Brian T. Moynihan, chairman of the board, chief executive officer of Bank of America Corp. (NYSE: BAC), had a very good year. He made $21,791,812 in 2017. That is 250.1 times as much as the bank employee’s median compensation for the year. That figure was $87,115.
As part of the Bank of America proxy, it disclosed the numbers. The math was easy to do, according to the document:
Our CEO pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules. Our methodology and process is explained below:
Determined Employee Population. We began with our global employee population as of October 1, 2017, including full-time, part-time, and seasonal or temporary workers, employed by our company or consolidated subsidiaries, but excluding our CEO.
Identified the Median Employee. We calculated compensation for each employee using base salary as of October 1, 2017 and estimated overtime, plus performance year 2016 cash incentives paid and equity awards granted in 2017. We identified employees within $500 of the median compensation and removed those employees who had anomalous compensation characteristics. For each remaining employee, we estimated total compensation using a method similar to the Summary Compensation Table rules, but including employer health insurance contributions and the value of other benefits, and then identified the median employee.
Calculated CEO Pay Ratio. We calculated our median employee’s annual total compensation for 2017 according to the SEC’s instructions for preparing the Summary Compensation Table, including employer health insurance contributions and the value of other benefits. We then calculated our CEO’s annual total compensation using the same approach to determine the pay ratio shown above.
The proxy followed the disclosure with a reference to the bank’s “Being a Great Place to Work” statement. Among the values listed in the statement is that “we put our customers first,” “emphasize integrity and responsibility” and “actively encourage all employees to bring their whole selves to work.” Their whole selves were paid much less than Moynihan.
At the end of 2017, Bank of America had 209,000 employees. Many of them will read the disclosure of why Moynihan’s pay was so high. The company’s earnings per share barely rose from $1.57 in 2016 to $1.63. Bank of America’s shares did rise 31% in 2017, better than the S&P at 19% for the same period. The gulf, however, is still huge, and enough for both shareholders and employees to wonder how it could have gotten so big.