If there is such a thing as a President's Day present, then Brian Moynihan just got one. Bank of America (NYSE:BAC) announced at the end of last week that its 57-year-old chairman and CEO got a 25% pay raise for his performance last year.

Moynihan is set to earn $20 million in total compensation for 2016. That consists of a $1.5 million annual salary and $18.5 million in restricted stock.

Bank of America chairman and CEO Brian Moynihan.

Bank of America chairman and CEO Brian Moynihan. Image source: Bank of America.

Bank of America cited five reasons for the bump:

  • The bank earned $17.9 billion last year, which was 13% higher than 2015 and the second highest earnings in Bank of America's history.
  • Revenue growth combined with expense decline increased operating leverage across the bank.
  • Bank of America also achieved historically low credit losses.
  • Total shareholder return was 33.3% in 2016, which beat its primary peer group on 1-, 3-, and 5-year bases.
  • And the bank also made progress on its long-term return on assets, return on tangible common equity, and efficiency goals.

There's no question that $20 million is a lot of money. That said, if you're going to pay a banker that much, then Moynihan certainly seems like a worthy recipient.

He navigated the nation's second largest bank by assets through the most challenging time in its 100-plus year history. After absorbing nearly $200 billion in crisis-related expenses, Bank of America turned the corner in 2015 and hasn't looked back since.

The Charlotte, North Carolina-based bank's profitability is improving and stabilizing, leaving the wild gyrations in the past. And most impressively, under Moynihan's watch, Bank of America has cut upwards of $20 billion worth of annual operating expenses.

Moynihan is now set on inoculating a culture of responsible growth throughout the bank. This will be a challenge because it goes against Bank of America's decades-long strategy to grow at all costs, but it's nevertheless the right message.

In order for the entire amount of Moynihan's restricted stock grant to vest -- which, again, accounts for the lion's share of his 2016 compensation -- Bank of America will need to continue heading in the right direction.

The grant kicks in over the next three years, but only if the bank exceeds two targets: exceeding a three-year average return on assets of 0.80% as well as a three-year average growth of adjusted tangible book value of 8.5%.

To put these figures in perspective, Bank of America's average return on assets over the past three years is only 60%, while it has grown its tangible book value per share by right around 8.5% each year.

The profitability goal in particular, in turn, ensures that Moynihan's interests overlap closely with the bank's shareholders.

John Maxfield owns shares of Bank of America. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.