Photographer: Scott Eells / Bloomberg
Photographer: Scott Eells / Bloomberg
Anger is building in the higher ranks of Bank of America Corp. after the company gave up an impeccable new bonus policy for major retailers and distributors, keeping the plan in place for other employees.
In question, there is a grant of shares of the company that first received the highest winners (usually those earning $ 1 million or more) as part of its compensation for 2020. Instead of invest in equal parts for a certain period, as these awards are usually done, these bonuses have a provision of “cliff dress” that makes the shares eligible for sale only at the end of four years.
People familiar with the situation described an internal drama that unfolded over the past two weeks.
Initially, the bank planned to apply the new salary structure broadly. But veterans of investment banking and commerce revolted when they felt they would have to stay until 2024 to get bonds by 2020 and management agreed to exempt them.
CEO Brian Moynihan acknowledged the setback in a Jan. 27 interview with Bloomberg Television, saying the policy change “didn’t work the way some people wanted it to, so we fixed it.”
Brian Moynihan, CEO of Bank of America Corp.
Photographer: Andrew Harrer / Bloomberg
However, colleagues in commercial and business banking, a less powerful cohort, soon learned that their awards are still subject to purchase restrictions. That’s when the harassment started, people said. In recent days, employees have come together to call to vent frustrations and discuss options.
The decision touched a raw nerve. Bank of America is torn apart by jealousies and slow-fire divisions for more than 200,000 people, many of whom date back to the shotgun marriage with Merrill Lynch in the 2008 financial crisis. An uneven approach to compensation runs the risk of sharpening these strains at a time when most of the company works from home and collaboration is very important.
While compensation on Wall Street is always a balance, circumstances were unusually complicated for Moynihan. Many traders and bankers had a fantastic year, which prospered as the markets grew and hoped to be rewarded. But Bank of America tripled its provisions for credit losses in addition to $ 11 billion, anticipating that pandemic-affected borrowers could default. Net income for the year fell 35%.
“You have to pay for the performance and the shareholder has to benefit as well,” Moynihan said in the interview.
Wall Street has been mostly conservative with a 2020 paycheck. JPMorgan Chase & Co. i Goldman Sachs Group Inc. kept compensation per employee under control, and Citigroup Inc. cut back bonuses for dozens of top executives after regulators scolded the bank.
Read more: Wall Street becomes frugal with employees after unexpected pandemics
Throughout, Bank of America reduced cash payments and extended the grant periods of normal share awards. Without the new bonuses, many executives would have suffered pay cuts, according to people.
In the interview, Moynihan said the company would distribute a total of $ 10,000 to $ 11 billion in incentive compensation by 2020. Bankers and investment traders tend to get a larger share of their capital salary than employees from other places in the company.
“Our bonus quotas are falling year after year, but some teammates made more money and some made less,” Moynihan said.
The provision of cliff suits is especially problematic for long-term executives in corporate and commercial banking who hoped to opt for what is known internally as the “60’s rule”. Previously, Bank of America allowed staff to retire with all deferred wages as long as their age plus a minimum of ten years serving the company was 60. This exquisite attention now excludes new bonuses.
People said exacerbating these frustrations is the decision to exempt investment bankers from buying restrictions, seen as a golden handle, but to enforce them for corporate bankers. Both groups are part of the same division (global corporate and investment banking) led by Matthew Koder.
These resentments have divided the big banks for years. Across the industry, rainmakers that grant multimillion-dollar merger mandates or large-ticket corporate financing are scammed and can withdraw eight-figure payment packages. Meanwhile, traditional bankers responsible for lower-margin activities such as lending or cash management earn less and feel as second-class citizens.
Bank of America’s powerful chief operating officer, Tom Montag, who joined Merrill’s acquisition, is widely believed to be loyal to traders and investment bankers. Some veterans of commercial banking feel they are being unjustly punished by the pandemic, a calamity beyond their control, according to people who know the situation.
– With the assistance of David Westin