Photographer: Scott Eells / Bloomberg
Photographer: Scott Eells / Bloomberg
Anger builds in the upper ranks at Bank of America Corp. after the company abandoned a new unpopular bonus policy for top merchants and dealers, while maintaining the plan for other employees.
The issue is a subsidy of company shares that those with high incomes – usually those earning 1 million or more – received for the first time as part of their compensation in 2020. Instead of investing in equal parts on for a set period, as these prizes usually do, these bonuses have a “rock vest” disposition that makes the shares eligible for sale only at the end of four years.
People familiar with the situation described an internal drama unfolding in the last two weeks.
Initially, the bank planned to apply the new salary structure on a large scale. But veterans in the field of investment and banking revolted after hearing that they will have to stay until 2024 to get bonuses for 2020, and the management agreed to exempt them.
Executive Director Brian Moynihan acknowledged the riot in a January 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, executive director of Bank of America Corp.
Photographer: Andrew Harrer / Bloomberg
However, senior colleagues in the corporate and commercial banking sector, a less strong cohort, soon learned that their rewards are still subject to acquisition restrictions. That’s when the worry started, people said. In recent days, employees have gathered on calls to escape frustrations and discuss options.
The decision hit a raw nerve. Bank of America is torn apart by jealousies and divisions that have long receded among its more than 200,000 staff, many dating back to the Merrill Lynch rifle marriage in the 2008 financial crisis. An unequal approach to compensation risks exacerbating those strains in a time when most of the company works from home and the collaboration is at a price.
While Wall Street compensation is always an act of balancing, circumstances have been unusually complicated for Moynihan. Many traders and bankers had a great, flourishing year as the markets grew and expected to be rewarded. But Bank of America tripled its provisions for foreign credit losses $ 11 billion, anticipating that pandemic loans could be implicit. Net income for the year sunk by 35%.
“You have to pay for the performance and the shareholder has to benefit as well,” Moynihan said in an interview.
Wall Street has been largely conservative, with 2020 pay. JPMorgan Chase & Co. and Goldman Sachs Group Inc. held in check compensation on employee and Citigroup Inc. reduced bonuses for dozens of top executives after the bank was reprimanded by regulators.
Read more: Wall Street is becoming frugal with employees after an unexpected pandemic
Throughout, Bank of America reduced cash payments and extended the acquisition periods for the normal granting of shares. Without the new bonuses, many executives would have faced pay cuts, according to people.
In the interview, Moynihan said the company will distribute a total of $ 10 billion to $ 11 billion in incentive compensation by 2020. Bankers and investment traders typically get a higher share of their equity wages than employees elsewhere. of the company.
“Our bonus groups are declining from year to year, but some teammates have made more money and others have made less money,” Moynihan said.
The prediction of rock vests is particularly problematic for long-serving executives in the corporate and commercial banking sector who expected to qualify for what is known internally as the “60’s rule”. Previously, Bank of America allowed staff to retire with all deferred salaries, as long as their age plus a minimum of 10 years of service to the company was 60. That precious condition now excludes new bonuses.
People have said that exacerbating these frustrations is the decision to relieve investment bankers of acquisition restrictions, seen as a golden shackle, but to implement them for corporate bankers. Both groups are part of the same division – global banking for companies and investments – led by Matthew Koder.
Such resentments have divided the big banks for years. Across the industry, rain producers with billions of dollars in merger mandates or big-ticket corporate financing are being lionized and can bring down eight-figure wage packages. Meanwhile, traditional bankers responsible for smaller margin activities, such as lending or cash management, earn less and sense as second-class citizens.
Bank of America’s powerful chief operating officer, Tom Montag, who joined Merrill’s acquisition, is widely seen as loyal to traders and investment bankers. Some veterans in commercial banking sense people who are familiar with the situation have said they are being unjustly punished for the pandemic, a calamity beyond their control.
“With the assistance of David Westin.”