Bank of America CEO Brian Moynihan ranks near the top of U.S. executives in his use of a prestigious perk typically unavailable to a company’s rank and file – personal use of corporate aircraft.
The head of the Charlotte-based bank was fifth among Fortune 100 executive officers based on the size of aircraft perks in 2014, according to the latest available data from compensation-research firm Equilar. The value of Moynihan’s benefit puts him under former CEOs of Procter & Gamble and Boeing and above CEOs of Walt Disney Co. and General Electric.
It’s not a new occurrence for Moynihan, who ranked fourth in 2013 and second in 2012. But this year a prominent shareholder advisory firm says investors would benefit from more details on why the bank provides jet perks “that far exceed market norms.” In 2015, the benefit was valued at $380,323.
Bank of America spokesman Lawrence Grayson said Moynihan’s aircraft costs are associated with the CEO’s commuting. Since taking over in 2010, Moynihan has continued to live in Boston with his family while flying to Charlotte to work at the bank’s uptown headquarters tower, a round trip of about 1,400 miles.
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According to the bank’s regulatory filings, Moynihan reimburses the company for the expense of his commuting, a figure the bank does not disclose. That can include fuel and landing fees. Grayson said the amount the bank reports reflects other costs arising from Moynihan’s commuting, such as flying an empty aircraft to a hangar in another city. Moynihan does not reimburse the bank for those costs.
Despite citing the jet perk’s costs, Institutional Shareholder Services, the advisory firm, is recommending Bank of America shareholders vote to endorse the bank’s 2015 compensation for Moynihan and other top executives. Shareholders will cast those nonbinding votes during the bank’s annual meeting in Charlotte on Wednesday.
Moynihan, 56, is allowed the perk under a 2011 contract that lets him lease the bank’s aircraft. The fleet includes planes such as a Gulfstream Aerospace G-VSP. Although the bank generally does not consider the perk’s value as compensation to Moynihan, federal securities rules require the company to disclose the figure as part of his total annual pay.
Grayson said Moynihan does not use the aircraft for vacations or other non-business purposes.
Bank of America has noted in past years the arrangement lets Moynihan travel safely and efficiently, justifications commonly cited by other companies that award aircraft perks.
But others question the upsides of a CEO making long-distance commutes.
“I think it can sometimes result in actually a lack of focus on the job because of the commute,” said Eleanor Bloxham, CEO of The Value Alliance, an Ohio company that advises boards of directors on best practices in corporate governance.
While corporate aircraft can help commuter CEOs spend more time with their families, it could also hurt morale of employees who don’t have access to the perk, in addition to creating other challenges for a chief executive, Bloxham said.
“The ability of the CEO to start to learn the culture of the organization can be impeded if they don’t spend enough time in the headquarters community,” she said.
Others, though, point out that even non-commuter CEOs are frequently away from their headquarters cities on business travel.
During an appearance at Christ Church Charlotte last year, Moynihan said he’s back home in Boston on the weekends and at least one night a week. “You’ll never get this right,” he said regarding work-life balance. “It’s very difficult.”
Since the dot-com bubble burst in the early 2000s, the Securities and Exchange Commission has required public companies to disclose more about executive perks.
Companies must disclose perks to certain executives if their total value exceeds $10,000. Companies may offer a range of fringe benefits to their upper ranks – from club memberships to help preparing an executive’s taxes.
For aircraft perks, 38.6 percent of all CEOs in the S&P 500 used the benefit in 2014. That’s about the same as 2012 and 2013 and down slightly from 2011.
Equilar says the decrease, though perhaps not directly related, occurred as the SEC in 2011 began mandating that companies let shareholders cast advisory votes on top executives’ pay. Those “say-on-pay” votes, required under the 2010 Dodd-Frank financial overhaul law, must take place at least once every three years.
Bank of America, in a regulatory filing, points out its executive compensation has received more than 90 percent support of votes from shareholders since 2011. Last year, the compensation won 94.8 percent support. That’s above the 92.6 percent average last year for S&P 500 companies, according to ISS.
Calls for more disclosure
This year marks the third time ISS has brought special attention to Moynihan’s personal use of corporate aircraft.
The adviser uses stronger language than when flagging the perk in 2013 and 2014 reports. In its latest report, ISS writes that Moynihan’s 2015 costs “significantly exceeded” the median value of the same perk awarded to companies in the S&P 500 Index.
ISS said Bank of America shareholders would benefit from additional disclosure regarding the decision by the bank’s compensation committee to provide the perk.
In a report last year, the adviser did not call special attention to Moynihan’s aircraft use in 2014, when the costs hit a peak of $478,545. ISS declined to comment beyond this year’s report.
$478,545 Value of air-travel perk Bank of America awarded to CEO Brian Moynihan in 2014
$380,323 Value of Moynihan’s air-travel perk in 2015
This year, the adviser gave the bank its highest possible score for its governance practices pertaining to compensation. But ISS also said that “concerns remain concerning the company's overall discretionary approach in determining executive compensation.”
Moynihan remains compensated overall at a lower level than his counterparts at other large banks. His 2015 compensation of $16 million was the lowest among CEOs at the five largest U.S. banks by assets.
While Moynihan’s jet perk is high relative to other Fortune 100 companies, the CEO has cut billions of dollars in costs in recent years, including shutting branches and eliminating tens of thousands of jobs.
Another prominent firm that advises shareholders, Glass Lewis, makes no mention of Moynihan’s jet perks in a report to investors ahead of the bank’s annual meeting.
The financial crisis led some banks to pare their operations at Charlotte Douglas International Airport amid increased scrutiny of corporate expenses.
Following the crisis, Bank of America announced plans for selling three planes and a helicopter. After buying Wachovia in 2008, Wells Fargo closed the former Charlotte-based bank's Hawkaire aviation subsidiary and announced plans to sell five planes.
Moynihan isn’t the first CEO with an ultralong commute.
▪ Omaha, Neb.-based food maker ConAgra Foods, whose brands include Chef Boyardee and Jiffy Pop, allowed former CEO Gary Rodkin to commute from his home in Greenwich, Conn. Rodkin retired last year.
▪ Cincinnati’s Procter & Gamble, maker of Crest toothpaste and Tide detergent, permitted former CEO A.G. Lafley to commute from his home in Sarasota, Fla. Lafley stepped down last year.
Other big banks have varying policies regarding executive use of corporate aircraft.
▪ JPMorgan Chase & Co.’s 2015 compensation for CEO Jamie Dimon included $123,873 for aircraft perks.
▪ Morgan Stanley recorded $153,588 in such costs for CEO James Gorman.
▪ Goldman Sachs says its policy is not to allow top executives to have personal use of third-party aircraft, except in connection with business trips. In those cases, executives must pay the company for the additional costs.
▪ Wells Fargo says it provides a car and driver to CEO John Stumpf and certain other executives primarily for business travel and occasionally for commuting.
Mitchell Moss, a New York University professor who researches transportation and commuting, said the main focus for a CEO who is always on the go should be on how they are spending their time.
“They’re constantly in motion,” he said. “Where they’re located,” Moss said, “is less important than who they’re interacting with.”