Bank of America’s Incentive Compensation Plan is a Model for Other Financial Firms

News trickled out Monday evening about the new pay package for Brian Moynihan, Bank of America’s CEO.  I won’t quote all of the details of the plan, but what I consider to be most noteworthy and admirable is the board of directors tying Moynihan’s pay to the Bank’s four-year performance.  This is truly extraordinary!

Furthermore, none of Bank of America’s executives received a cash bonus and Moynihan’s salary of $950,000 was kept flat for the upcoming year.

I sincerely hope that this is a trend that continues in the world of business.  I have long argued for aligning incentive compensation with long-term business goals.  By doing this, boards of directors dissuade executives from “swinging for the fences” when they make decisions.  Previously executives made decisions through the myopia encouraged by very large financial reward handed out for short-term performance.  Exasperating!

Jason