.
At Beneficial Bank, since the formerly depositor-owned company began selling shares in 2007, management rewarded employees and work groups for hitting production goals by paying them bonuses in shares of the bank’s own stock.
It was an employee stock-ownership program – the kind that accountants call a KSOP, because it was part of each staffer’s tax-protected retirement account, or 401(k).
By last year, Beneficial’s KSOP reported holding 4.4 million shares, or more than 6 percent of the company.That’s when chief executive Gerry P. Cuddy said he was selling the bank for $1.5 billion in cash and stock to WSFS Financial Corp. of Wilmington.
Philadelphia-boosters were disappointed that the bank was being sold after failing to build sales and profits enough to boost its share price, which is what shareholder-owned companies must do to stay independent.
But for veteran Beneficial staff, there was a bright side. WSFS would pay for the deal mostly with its own shares, then worth a near-record $55 each. KSOP members and other Beneficial owners would trade their shares for WSFS stock at a fixed ratio (plus a little cash). If that price held, Beneficial employees would finally realize significant gains on the stock they had been awarded, which had lagged other bank stocks since the formerly depositor-owned bank first sold shares.
WSFS doesn’t have a similar stock-ownership program to roll the shares into. So Beneficial staff, including those who will be kept on by WSFS as well as those who will be laid off, retired, or transferred with a group of New Jersey branches to the Bank of Princeton, looked ahead to receiving WSFS shares in exchange for Beneficial’s, and moving them into personal retirement accounts, or cashing them in with gains to reward their patience.