Say you find yourself losing billions of dollars as your chief rivals – even Citi, for crying out loud — make good money. How do you explain yourself?
If you’re Bank of America (BAC), you write off your latest pathetic performance as “a unique and critical transition year for the company.” Then you return to business as usual and hand out million-dollar bonuses like they’re Necco Sweethearts.
This is how BofA’s chief executive, Brian Moynihan, came to get a $10 million pay package for 2011, comprising $950,000 in salary and the rest in restricted stock. His top aides, Charles Noski and Joe Price, will each get $5.7 million, mostly in stock.
Those numbers seem rather large considering how BofA did in 2010. It lost $2.2 billion, as regulators finally cracked down on the practice of fleecing people to the tune of $35 for a debit card overdraft. The bank also took a beating in the press as its many foreclosure fumbles came to light.
Though Moynihan and his lieutenants have been claiming their efforts last year at least cleared away the legal and operational underbrush, it’s not clear that Wall Street agrees (see chart, right). The bank continues to trade at around book value, which suggests investors remain skeptical about BofA’s high costs and questionable growth prospects, as well as its exposure to costs tied to Ken Lewis’ deranged 2008 acquisition of Countrywide.
It is mostly by comparison to Lewis that Moynihan’s pay looks reasonable, actually. Yes, $10 million is a lot for piloting a bailed-out, federally coddled bank to a multibillion dollar loss, with no certainty that more of the same won’t follow.
But hey, Ken Lewis was pulling down $20 million or more a year for most of the past decade before he steered BofA into the abyss with his clever purchases of Countrywide and another fine franchise, Merrill Lynch. He then walked into the sunset with $53 million worth of shareholder funds, surely a just reward for a job poorly done.
It is certainly much easier to justify Moynihan’s pay by comparing to it to the scandalous sums spent on Lewis than by matching his compensation up with those of his current peers. Yes, Goldman is paying for failure lately, but it did make $8 billion last year. That is $10 billion more than BofA made, and Lloyd Blankfein’s check is only 50% bigger than Moynihan’s — go figure.
BofA looks even worse next to Citi, a statement you don’t find yourself making all that often. Citi has been a mess for years, but it too made money in 2010 and Vikram Pandit is bringing down just $1.75 million for all his turnaround trouble.
So BofA’s compensation committee is off its rocker as usual, if not quite as incoherent as it was in the Lewis days. But the final word on this year’s pay packages won’t come till we see what the supposed transition year of 2010 actually leads to.