Bank of America Banker Revolt Spurs Retreat on Bonus Plan for Veteran Staff
(Bloomberg) -- Bank of America Corp. scrapped a proposed bonus policy this week after it provoked the ire of high-earning traders and dealmakers, some of whom could have missed out on a big chunk of their compensation.
The company told veteran employees Wednesday it was reversing course on the plan, which was introduced just last week, according to a person familiar with the matter. The change would have forced some long-tenured staff eligible for retirement to forfeit a major portion of their 2020 bonus. Chief Executive Officer Brian Moynihan, Chief Operating Officer Tom Montag and Chief Human Resources Officer Sheri Bronstein were among the leaders who decided to abandon the idea.
Other compensation changes that sparked anger in the investment-banking and trading divisions remain in place, according to people with knowledge of the matter. Cash portions of bonuses were still reduced, with the rest paid in company stock, according to the people, who asked not to be identified discussing pay. Vesting periods for stock awards were lengthened to four years from three, which was comparable to competitors’ policies, they said.
The tweaks apply to high earners, including those who make more than $1 million, although individual pay packages vary.
Investment bankers and traders who produce big profits typically expect comparable bumps in their bonuses. Not so during the pandemic. A picture of restraint is emerging after U.S. banking behemoths reaped a windfall from their Wall Street operations while consumer divisions came under pressure from high unemployment and shuttered businesses. Industry leaders, who’ve been frugal with compensation after navigating last year’s gyrating markets, are talking up the need for cost discipline, sparking angst among rainmakers.
Bank of America’s now-scrapped policy applied to staff looking to retire. Typically, senior executives are allowed to leave and have unpaid shares vest if their age plus number of years at the firm exceeds 60. But for 2020 bonuses, the bank gave staff a large portion of stock that would have been forfeited by those who took early retirement. Wednesday’s changes make the stock awards eligible for those retirees.
The bank’s bonus pool will end up in a range of $10.5 billion to $11 billion this year, Moynihan said in a Bloomberg TV interview Wednesday, in response to a question about pay. The company made a tweak that didn’t work the way it was intended, so it was fixed, he said.
“The reality is our stock was down last year, so our bonus pools are down year-over-year, yet some teammates made more money and some made less money,” he said. “It’s just the reality, you’ve got to pay for performance, and the shareholder has to benefit too.”
The firm’s Wall Street workforce was already frustrated by bonuses that appeared to lag behind rivals. Many were befuddled by the more-restrictive pay policies, which further inflamed tensions among those who had expected bigger rewards for a bumper year.
The company’s net income slumped 35% to $17.9 billion in 2020, but the Wall Street businesses helped it avoid a bigger slide. Investment banking-fees jumped 27%, while sales and trading revenue climbed 17%.
As early as November, the bank’s leaders were signaling a tepid outlook for payouts that proved to be a harbinger for the rest of the industry. By year-end, revenue per employee at the Charlotte, North Carolina-based lender had fallen 8%, which translated to more modest bonuses even as lower-paid staff got extra payments of $750.
Moynihan, in his 11th year at the helm, is steering the lender through yet another economic slump. Among Wall Street’s CEOs, he’s especially familiar with shifting political winds after rebuilding the company’s battered businesses and reputation in the aftermath of the 2008 crisis. In public speeches, he often recites the company’s mantra of “responsible growth,” including an emphasis on environmental, social and governance goals.
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