(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
By Agnes T. Crane
NEW YORK, Feb 20 (Reuters Breakingviews) - Bank of America
(BAC.N) has structured Brian Moynihan's pay just so. The bank
boss landed one of the biggest raises among peers for last
year's work despite the lender's many lingering problems. Even
so, return on assets and the share price soared. Bank of America
also now requires specific financial targets be met for the
chief executive to be paid in full. In this regard, the bank is
an industry leader.
In a filing this week, Bank of America said it would award
its top boss $11.1 million of stock grants for 2012 on top of
his $950,000 base salary. That's a 73 percent increase over the
previous year. Moreover, Moynihan's regular paycheck will swell
by more than 50 percent to $1.5 million this year. That has to
sting JPMorgan’s (JPM.N) Jamie Dimon, whose bonus was halved,
and Morgan Stanley’s (MS.N) James Gorman, who had to swallow a 7
percent pay cut.
But Moynihan is worthy of a big raise given the turnaround
in the bank's fortunes. Last year the stock surged by more than
100 percent, more than double the gains enjoyed by its rivals.
Starting from a low base certainly helped – 2011 was a rough
time at the Charlotte, North Carolina-based bank. And Bank of
America still has a long way to go in what has become a tortuous
road to recovery. Its return on assets in 2012, while treble the
previous year's showing, still only clocked in at a meager 0.19
percent. And Moynihan still hasn't worked the bank completely
out of the thicket of legal battles.
That's what makes the bank's decision to tie $5.6 million of
his 2012 comp to future performance sensible. The bank will use
return-on-asset and adjusted tangible book-value targets to
assess just how much of that pot the executive will get in three
Of course, the hurdles have to be high enough to set a
challenge – unlike the gift of an incentive plan Citi (C.N)
handed then-boss Vikram Pandit in 2011. If the terms serve as a
well-placed carrot to keep Moynihan hungry while discouraging
undue risk, it could become a model worth adopting elsewhere on
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- Bank of America awarded Chief Executive Brian Moynihan
$12.1 million in compensation for 2012, a 73 percent increase
over the previous year. In addition to his base salary of
$950,000, the bank gave the CEO stock grants worth $11.1
million, based on the Feb. 15 closing share price of $12.03.
- Moynihan's base salary for 2013 will increase to $1.5
million, according to a source familiar with the matter.
- Bank of America's share price increased by 109 percent in
2012, more than double the gains for shares of Citigroup,
JPMorgan and Wells Fargo (WFC.N).
- In 2012 the bank's return on assets was 0.19 percent, up
from 0.06 percent the prior year. Tangible book value was
$13.36, up from $12.95 in 2011.
- BofA filing: link.reuters.com/cej26t
- Reuters: BofA's Moynihan gets 73 percent pay increase in
Going fourth [ID:nL1E9CAB76]
- For previous columns by the author, Reuters customers can
click on [CRANE/]
(Editing by Antony Currie and Martin Langfield)
Keywords: BREAKINGVIEWS BOFA/
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