8-KOther Events

BANK OF AMERICA CORP /DE/ 8-K Report, Corporate Update (Feb 7, 2020)

Filed February 7, 2020For Securities:BACBAC-PBBAC-PKBAC-PLBAC-PMBAC-PNBAC-PSBML-PJBAC-PEBAC-PPBAC-PQBACRPBML-PGBML-PHBML-PLBAC-POMER-PK

Summary

Bank of America Corporation (BAC) announced on February 7, 2020, the approval of its CEO Brian T. Moynihan's 2019 total compensation, which was set at $26.5 million. This compensation package is unchanged in both amount and structure from the previous year. The Board of Directors based this decision on the company's strong 2019 financial performance, including reported net earnings of $27.4 billion (or $29.1 billion excluding a specific impairment charge), solid returns on assets (1.14%) and equity (10.6%). The compensation structure emphasizes long-term shareholder value and executive accountability. It consists of a $1.5 million base salary and $25 million in equity incentives, entirely comprised of restricted stock units (RSUs). Notably, there is no cash bonus. The equity awards are a mix of time-based and performance-based RSUs, with a significant portion subject to 're-earning' based on future financial performance over a three-year period. These awards also include stringent stock ownership and retention requirements, as well as clawback provisions, aligning executive interests with those of shareholders.

Key Highlights

  • 1CEO Brian T. Moynihan's 2019 total compensation approved at $26.5 million, unchanged from 2018.
  • 2Compensation structure remains consistent, comprising base salary and equity incentives with no cash bonus.
  • 3Company reported 2019 net earnings of $27.4 billion (or $29.1 billion excluding an impairment charge).
  • 4Strong shareholder returns in 2019: dividends per common share increased 22%, and total capital returned to shareholders (including buybacks) was over $34 billion, a 34% increase.
  • 5BAC stock price appreciated 42% in 2019, outperforming peers and the S&P 500 over multiple time horizons.
  • 6CEO's equity incentive award ($25 million) includes performance RSUs with a 're-earn' mechanism, requiring sustained company performance over three years.
  • 7All equity awards are subject to stock ownership/retention requirements and clawback policies, aligning executive incentives with long-term shareholder value.

Frequently Asked Questions

The total compensation for CEO Brian T. Moynihan in 2019 was $26.5 million. This amount and its structure are identical to his compensation in 2018, indicating no change in executive pay.

The CEO's compensation includes a base salary of $1.5 million and $25 million in equity incentives. There is no cash bonus. The equity portion consists of 30% cash-settled RSUs vesting over 12 months, 20% stock-settled RSUs vesting over three years, and 50% performance RSUs. These performance RSUs are subject to a 're-earn' provision, meaning they will only vest if the company meets specific financial performance standards over a three-year period.

The Board cited strong 2019 performance as the basis for the CEO's compensation. Key metrics include reported net earnings of $27.4 billion (or $29.1 billion excluding a $1.7 billion impairment charge), a 22% increase in dividends per common share, and over $34 billion in total capital returned to shareholders, a 34% increase from 2018. The company's stock price also saw a significant 42% increase in 2019.

Yes, the CEO's equity awards are subject to significant safeguards. They include rigorous stock ownership and retention requirements, where 50% of net after-tax shares must be retained for one year post-retirement. Furthermore, all equity awards are subject to Bank of America's clawback policies, which allow the company to recover compensation under certain circumstances.