Bank of America Corp. Chief Executive Officer Brian T. Moynihan said talks to cut employees’ pay are “open and honest” and he doesn’t share Morgan Stanley CEO James Gorman’s opinion that miffed workers should leave.
Asked today if he would tell complainers to go, Moynihan answered, “I wouldn’t.”
“Our employees know what they’ve contributed and how they’re paid,” he said in a Bloomberg Television interview from Davos, Switzerland. “We’re with people every step of the way, so the discussions are always open and honest and fair.”
Wall Street firms are reducing compensation for dealmakers and traders amid a revenue slump, with Bank of America telling its investment bankers to expect 2011 pay that averages 25 percent less than a year earlier, people with knowledge of the talks said earlier this week. Gorman said that while his employees understand why Morgan Stanley (MS) is cutting remuneration, anyone who doesn’t should adjust their attitude or leave.
“You’re naive, read the newspaper, No. 1,” Gorman said he would tell complaining employees during a Jan. 25 interview from Davos. “No. 2, if you put your compensation in a one-year context to define your overall level of happiness, you have a problem which is much bigger than the job. And No. 3, if you’re really unhappy, just leave. I mean, life’s too short.”
Both Moynihan and Gorman are attending the World Economic Forum’s annual meeting in Davos this week.
Bank of America’s warnings to employees about the 25 percent cuts preceded formal 2011 pay discussions, said the people, who declined to be identified because the Charlotte, North Carolina-based company’s talks are private. The reductions include salary and bonus, the people said.
The firm is also freezing base salary levels and limiting cash bonuses to $150,000 for some investment bankers, two people with knowledge of the plans said this week. The cap on cash payments applies to those getting as much as $1 million in total year-end bonuses, with the rest coming in shares of the lender, said the people.
The bank’s decision to leave salaries unchanged comes after companies boosted them in 2009 to de-emphasize bonuses, which lawmakers said encouraged unwarranted risks that fueled the financial crisis. Bank of America uses a tiered system based on the size of the bonus to determine the portion to pay in cash.
Financial stocks were the worst performers among the Standard & Poor’s 500 Index’s 10 sectors last year. Concerns that Europe’s sovereign-debt crisis would spread to lenders sapped deal activity and trading, and the Federal Reserve’s low interest rates helped to bring down margins.
The trading environment is showing signs of improvement, Moynihan said today.
“You had serious disruption in the markets in the last part of last year,” he said. “That’s a little bit behind us” with stability and spreads improving.
Bank of America slipped 1 cent to $7.29 at 4 p.m. in New York. The company has surged 31 percent this year, the best performance in the Dow Jones Industrial Average. Moynihan’s firm dropped 58 percent last year as mortgage-related costs pressured earnings.
He said today that the bank’s costs will decline as loan performance improves.
“Delinquencies continue to come down, which is important because what that really represents is we’re getting to the other side of the river,” Moynihan said. “It’s still got a lot of work ahead of it, but we’re getting there.”