As COVID spikes, Bank of America ends pandemic pay increase
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On March 20, 2020, there were 20,880 confirmed COVID-19 cases in the United States, which resulted in 311 deaths. Bank of America, at that time, recognized the additional risk that the pandemic posed to the workers in its branches and call centers. CEO Brian Moynihan approved pay increases. Workers at Bank of America branches (and its Merrill Lynch subsidiary) received an additional $200 every two weeks. Workers at call centers — and other support staff that needed to continue reporting to the office — were paid double their hourly rate for any overtime.
How long would these pay increases last? "The pay increase...will remain in place for the duration of the coronavirus crisis, said a person with knowledge of the plans," CNBC reported.
Today, there are more than 8.9 million confirmed COVID-19 cases, which resulted in more than 230,000 deaths. Over the last week "the seven-day average of daily new cases reached an all-time high of 68,767 on Sunday, according to data from Johns Hopkins University." A record "83,000 new cases were reported both Friday and Saturday." The surge "reflects an onslaught of new infections -- not just increased testing."
Yet, in a memo to employees obtained by Popular Information, Bank of America announced that it would end its pandemic pay increase. The memo informs employees that the company will "transition our compensation plans to be more business-as-usual once again." That means the company's "$200 special supplemental pay and special enhanced overtime pay programs… will be retired in October."
The decision is not being made out of financial necessity. Despite the pandemic, Bank of America is highly profitable.
In the third quarter, which included the pandemic pay increase for all three months, Bank of America turned a profit of $4.9 billion. "[W]e generated nearly $5 billion in earnings this quarter, reflecting the diversity of our business model, our industry-leading market position and digital capabilities, and our adherence to responsible growth," Moynihan said in a statement on September 30. "I want to thank our teammates for their exceptional work under extraordinarily difficult circumstances."
Today, the circumstances are even worse and Moynihan is cutting pay for thousands of his "teammates." Moynihan will be paid $26.5 million this year.
Bank of America did not respond to a request for comment.
Workers versus stock buybacks
Bank of America touted its pandemic bonuses in a series of media interviews. Moynihan, for example, discussed the bonuses in an October interview with CEO Magazine, which named him 2020 CEO of the Year. Moynihan said that, during the pandemic, his "number one" priority was to "take care of the employees." Moynihan cited "extra pay for the teammates that still had to come into work" as proof of the company's commitment. In an October 22 acceptance speech for the award, Moynihan emphasized his commitment to workers, particularly those who have continued to staff branches:
I want to give a special shout out to our teammates who work every day in our branches. From the day the crisis hit, they’ve been out there, making sure the economy runs, making sure all of you – while we were all in work from home mode – have the ability to conduct your financial affairs. And they’ve done a great job.
He did not mention that he was cutting pay for those same employees, effective the next day.
The speech centered around "stakeholder capitalism" and the necessity of all companies to deliver "profits and purpose." But, in Bank of America's case, the scale appears to be tilted towards "profits."
The pandemic bonus represented an investment of a few hundred million dollars at most. In a July call with investors, Moynihan said that expenses in the second quarter, while the increase was in place, were $13.4 billion. This is within "in a tight four-year long range of $13 billion to $13.5 billion with little exception" despite "higher COVID operating expenses." In other words, the investment in extra pay was so minimal, it did not create any noticeable extra expense. Moynihan is canceling the extra pay anyway.
In contrast, last year the company spent "a record $34 billion" on "stock repurchases and dividends" in an effort to boost its stock price. Bank of America spent more on stock buybacks than any other company in the S&P 500 except Apple.
Bank of America bought back another $6.5 billion of its stock in the first half of this year. Once the pandemic hit, however, the Federal Reserve has prohibited stock buybacks and limited dividends to preserve liquidity.
Beyond Bank of America
Back in March and April, other major banks implemented one-time bonuses or wage increases for front-line workers. By the time the summer rolled around, however, most of the benefits were phased out.
In March, JPMorgan Chase, the largest U.S. bank by assets, said it was providing “front-line employees” a one-time $1,000 bonus. “Many of our front line employees in our branches, operations and call centers, and other key sites who continue to go into their office or branch each day face particular challenges related to issues like childcare and transportation,” JPMorgan Chase said to employees. Childcare and transportation issues are an ongoing issue for working Americans. And JPMorgan Chase remains highly profitable. In the third quarter, the bank reported a profit of $9.44 billion. Corporate and investment banking revenue, in particular, increased 52% from the same period last year.
Similarly, Citigroup announced in March that the bank was giving U.S. employees who make $60,000 or less in base salary an award of $1,000. According to CEO Michael Corbat, these bonuses were provided “to help ease the financial burden of [the pandemic].” Since then, Citigroup has not offered another round of awards, despite employees continuing to work through the pandemic.
Earlier this month, Citigroup “reported better than-expected results for the third quarter,” according to CNBC. The company generated a net income of $3.2 billion during the third quarter and remarked that “trading and investment banking remained strong.”
U.S. Bank also said it was providing “critical front-line employees with a temporary 20% hourly wage increase” for four weeks. “Our branch, contact center and operations employees continue to play an essential role in ensuring we remain able to provide essential banking services to our customers,” U.S. Bank CEO Andy Cecere said in March. “It’s important that we recognize their extraordinary efforts while also looking ahead to supporting the long-term recovery efforts in communities across the country.”
This quarter, the company beat analyst expectations and recorded a net income of $1.58 billion.