A Seething Rant on CEO Pay From a Bank of America Shareholder

As a shareholder in Bank of America (NYS: 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 (NYS: 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 (NYS: 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!

Signed,
Sean Williams (TMFUltraLong)
Bank of America shareholder

Is CEO pay out of control? Share your thoughts in the comments section below.

If you'd like to avoid the potential pitfalls of poorly thought-out CEO compensation packages, then I encourage you to get your copy of The Motley Fool's latest special report that looks at what the smartest investors are buying. And oh, yes -- it's free!

At the time this article was published Fool contributor Sean Williams owns shares of Bank of America but has no material interest in any other companies mentioned in this article. He is unafraid to point out what he feels are gross misrepresentations of shareholder interests. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Bank of America, Citigroup, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that always puts shareholders first.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


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5 Comments

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scherfy42

Amazing reasoning.

May 25 2012 at 10:50 AM Report abuse rate up rate down Reply
Laura

The big banks enrage me. They pay their high ranking management these HUGE amounts of money while the poor folks having to actually do the work are getting laid off. That doesn't bother management though. They sit back with their pockets full of money and ship the few remaining jobs offshore. When will business get it through their heads that our economy will not improve if they continue to shift the jobs offshore? Those of us who live here will not have money to put back into the economy! HELLO! If banks need to save money, they can start by making the salaries (and incentives) in line with the amount they are paying their 'bottom line' employees. It's totally ridiculous!

May 02 2012 at 3:59 PM Report abuse rate up rate down Reply
Carol Borshowsky

SMC Opinions are like A -holes everyone has one and most stink. Listen buddy your not helping your cause either look at the stock price today. Your spitting in the wind!

April 03 2012 at 2:40 PM Report abuse rate up rate down Reply
DJF

I, as every Bank of America shareholder should DEMAND that the Board of Directors of Bank of America recind Moynihan's increase . In light of Bank of America's financial performance and current financial condition, the Board and Moynihan demonstrated both their lack of prudent judgement in their granting the increase and his accepting it! They clearly demonstrating their complete disregard of their shareholders interests.

If I wouldn't incur a major financial loss, I'd sell my entire holdings immediately. The entire Board and Moynihan should be replaced. If the stock ever gets back to the price I paid for it, I will sell immediately.

April 03 2012 at 12:39 PM Report abuse rate up rate down Reply
rnewman514

As a shareholder in BAC, I have seen my investment drop by 76%. In addition, the dividend I did receive of $2.64 per share per year has dropped to $0.04 per year. Does the CEO have to be paid over SEVEN MILLION per year for selling off asset? That really takes a powerful leader to fire sale your assets. However the real "winner" in the management of BAC was Lewis, the retired CEO, who bought Countrywide Mortgage. That was a stroke of sheer genius. You could not find a bigger "turkey" on the market than Angelo's pride. Maybe it is time for a new CEO and a new Board of Directors after we sue them for approving these activities.

April 03 2012 at 5:55 AM Report abuse +3 rate up rate down Reply