In 2010, Thomas Montag, head of global banking and markets at Bank of America, was riding high. He exercised some of his options in his employer, and realised a pleasant gain of $11.5m.
This year, Montag is riding a pygmy goat.
BofA’s proxy statement shows that Montag’s target earnings from 2010 stock awards were supposed to reach $12m this year. Following a 70% collapse in the company’s share price since January and a 66% collapse since February 15th, when the stock was awarded, Montag’s earnings will be a lot less: around $8m less, in fact.
Worse, Montag has more than 2 million options to buy BofA stock at $30.7. After yesterday, when the bank’s shares fell below the ‘psychological’ $5 mark, the stock currently stands at $4.9. Montag has until 2018 to exercise his options, so will be hoping something rather dramatic happens in the next six years.
It’s clearly not just Montag. The collapsing share price has implications for Bank of America Merrill Lynch staff inLondonand elsewhere. On one hand, they may want to get out while the value of their deferred bonuses is being eviscerated by fears about future litigation and the real value of BofA’s supposed ‘assets.’ On the other, they may want to stay until the stock recovers and they can persuade another firm to buy out their deferred stock at a more reasonable rate.
Most BAML share payments vest over three years. The only lining in this cloud is the fact that a lot of its senior bankers apparently received a lot of their bonuses in cash this year: up to 80% in some cases. The hope will clearly be for a repeat in 2012. If not, BAML may have a mutiny on its hands.