Magazine article Workforce Management

Bank of America Ties Bonuses to Overall Success

Magazine article Workforce Management

Bank of America Ties Bonuses to Overall Success

Article excerpt

COMPENSATION

Bank of America's new bonus program, Rewarding Success, is raising eyebrows in the compensation industry because it departs from the tried-and-true convention of tying bonus awards to individual performance. Instead, the bank will distribute annual bonuses of $500 to $3,000 to approximately 150,000 associates based on whether the company reaches target income of $16.1 billion and a stock price appreciation of at least 8 percent in 2005.

"Associates will be inspired to work harder and be more productive because if the bank does well, then they will do well," says Tara Burke, a spokeswoman for Bank of America in New York.

Some compensation specialists, however, wonder whether the program's lack of personal accountability will allow it to muster the level of enthusiasm that workers often need to bolster productivity. "Generally speaking, it is desirable to design bonus plans that enable workers to draw a direct line of sight between their personal performance and the company's success," says Robert Fulton, managing director at Pathfinder's Group.

The Rewarding Success program clearly breaks with tradition because its beneficiaries, who do not have to adhere to any individual productivity goals, are not the usual high-level executives whose bonuses are linked to company performance. Instead they are less highly compensated employees, earning $100,000 a year or less.

Considering that high-ranking executives, including Bank of America CEO Kenneth Lewis, were among the architects of the program, this deviation from the norm is not a haphazard one. The program's structure could be indicative of goals that are perhaps more pressing than productivity, compensation experts say. One such goal might be creating a unified environment in the wake of its high-profile merger with FleetBoston in 2004.

"Companies create bonus programs for a variety of reasons. …

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