Bank of America (BAC 0.87%) CEO Brian Moynihan doesn't get a whole lot of love. In fact, I recently wondered why we love to hate him so much, and it has mostly to do with the poor performance of Bank of America's stock since he assumed the top spot in 2009. However, in light of Vikram Pandit's contentious battle with shareholders over his compensation package earlier this year -- which might have been partially responsible for his resignation from Citigroup (C +0.11%) last month -- I decided to take a look at Moynihan's compensation package to see if there was anything for investors to worry about.
One quick note
Before we take a look at Moynihan's compensation, it is important to note that a mere four years ago, executive compensation was extremely limited in the shadow of the 2008 financial crisis. With the passage of the Troubled Assets Relief Program, any company that received funds from the program had to restrict tax-deductible executive compensation to $500,000 per year for as long as the Treasury Department held shares in the institutions. The hope was that any monetary incentives to chase profit over solvency would be avoided and that executives would only be rewarded when their companies performed well.
With most of the largest institutions repaying their TARP money, they are no longer restricted from paying high salaries to top executives. And when we look at the most recent proxies of the largest banks, we can see that they have definitely decided to go beyond $500,000:
|
Company |
CEO |
Base Salary |
Other Incentives |
Total Compensation |
|---|---|---|---|---|
|
Bank of America |
Brian Moynihan |
$950,000 |
$6,050,000 |
$7,000,000 |
|
JPMorgan Chase (JPM +0.19%) |
Jamie Dimon |
$1,500,000 |
$21,500,000 |
$23,000,000 |
|
Wells Fargo (WFC 1.54%) |
John G. Stumpf |
$2,800,000 |
$17,043,021 |
$19,843,021 |
|
Citigroup |
Vikram Pandit* |
$1,671,370 |
$13,185,733 |
$14,857,103 |
Source: Company 2011 Proxy Statements. *Pandit resigned October 16, 2012.
What's interesting to note is that despite helming the second largest bank based on total assets, Moynihan is compensated the least of the "Big 4" bank CEOs. While the $7 million that he took home last year is much more money than a lot of folks will earn their entire working lives, it still bears some further examination.
Should he be making more?
As noted in the chart above, base salary is but a small part of a CEOs compensation package. The largest portion of all these CEOs compensation packages are the so-called other incentives. I was limited by space in my chart above, but typically the other incentives are an annual cash bonus, restricted stock awards based on performance, other stock awards, and non-monetary perks.
Beyond earning the lowest base salary, Brian Moynihan is also trailing greatly in other incentives. A big reason for this is Bank of America's compensation committee deciding not to award Moynihan with a cash incentive during 2011, which was a repeat of both 2009 and 2010. In this case, the compensation committee is actually considering the performance of the bank in making salary determinations, and Moynihan has been compensated accordingly. Whether this is an indication of unduly high standards placed on him by the compensation committee -- the other five executives at the bank all received a cash bonus last year -- or simply a great policy that aligns the CEO with the bank's performance may be up for debate.
What it all means
Regardless of how you view his compensation, Brian Moynihan appears to have some incentive to improve the performance of the bank. Stronger bank performance could signal to the compensation committee to award him an annual bonus, but it would also make some of the stock awards he has received more valuable, thus increasing his non-cash compensation as well. Though his compensation may be drastically higher than the typical shareholder, I don't think they will be putting up the same fight as Citigroup shareholders did this past spring against Pandit.
