February 20, 2013 / 11:31 PM / 5 years ago

BREAKINGVIEWS-BofA structures Brian Moynihan's pay just so

(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 years’ time.

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 Wall Street.


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- 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 2012 [ID:nL1N0BJAIB]


    Going fourth [ID:nL1E9CAB76]

    - For previous columns by the author, Reuters customers can click on [CRANE/]

    (Editing by Antony Currie and Martin Langfield)

    ((agnes.crane@thomsonreuters.com)(Reuters messaging agnes.crane.thomsonreuters.com@reuters.net)) Keywords: BREAKINGVIEWS BOFA/

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