BANK OF AMERICA CORP DE
For the period ended Apr 24, 2024. Filed Mar 11, 2024.
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What shareholders are asked to vote on at a company's meeting. It is where to find what directors and top executives are paid, and who owns the most shares.
Apr 24, 2024 · Filed Mar 11, 2024
Contents
Executive compensationprogram features
- Executive compensation program features
a. Executive pay components & variable pay mix
Our Compensation and Human Capital Committee determines the pay for our named executive officers for each performance year. Ourpay-for-performance structure is designed to emphasize variable pay and help motivate our executives to deliver sustained shareholder value and Responsible Growth.
Consistent with prior years, restricted stock units are divided into the following components: annual cash-settled (CEO only), time-based and performance-based. The following charts provide an overview of the 2023 pay components and 2023 variable pay mix for our named executive officers, including the vesting, performance, and settlement standards that provide a multi-year look back on 2023 achievements.
| Performance Year 2023 Pay Components | |
| Cash Pay Components | |
| Description | How it pays |
| Base Salary • Determined based on job scope, experience, and market comparable positions; provides fixed income to attract and retain executives and balance risk-taking | • Semi-monthly cash payment through 2023 |
| Annual cash incentive—except CEO • Provides short-term variable pay for the performance year for non-CEO executives | • Single cash payment in February 2024 |
| Restricted Stock Pay Components | |
| Description | How it pays |
| Annual cash-settled restricted stock units (annual CRSUs)—CEO only | |
| • Track stock price performance over 1-year vesting period • Vest in 12 equal installments from March 2024 – February 2025 | • Granted in February 2024 • Cash-settled upon vesting |
| Performance restricted stock units (PRSUs) | |
| • Vest based on future achievement of specific tax-normalized return on assets (ROA) and growth in adjusted tangible book value (TBV) standards over 3-year performance period • Track company and stock price performance • Encourage sustained earnings during the performance period; future adverse performance below these standards will decrease the amount paid | • Granted in February 2024 • If performance standards are achieved, grants will be re-earned at the end of the performance period (2026) • 100% is the maximum that can be re-earned • If both threshold standards are not achieved, the entire award is forfeited • Stock-settled to the extent re-earned |
| See “Results for performance restricted stock units” on page 71 for the vesting and value of prior awards | |
| Time-based restricted stock units (TRSUs) | |
| • Track stock price performance over 4-year vesting period • Align with sustained longer-term stock price performance | • Granted in February 2024 • Vests in four equal annual installments beginning in February 2025 • 100% stock-settled for our CEO upon vesting • 50% stock-settled and 50% cash-settled upon vesting for other named executive officers |
Performance Year 2023 Variable Pay Mix
A majority of variable pay is delivered as equity-based awards that reflect the balance between short-term and long-term results. • We changed the proportion of equity-based and annual cash awards for named executive officers, other than the CEO, for 2023 pay decisions in order to further drive alignment with shareholders over the long-term. • For NEOs other than the CEO, the percentage of variable pay delivered in TRSUs and PRSUs has been increased by 10%, with a 10% reduction in annual cash. Accordingly, 70% of variable pay for these executives will now be delivered over the long-term. • CEO variable pay mix is unchanged with 100% delivered in equity-based awards and 70% delivered over the long-term. • The charts below illustrate the variable pay mix for our CEO and other named executive officers.
| 2024 PROXY STATEMENT | 67 |
Compensation discussion and analysis
b. Standards for performance restricted stock units
Re-earning the PRSUs granted in February 2024 (based on 2023 performance) requires the company to meet average ROA and average adjusted TBV growth standards(tax-normalized) over a three-year performance period from 2024-2026. The Committee made no change to the standards for performance year 2023 PRSU awards.
Under a hypothetical scenario, if our 2023 ending assets of $3.2 trillion remained constant during the performance period, our company would need to earn $77.1 billion in aggregate net income from 2024-2026 to achieve the PRSU 80 bps ROA standard. On an annualized basis, this equals approximately $25.7 billion in earnings which is higher than reported net income in seven of the last twelve years.
These performance metrics and standards encourage the achievement of sustained shareholder value and Responsible Growth. PRSUs are forfeited if results are below both minimum standards. PRSUs granted since 2017 provide no upside payout opportunity (100% is the maximum that can bere-earned for these awards). For any portion of the PRSU standards achieved, payment will be made after the end of the performance period. The performance year 2023 PRSU standards are outlined below:
| Three-year average ROA(tax-normalized)(1) (50% weighting) | Three-year average growth in adjusted TBV(2) (50% weighting) | ||
|---|---|---|---|
| Standard | % Earned | Standard | % Earned |
| <50bps | 0% | <5.25% | 0% |
| 50bps | 33 1⁄3% | 5.25% | 33 1⁄3% |
| 65bps | 66 2⁄3% | 7.00% | 66 2⁄3% |
| ≥80bps | 100% | ≥8.50% | 100% |
Note: Any results achieved above 331⁄3% will be interpolated on a straight-line basis between the two nearest standards.
| (1) | Three-year average ROA (tax-normalized) means the average “return on assets” for the three calendar years in the performance period. For this purpose, “return on assets” will be determined at the conclusion of each year based on the generally accepted accounting principles (GAAP) definition and, to the extent necessary, normalized to exclude the material effects of changes in the Internal Revenue Code of 1986 and related regulations adopted after the first day of the performance period. |
| (2) | Three-year average growth in adjusted TBV means the average year-over-year percentage change in “adjusted tangible book value” for the three calendar years in the performance period. For this purpose, “adjusted tangible book value” for each year will equal our total common shareholders’ equity, less (a) the cumulative impact of any capital actions approved by our company’s Board and completed by our company during the performance period, and less (b) the sum of the carrying value of: (i) goodwill and (ii) intangible assets excluding mortgage servicing rights; adjusted for (iii) deferred tax liabilities directly related to: (i) and (ii). Each year-over-year percentage change is measured after the conclusion of each calendar year using the beginning balance as of January 1 and the ending balance as of December 31 of that year and, to the extent necessary, will be normalized to exclude the material effects of changes in the Internal Revenue Code of 1986 and related regulations adopted after the first day of the performance period. |
| 68 | BANK OF AMERICA |
Compensation discussion and analysis
c. Compensation risk management features
Our Compensation and Human Capital Committee has designed our executive compensation program to encourage executive performance consistent with the highest standards of risk management.
i. Pay practices
Highlighted below are the key features of our compensation program for executive officers, including the pay practices we have implemented to drive Responsible Growth, encourage executive retention, promote conduct consistent with our values, and align executive and shareholder interests. We also identify certain pay practices we have not implemented because we believe they do not serve our risk management standards or shareholders’ long-term interests.
| What We Do | Pay for performance and allocate individual awards based on actual results and how results were achieved | ||
|---|---|---|---|
| Use balanced, risk-adjusted performance measures | |||
| Review feedback from independent control functions in performance evaluations and compensation decisions | |||
| Provide appropriate mix of fixed and variable pay to reward company, line of business, and individual performance | |||
| Defer a majority of variable pay as equity-based awards | |||
| Apply robust clawback features to all executive officer variable pay | |||
| Require stock ownership and retention to retirement of a significant portion of equity-based awards | |||
| Engage with shareholders on governance and compensation | |||
| Prohibit hedging and speculative trading of company securities | |||
| Grant equity-based awards on a pre-established date to avoid any appearance of coordination with the release of material non-public information | |||
| Prohibit pledging of equity-based awards | |||
| What We Don’t Do | Change in control agreements for executive officers | ||
| Severance agreements for executive officers | |||
| Multi-year guaranteed incentive awards for executive officers | |||
| Severance benefits to our executive officers exceeding two times base salary and bonus without shareholder approval per our policy | |||
| Accrual of additional retirement benefits under any supplemental executive retirement plans | |||
| Excise tax gross-ups upon change in control | |||
| Discounting, reloading, or repricing stock options without shareholder approval | |||
| Single-trigger vesting of equity-based awards upon change in control | |||
| Adjust PRSU results for the impact of litigation, fines, and penalties or non-tax impairment charges | |||
Additionally, it has not been our policy to provide for the accelerated vesting of equity awards upon an employee’s voluntary resignation to enter government service.
The “Compensation governance and risk management” discussion beginning on page 34 contains more information about our Compensation Governance Policy and our compensation risk management practices. That section describes our Chief Risk Officer’s review and certification of our incentive compensation programs and our Chief Audit Executive’s risk-based review of our incentive plans. We also describe the extent to which our CEO participates in determining executive officer compensation, and the role of Farient Advisors, the Committee’s independent compensation consultant.
| 2024 PROXY STATEMENT | 69 |
Compensation discussion and analysis
ii. Multiple cancellation & clawback features
Our equity-based awards are subject to three separate and distinct features that can result in the awards being canceled or prior payments being clawed back in the event of certain detrimental conduct or financial losses. These features were designed to encourage appropriate behavior and manage risk in our compensation program. Our named executive officers are subject to all three cancellation and clawback features.
| Detrimental conductcancellation & clawback | Performance-based cancellation | Incentive compensationrecoupment policy | |
| Who | • Applies to over 18,700 employees who received equity-based awards as part of their 2023 incentive compensation, as well as all recipients of our Sharing Success equity-based awards granted in March 2023 | • Applies to approximately 4,600 employees who are deemed to be “risk takers” and received equity-based awards as part of their 2023 compensation • “Risk takers” defined according to banking regulations and company policies | • Applies to all our executive officers |
|---|---|---|---|
| When | • An employee engages in certain “detrimental conduct,” including: • illegal activity • breach of a fiduciary duty • intentional violation or grossly negligent disregard of our policies, rules, and procedures • trading positions that result in a need for restatement or significant loss • conduct constituting “cause” | • Our company, a line of business, a business unit, or an employee experiences a loss outside of the ordinary course of business and the employee is found to be accountable based on: • the magnitude of the loss • the decisions that may have led to the loss • the employee’s overall performance | • Our company restates its financial statements |
| What | • All unvested equity awards will be canceled • Any previously vested award may be recouped, depending on the conduct | • All or part of the outstanding award may be canceled | • Any incentive compensation granted, earned or vested based on the attainment of a financial reporting measure that exceeds the amount that would have been paid after giving effect to the restatement must be recouped as determined by the Board or a Board committee • In addition, if the restatement is caused by an executive officer’s fraud or intentional misconduct, any action necessary to remedy the misconduct and prevent its recurrence may be taken |
In 2023, the NYSE adopted listing standards implementing final SEC rules and, as a result, we expanded our Incentive Compensation Recoupment Policy to comply with the listing standards. All of our equity-based awards granted since 2011 have provided that they are subject to any final rules implementing the compensation clawback provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) that the SEC and NYSE may adopt. A copy of our Incentive Compensation Recoupment Policy is available as an exhibit to our 2023 Form 10-K.
Pursuant to our Incentive Compensation Forfeiture & Recoupment Disclosure Policy, we will disclose publicly the incentive-based compensation forfeited by or clawbacks recovered from certain senior executives in the aggregate pursuant to our Detrimental Conduct and Incentive Compensation Recoupment policies described above, subject to certain privacy, privilege, and regulatory limitations. We will also disclose any clawbacks to the extent required by SEC rules and NYSE listing standards.
| 70 | BANK OF AMERICA |
Compensation discussion and analysis
iii. Stock ownership & retention requirements
Our stock ownership and retention requirements align executive officer and shareholder interests by linking the value realized from equity-based awards to sustainable company performance. Our Corporate Governance Guidelines require:
| Minimum shares of common stock owned | Retention | |
|---|---|---|
| Chief Executive Officer | 500,000 shares | 50% of net after-tax shares received from equity-based awards retained until one year after retirement |
| Other Executive Officers | 300,000 shares | 50% of net after-tax shares received from equity-based awards retained until retirement |
In light of our policy, we expect new executive officers to be in compliance with these requirements within five years. Full-value shares and units owned, awarded, or deemed beneficially owned are included in the stock ownership calculations; PRSUs are included only when earned and stock options are not included. All named executive officers are in compliance with their ownership requirements. Our Code of Conduct prohibits our executive officers from hedging and speculative trading of company securities. See the “Hedging policy” section on page 36 for more information on our hedging policy and rules.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.