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As a shareholder in Bank of America (NYSE: BAC ) , I, like many others, am holding to the belief that the company will eventually right itself and get back to its highly profitable ways sooner than later. At just half of book value, the once-dominant bank seems like a sure lock, at least to me, to find its footing. But that doesn't mean I can't wag my finger in disdain at upper management once in a while.
Here at The Motley Fool we firmly believe that the management of publicly traded companies, whether big or small, works for their shareholders. As a shareholder, I'm disgusted by the admission yesterday that Brian Moynihan took home more than 6 times the compensation that he received in 2010. Bank of America's justification for the pay increase was almost as ridiculous as the events that surrounded it.
The reasoning behind the boost in Moynihan's compensation package to $7.5 million from $1.2 million was interpreted by The Washington Post as "[j]ustified because the bank turned a profit after losing money in 2010, and because it ended the year with a stronger balance sheet."
You read that correctly: "after turning a profit." The company made $0.01 in 2011 ... one penny per share! As for the stronger balance sheet, this comes only after Bank of America sold its stakes in China Construction Bank for $8 billion, credit card assets to Toronto-Dominion Bank for $7.6 billion, and the Pizza Hut franchise for approximately $400 million. Bank of America has been fire-selling its assets to better its capital position, and it is working. This does not, however, justify a fivefold pay increase.
But don't think I'm anywhere near done. Last week, I set my discerning eyes on Citigroup's (NYSE: C ) CEO, Vikram Pandit, for "humbly" accepting a 14,900,000% increase in his pay package despite the fact that Citigroup had plans to layoff 4,500 of its employees -- mostly investment bankers. Moynihan makes these layoffs look like child's play. His cost-cutting measures (yes, I did just say cost-cutting) entailed laying off 30,000 workers over the next few years! That's just a shade over 10% of the bank's total workforce of 288,000.
Last year was also one where Bank of America was surpassed in total assets by JPMorgan Chase (NYSE: JPM ) . Turning its focus to shedding assets and reining in expenses has left the bank vulnerable to other national banks.
I wish I could say I was done, but I'm not! Did you know that Bank of America, in relation to mortgage and foreclosure-related lawsuits, paid out $14 billion in settlements in 2011? Did I mention that Bank of America's stock lost 58% of its value last year? Forget that it's nearly doubled off its lows set in December -- it still has a long way to go before it gets back to where it began 2010.
Let me be clear that I believe in Bank of America's business model and I understand the need to reduce costs to facilitate profits and do what's best for shareholder interests -- but increasing Moynihan's pay by more than 500% is a gross misuse of company funds when it should be in cost-reduction mode.
For shame, Moynihan, for shame!
Sean Williams (TMFUltraLong)
Bank of America shareholder
Is CEO pay out of control? Share your thoughts in the comments section below.
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