Anger is brewing in senior range Bank of America Corp waived an unpopular new bonus policy for top traders and traders while the company plans to replace other employees.
At issue is a grant of company stock that high-income people – typically making $ 1 million or more – received for the first time as part of their 2020 compensation. Instead of vesting in equal parts over a set period, as such awards generally do, these bonuses have a “cliff vest” provision that makes shares eligible for sale only at the end of four years.
People familiar with the situation described an internal drama over the past few weeks.
Initially, the bank planned to broadly implement the new pay structure. But giants in investment banking and business revolted upon hearing that they would have to stay until 2024 for bonuses for 2020, and management agreed to exempt them.
In an interview on Bloomberg Television on January 27, CEO Brian Moynihan said the change in policy “did not work the way some people wanted it to, so we fixed it.”
Yet the less powerful peers, the senior peers of corporate and commercial banking, soon find out that their rewards are still subject to vested restrictions. When the skirmish began, people said. In recent times, employees have been discussing calls to frustrations and vent options.
The decision touched a raw nerve. Bank of America is torn apart by the long-standing jealousy and division among its employees of more than 200,000 from a shotgun marriage to Merrill Lynch in the 2008 financial crisis. A disproportionate approach to compensating risk eliminates those strains at a time when the majority of the company is working from home and collaboration is at a premium.
While compensation on Wall Street is always a balancing act, the circumstances were unusually difficult for Moynihan. Many merchants and bankers had a great year, thriving as a market, and expected to be rewarded. But Bank of America tripled its provisions to exceed the credit deficit $ 11 billion, speculating that borrowing could be defaulted by the epidemic. Net income for the year 35% drowned.
“You’ve got to pay for the performance, and the shareholder will also benefit,” Moynihan said in the interview.
Wall Street has been mostly conservative with 2020 remuneration. JPMorgan Chase & Company & Goldman Sachs Group Inc. paid per employee compensation in checks, and Citigroup Inc. cut bonuses for dozens of top executives after regulators reprimanded the bank.
Read more: After the epidemic, there was chaos in Wall Street with employees
Across, Bank of America reduced cash payments and lengthened the vesting period for common stock awards. Without the new bonus, many executives would have faced pay cuts, according to People.
In the interview, Moynihan said the company would split incentive compensation for 2020 by a total of $ 10 billion to $ 11 billion. Investment bankers and traders usually receive a larger share of their salaries in equity than employees elsewhere in the company.
“Our bonus pools are down from year to year, yet some peers made more money and some made less money,” Moynihan said.
The Cliff-West provision is particularly problematic for long-serving executives in corporate and commercial banking who hope to qualify to be known internally as the “60s rule”. Earlier, Bank of America allowed employees to retire with all deferred pay until their age plus at least 10 years of service equals 60 years. This does not include the new bonus so far.
Uncovering those frustrations, people said, is the decision to free investment bankers from implicit restrictions, which are seen as a gold handcuff, but they are applied to corporate bankers. The two groups are part of the same division – global corporate and investment banking – run by Matthew Coder.
Such outrage has divided big banks over the years. Across the industry, rainmakers who plunge into multibillion-dollar merger mandates or big-ticket corporate financing are licensed and can pull out eight-figure pay packages. Meanwhile, traditional bankers responsible for low-margin activities such as lending or cash management earn less and less. Feel Like second-class citizens.
Bank of America’s powerful chief operating officer, Tom Montag, who became involved with the Merrill acquisition, is widely seen as loyal to traders and investors. Some giants in commercial banking Feel They are being unfairly punished for the epidemic, a disaster beyond their control, people familiar with the situation said.
– assisted by David Westin