Bank of America (NYSE:BAC) announced earlier this month that it gave its CEO, Brian Moynihan, a $3 million pay raise last year. While the bank's performance improved in 2015, which I believe justified his raise, the structure of Moynihan's compensation leaves a lot to be desired.
The majority of Moynihan's compensation is tied to the bank's performance. Of his $16 million pay package, in fact, only $1.5 million consisted of a base salary. The remainder was split evenly between time- and performance-based restricted stock units.
The problem is that Bank of America's board set a low bar for Moynihan's performance-based award, which consists of $7.25 million worth of restricted stock. Two things must happen for him to clear the hurdle: Bank of America needs to earn a three-year average return on assets of 0.80%, and the bank's tangible book value must increase by a three-year annual average of 8.5%.
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