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Report: Bank of America cutting cash portion of bonuses

Bank of America, which got and repaid $45 billion in taxpayer money, will significantly cut the cash portion of the bonuses it pays to executives, tilting more toward stock rewards, Bloomberg is reporting.

Senior bankers will get only 5 to 15 percent of their bonuses in cash, with the rest coming in Bank of America stock. Junior bankers may get as much as 25 percent of their bonus in cash.

As I wrote here yesterday, figuring out how much bonus someone should get -- and how much should come in cash -- is no slam-dunk. Bonuses are a real part of a household's yearly budget and they come all at once, once a year.

The BofA bonuses get paid out in February.

-- Frank Ahrens
Follow me on Twitter at @theticker

By Frank Ahrens  |  January 13, 2010; 2:47 PM ET
Categories:  Corporations , The Ticker  | Tags: Bank of America, bonuses, executive compensation  
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Bonuses should never be a guarantee and thus should never be part of a household budget. Bonuses should be based on performance by the individual with consideration of its relationship to corporate performance. When companies began to give bonuses as a guarantee, they moved away from merit and performance based compensation and created a form of corporate welfare for the wealthy. Some of the executives and staff of these banks and investment houses should be terminated without any form of a golden parachute; their performance in 2008-2009 was horrendous at best, criminal at worst.

The argument that these companies have to create these compensation packages to recruit and retain the best and brightest is fallacious. For every "best" employee expecting to get paid some outrageous package, there are plenty of qualified individuals with the same drive and the same chance of being successful but at a significantly lower cost to the company. These qualified individuals are not being given a chance to succeed because "best and brightest" is IMO just a code word for "connected".

I am convinced the executives of the major corporations like being part of the global plutocracy and use compensation arguments to maintain their power and wealth. Woe to us when this happens again and again due to our shortsightedness and willingness to allow this corporate misbehavior to continue.

Posted by: mraymond10 | January 13, 2010 5:16 PM | Report abuse

The corporate world and the extreme right of the Republican Party defend bonuses as a needed tool to enlist talent. Apparently the argument is that without bonuses no one having the necessary skill sets will take the job. These same people want us to believe that organized labor aka unions are bad and are the reason operating costs threaten economic prosperity. Both are absolute crap.

If it were not for the unions we would all still be making poverty wages, none of us would have medical insurance and retirement plans. Further, we would all be on lines waiting for the go ahead to do a days work for less than a surving wage. Let's face it, without organized labor the United States would not have a prosperous middle class. All one has to do is look at the Bush Administrations union busting activities and correlate that with the fact that earnings actually went backwards for most Americans.

Bottom line, bonuses at the very top are nothing more than hogging corporate wealth for themselves while telling the rank and file that they need to cut back on their wages and give back on their health benefits.

Capitalism needs new rules, and those rules must make social and environmental responsibility supercede the mantra of profit at any cost.

Every economic recession can be directly connected to corporate greed, primarily on Wall Street but their is more than enough wrong doing to cover the whole corporate world.

Posted by: garryh | January 13, 2010 6:55 PM | Report abuse

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