The Wall Street Journal reported on Thursday that Bank of America (NYSE:BAC) will pay bonuses to its investment bankers at a rate similar to amounts the company paid in 2007. The paper reported that some bankers will get paid roughly the same bonus as they received in 2007, prior to the collapse of the credit market and downturn in the US economy, though the overall average per employee will be slightly lower than two years ago.
According to sources cited by the paper, the yearly bonus will be approximately 25% in cash, and the remaining amount will be deferred and in either the form of stock options or cash, and will be dependent on the future performance of the company. For many high level employees and executives, the bonus payment will also contain clawback provisions that will require repayment to Bank of America should there be significant losses by the company in the future.
Bank of America received $45 billion of Federal Bailout money during the financial crisis, and paying bonuses now may invoke the ire of both lawmakers and taxpayers alike. But the company has said it is hemorrhaging employees and has stated that it needs to be able to pay competitive bonuses in order to retain not only top talent, but mid level employees as well. Time will tell if this strategy works for Bank of America or if employees continue to flee the banking and investment giant. The bonus payments are expected to be formally announced to individual employees later this month and likely paid in February.
The company is still embroiled in a controversy over bonuses paid to Merrill Lynch after being purchased by Bank of America is late 2009. The former CEO of Bank of America, Kenneth Lewis, announced his retirement at the end of September amid his own legal battle with New York Attorney General Andrew Cuomo over disclosures of Merrill Lynch bonus payments just before the Bank of America acquisition in January.
The bank is hoping that new CEO Brian Moynihan will add some stability, and after last month the company paid back the $45 billion in TARP funds it received. Whether or not the amounts of the bonuses (amounts paid similar to those made in 2007) are appropriate is now an internal company matter, as government oversight over bonuses ended when the TARP money was repaid. Paying annual bonuses to its investment bankers certainly represents a return to normal and “business as usual” and a possibly a sign that a sense of normalcy is returning to the company.
