BofA plan to defer bonuses set to inflame tensions with Merrill
By Greg Farrell in New York
Published: January 29 2009 02:00 | Last updated: January 29 2009 02:00
Bank of America is planning to defer bonus
payments to some investment banking staff this year - a move certain to
inflame tensions between its employees and officials of newly acquired
Merrill Lynch, say executives familiar with the matter.
Andrew Cuomo, New York attorney-general, is investigating Merrill's decision
to accelerate the payment of nearly $4bn (£2.8bn) in bonuses - mostly in
cash - to its employees just days before the closing of its sale to BofA on
As that probe proceeds, BofA was expected to tell staff at its capital
markets and investment banking units today that it would be deferring
payment of 2008 bonuses of $50,000 or more, according to executives familiar
with the decision. BofA employees, who would normally receive their 2008
bonuses in February, will have to wait until February 2010 before getting
one-third of their 2008 sum, the executives said. The remaining thirds will
be paid out in 2011 and then 2012.
BofA said in a statement: "We traditionally don't comment on our
compensation plans, particularly in advance of sharing details with our
associates. Your story is not entirely accurate."
Word of the deferred payments has sparked anger at BofA's capital markets
operations in New York and London, which were already facing the prospect of
job cuts of up to 40 per cent as they are combined with similar units at
BofA staffers are unhappy with the disparity between their bonuses and those
earned by staffers at Merrill Lynch.
BofA employees, on average, earn far less than their Merrill counterparts.
BofA insiders said that the deferral of payments would be a particular
problem for executives who have constructed a lifestyle around the
near-certainty that there would be some kind of bonus each February.
They said that this could lead to departures beyond the 3,000 or so job cuts
expected in the unit this quarter.
"This is going to cause an uproar," says one BofA executive familiar with
the matter. "There will be cash-flow issues for families." Most BofA bonuses
are paid in cash. Certain "key" employees are paid bonuses in a mixture of
cash and stock.
Morale is already low among legacy BofA capital markets and investment
banking staffers, who expect bonuses to be far lower than 2007 levels.
Across Wall Street, bonuses are down 44 per cent from the previous year,
according to a study released yesterday by the New York state comptroller's
Financial Times Limited 2009