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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

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Exchange Act of 1934 (Amendment No.    )

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¨		Soliciting Material Pursuant to §240.14a-12

 

Bank of America Corporation

 

(Name of Registrant as Specified in its Charter)

 

 

 

 

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Bank of America Corporation
Bank of America
2015
Proxy Statement
Annual Meeting of Stockholders

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March 26, 2015

Dear Fellow Stockholders:

We cordially invite you to attend the 2015 Annual Meeting of Stockholders, to be held May 6, 2015 at 10:00 a.m., local time, at the Charlotte Marriott SouthPark, 2200 Rexford Road, Charlotte, North Carolina.

At the meeting we will discuss and vote on the matters described in the notice and proxy statement. I also will provide a report on our company’s strategy and performance.

Your vote is important; please read the documents with care and follow the voting instructions to ensure your shares are represented. We look forward to your participation.

As a final note, on behalf of the Board, I would like to thank directors Chad Holliday and Clayton Rose, who are not standing for re-election for another term, for their counsel and guidance. Their services benefitted the Board and our company.

Sincerely,

 

Brian T. Moynihan

Chairman and Chief Executive Officer

 

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Notice of 2015 Annual Meeting of Stockholders

 

Date:		May 6, 2015
Time:		10:00 a.m., local time
Place:		Charlotte Marriott SouthPark, 2200 Rexford Road, Charlotte, North Carolina 28211

Matters to be voted on:

 

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Electing the 13 directors named in the attached proxy statement

 

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A proposal approving our executive compensation (an advisory, non-binding “Say on Pay” resolution)

 

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A proposal ratifying the appointment of our registered independent public accounting firm for 2015

 

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A proposal approving the amendment and restatement of the Bank of America Corporation 2003 Key Associate Stock Plan

 

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Stockholder proposals set forth on pages 62 through 69, if they are properly presented at our annual meeting

 

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Any other business that may properly come before our annual meeting

Record date: Bank of America stockholders as of the close of business on March 11, 2015, will be entitled to vote at our annual meeting and any adjournments or postponements of the meeting.

Your vote is very important. Please submit your proxy as soon as possible by the Internet, telephone or mail. Submitting your proxy by one of these methods will ensure your representation at the annual meeting regardless of whether you attend the meeting. Please refer to the following page for information on how to vote your shares and attend our annual meeting.

By order of the Board of Directors,

 

Ross E. Jeffries, Jr.

Corporate Secretary

March 26, 2015

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 6, 2015: Our Proxy Statement and 2014 Annual Report to Stockholders are available at http://investor.bankofamerica.com

 

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SUMMARY

 

SUMMARY

This summary highlights information contained elsewhere in this proxy statement or in our corporate governance documents published on our website at http://investor.bankofamerica.com. We encourage you to read this proxy statement in its entirety before voting.

VOTING YOUR SHARES

Your vote is important. Please exercise your right as a stockholder and submit your proxy as soon as possible.

You may vote if you were a stockholder as of the close of business on March 11, 2015. Stockholders may vote in person at the meeting or submit a proxy by the Internet, telephone or mail as follows:

 

		VIA THE INTERNET www.proxyvote.com				BY MAIL Complete, sign, date and return your proxy card in the envelope provided
		BY TELEPHONE Call the phone number located on the top of your proxy card				IN PERSON Attend our annual meeting and vote by ballot

If you submit your proxy by telephone or over the Internet, you do not need to return your proxy card by mail.

Stockholder Action

 

Proposals for Your Vote		Board Voting Recommendation		Votes Required		Page
Proposal 1: Electing Directors		FOR each nominee		Majority of votes cast		1
Proposal 2: Approving Our Executive Compensation (an advisory, non-binding “Say on Pay” resolution)		FOR		Majority of votes cast		25
Proposal 3: Ratifying the Appointment of Our Registered Independent Public Accounting Firm for 2015		FOR		Majority of votes cast		51
Proposal 4: Approving the Amendment and Restatement of the Bank of America Corporation 2003 Key Associate Stock Plan		FOR		Majority of votes cast		54
Proposals 5 to 8: Stockholder Proposals		AGAINST each proposal		Majority of votes cast		62

 

 

		BANK OF AMERICA CORPORATION				2015 PROXY STATEMENT				i

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SUMMARY

 

WE’RE BETTER WHEN WE’RE CONNECTED

Operating, Governance and Compensation Highlights

2014 FINANCIAL AND OPERATING PERFORMANCE

Our company is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations and institutions with a full range of banking, investing, asset management and other financial and risk management products and services. We continued to focus on our core business performance during 2014, reflecting our ongoing efforts to stabilize revenue, decrease costs, strengthen the balance sheet and manage risk, while improving future risk management efforts by resolving our most significant remaining legacy mortgage-related litigation matters.

See “Compensation Discussion and Analysis” on page 25 and our 2014 annual report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited financial statements.

GOVERNANCE HIGHLIGHTS

Director Independence. Our directors are seasoned leaders with diverse experiences, possessing sound judgment and the necessary skills that allow them to effectively oversee our company. Our directors are elected annually and we have adopted a majority vote standard in uncontested elections. A substantial majority of our directors are independent.

Board Leadership. We have strong independent Board leadership. During 2014, following a deliberate and diligent process, the Board determined to elect a Lead Independent Director with specified duties and responsibilities to serve for a minimum of one year and elected our Chief Executive Officer (CEO) to be Chairman of the Board. The Board believes that this is the most appropriate leadership structure for our Board at this time. See “Board Leadership” on page 11.

Board Oversight of Risk. Our Board oversees our company’s management of risk primarily through regular risk management updates and updates from its Enterprise Risk Committee and other Board committees. Each of these committees regularly receives risk management updates on risk-related matters within the committee’s responsibilities and reports to our Board. In addition, our Board’s Compensation and Benefits Committee oversees our compensation policies and practices so that they do not encourage employees to take unnecessary and excessive risks. Our Enterprise Risk Committee members understand our company’s risk management policies and framework and the risk management practices relevant to our company and at least one member has experience in identifying, assessing and managing risk exposures of large, complex financial firms. See “Board Oversight of Risk” on page 15.

Stockholder Rights. We provide the following stockholder rights:

 

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We permit stockholders owning 3% or more of our stock continuously for at least 3 years to nominate directors constituting up to 20% of our Board

 

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There are no supermajority amendment provisions in our Certificate of Incorporation or our bylaws

 

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Our directors are elected annually by a majority voting standard in uncontested elections

 

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Our Corporate Governance Committee considers director candidates recommended by stockholders

 

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Stockholders holding at least 10% of our outstanding common shares may convene a special meeting as provided in our bylaws

 

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We do not have a “poison pill” in effect

Stockholder Engagement. Our management meets with our largest stockholders throughout the year to discuss the issues that matter most to them. We share the feedback received with our Board and its committees to enhance our governance practices and transparency of those practices to our stockholders. See “Stockholder Engagement” on page 18 for a description of the governance enhancements we made in response to our stockholder feedback.

Stock Ownership and Retention Requirements. Our executive officers and non-management directors are subject to stock ownership and retention requirements.

Hedging Prohibition. Our Code of Conduct prohibits our directors and executive officers from hedging and speculative trading of company securities, including short sales and trading in options and derivatives.

 

ii					BANK OF AMERICA CORPORATION					2015 PROXY STATEMENT

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SUMMARY

 

COMPENSATION HIGHLIGHTS

Pay-for-Performance Compensation. Our compensation philosophy ties our executive officers’ pay to company, line of business and individual performance over the short and long term. In addition, our executive compensation program provides a mix of salary, incentives and benefits paid over time that we believe aligns executive officer and stockholder interests. A majority of total variable compensation granted to named executive officers is deferred equity-based awards, further encouraging long-term focus on generating sustainable results for our stockholders.

Compensation Risk Management. Our executive compensation program also supports our enterprise risk management goals through these checks and balances:

 

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Mix of fixed and variable pay

 

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Balanced, risk-adjusted performance measures

 

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Pay-for-performance process that allocates individual awards based on actual results and how results were achieved

 

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Review of feedback from independent control functions in performance evaluations and compensation decisions

 

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Deferral of a significant portion of variable pay as equity-based awards

 

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Use of multiple clawback and cancellation features for equity-based awards

Our Compensation Practices. For a list of “what we do” and “what we don’t do,” see page 30.

2014 Compensation Decisions for CEO. For performance year 2014, the Compensation and Benefits Committee and the Board’s independent directors determined the following compensation for our CEO, in recognition of his individual performance and the overall performance of our company:

 

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Total compensation, inclusive of base salary and equity-based incentives, for performance year 2014 of $13 million

 

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Half of the CEO’s variable pay for performance year 2014 was awarded in the form of performance restricted stock units that are earned, if at all, by achieving specific performance goals over a three-year period (2015-2017)

Prior Say on Pay Votes. At last year’s annual meeting of stockholders, over 93% of the votes cast approved our named executive officers’ 2013 compensation as described in the 2014 proxy statement. The Compensation and Benefits Committee believes these results affirmed our stockholders’ support of our company’s executive compensation program; and, as a result, we did not materially change our overall approach in setting executive compensation for 2014.

We encourage you to read the more detailed information in “Compensation Discussion and Analysis” on page 25 before voting on Proposal 2: Approving Our Executive Compensation (an advisory, non-binding “Say on Pay” resolution).

 

		BANK OF AMERICA CORPORATION				2015 PROXY STATEMENT				iii

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TABLE OF CONTENTS

 

TABLE OF CONTENTS

 

 

 

PROXY STATEMENT

We are providing or making available this proxy statement starting on or about March 26, 2015 to solicit your proxy to vote on the matters presented at our annual meeting. Our Board requests that you submit your proxy by the Internet, telephone or mail so that your shares will be represented and voted at our annual meeting.

INTERNET AVAILABILITY OF PROXY MATERIALS

We mailed or e-mailed to most of our stockholders a Notice of Internet Availability of our proxy materials with instructions on how to access our proxy materials over the Internet and how to vote. If you are a registered stockholder and would like to change the method of delivery of your proxy materials, please contact our transfer agent, Computershare Trust Company, N.A., P.O. Box 43078, Providence, Rhode Island 02940-3078; Toll free: 800-642-9855; or www.computershare.com/bac. You may do the same as a beneficial stockholder by calling the bank, broker or other nominee where your shares are held.

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PROPOSAL 1: ELECTING DIRECTORS

 

PROPOSAL 1: ELECTING DIRECTORS

Our Board is presenting 13 nominees for election as directors at our annual meeting. Directors Charles O. Holliday, Jr. and Clayton S. Rose are not standing for reelection. Effective as of the date of our 2015 annual meeting, the size of our Board will be reduced from 15 to 13 members. All nominees currently serve as directors on our Board and were elected by you at our 2014 annual meeting. Each director elected at the meeting will serve until our 2016 annual meeting or until a successor is duly elected and qualified. Each director nominee has consented to being named in this proxy statement and to serve as a director if elected. If any nominee is unable to stand for election for any reason, the shares represented at our annual meeting may be voted for another candidate proposed by our Board, or our Board may choose to reduce its size.

 

Name (1)

Age

Director Since

Independent

Principal Occupation

Number of Other Public Company Boards

Audit Committee

Corporate Governance Committee

Compensation and Benefits Committee

Credit Committee

Enterprise Risk Committee

Sharon L. Allen

63

2012

Yes

Former Chairman, Deloitte LLP

1

C

M

Susan S. Bies

68

2009

Yes

Former Member, Board of Governors of the Federal Reserve System

None

M

M

Jack O. Bovender, Jr.

69

2012

Yes

Lead Independent Director, Bank of America Corporation; Former Chairman and CEO, HCA Inc.

None

Frank P. Bramble, Sr.

66

2006

Yes

Former Executive Officer, MBNA Corporation

None

M

C

Pierre J. P. de Weck

64

2013

Yes

Former Chairman and Global Head of Private Wealth Management, Deutsche Bank AG

None

M

M

Arnold W. Donald

60

2013

Yes

President and CEO, Carnival Corporation and Carnival plc

2

M

M

Charles K. Gifford

72

2004

No

Former Chairman of the Board, Bank of America Corporation

2

C

Linda P. Hudson

64

2012

Yes

Chairman and CEO, The Cardea Group, LLC; Former President and CEO, BAE Systems, Inc.

1

M

M

Monica C. Lozano

58

2006

Yes

Chair of the Board, US Hispanic Media Inc.

1

C

M

Thomas J. May

68

2004

Yes

Chairman, President and CEO, Northeast Utilities

1

C

M

Brian T. Moynihan

55

2010

No

Chairman of the Board and CEO, Bank of America Corporation

None

Lionel L. Nowell, III

60

2013

Yes

Former SVP and Treasurer, PepsiCo, Inc.

3

M

M

R. David Yost

67

2012

Yes

Former CEO, AmerisourceBergen Corporation

3

M

M

Number of Meetings Held in 2014

Board: 26

19

11

9

10

14

C = Chair; M = Member

 

(1)

Prior to his election as Lead Independent Director, Mr. Bovender served on the Credit Committee and the Enterprise Risk Committee. Mr. Holliday serves on the Audit Committee and the Corporate Governance Committee and Dr. Rose serves on the Corporate Governance Committee, the Credit Committee and the Enterprise Risk Committee.

 

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PROPOSAL 1: ELECTING DIRECTORS

 

IDENTIFYING AND EVALUATING NOMINEES FOR DIRECTOR

Our Board believes our directors should possess backgrounds, qualifications, attributes and skills that, when taken together, provide our company with a broad range of experience in large, complex organizations; regulated industries; consumer, commercial and corporate businesses; and international organizations. Our directors also have experience in financial and regulatory oversight; risk management; strategic planning; and technology. See “The Nominees” on page 3 for the qualifications, attributes and skills our Board considers important for our nominees.

 

Our Corporate Governance Committee recommends candidates to our Board for nomination. When considering potential director nominees, the Committee has an established process that our primary bank regulators have reviewed and acknowledged. In that process, the Committee reviews available information regarding each potential candidate, including qualifications, experience, skills and integrity, as well as race, gender and ethnicity. Although we do not have a formal policy regarding diversity, our Board views diversity as a priority and seeks diverse representation among its members. Our Board, through our Corporate Governance Committee, assesses our Board’s diversity when identifying and evaluating director candidates. Of our 13 nominees, seven have international experience, nine have CEO experience, two are African-American and four are women, one of whom is Hispanic.

Our Corporate Governance Committee considers director candidates proposed by Board members, management, third-party search firms and our stockholders. The Committee follows the same director selection process and the same criteria for evaluating candidates regardless of who proposed their candidacy.

Any stockholder who wishes to recommend a candidate for consideration by our Corporate Governance Committee must submit a written recommendation to the Corporate Secretary, Bank of America Corporation, Hearst Tower, 214 North Tryon Street, NC1-027-18-05, Charlotte, North Carolina 28255. For our 2016 annual meeting of stockholders, the Committee will consider recommendations received by October 15, 2015. The recommendation must include the information set forth in our Corporate Governance Guidelines, which are published on our website at http://investor.bankofamerica.com.

 

2					BANK OF AMERICA CORPORATION					2015 PROXY STATEMENT

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PROPOSAL 1: ELECTING DIRECTORS

 

THE NOMINEES

Our Board selected the 13 nominees based on their experience, qualifications, attributes and skills and the belief that each can make substantial contributions to our company.

 

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Our nominees are seasoned leaders, and the majority serve or have served as chief executive officers

 

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Our nominees bring to our Board a vast depth and diversity of public company, financial services, private company, public sector, academic, nonprofit and other domestic and international business experience

 

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Our nominees held leadership positions in complex financial services organizations and with our primary regulator, and management roles in the areas of risk, operations, finance, technology and human resources

 

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Our nominees represent diverse viewpoints and bring a blend of historical and new perspectives about our company as a result of their varied lengths of tenure as our directors

Our Board believes, in totality, this mix of attributes among the nominees enhances our Board’s independent leadership and effectiveness in light of our company’s businesses and organizational complexities, our industry’s operating environment and our company’s long-term strategy.

Our Corporate Governance Guidelines provide that a director who has reached the age of 72 shall not be nominated for initial election to our Board, although our Board may approve the nomination for re-election of a director at or after the age of 72 if, in light of the circumstances, it is in the best interests of our company and its stockholders. Our Board requested that Charles K. Gifford, a director of our company since 2004 whose age is 72, stand for nomination for re-election to our Board at our annual meeting. Mr. Gifford is a former Chairman of our Board and serves as chair of our Board’s Credit Committee. He has also been the CEO of a bank holding company, and has approximately 50 years of experience in the financial services industry.

 

Our Board recommends a vote “FOR” each of the nominees listed below for election as a director (Proposal 1).

Set forth below are each nominee’s name, age as of our annual meeting date, principal occupation, business experience and public company directorships held during the past five years. We also discuss the qualifications, attributes and skills that led our Board to decide the nominee should be elected a Bank of America director.

 

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PROPOSAL 1: ELECTING DIRECTORS

 

 

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CORPORATE GOVERNANCE

 

CORPORATE GOVERNANCE

 

DIRECTOR INDEPENDENCE

The New York Stock Exchange (NYSE) listing standards require a majority of our directors and each member of our Audit, Compensation and Benefits, and Corporate Governance Committees to be independent. The Federal Reserve Board Enhanced Prudential Standards require the chair of our Enterprise Risk Committee to be independent. In addition, our Corporate Governance Guidelines require a substantial majority of our directors to be independent. Our Board has adopted Director Independence Categorical Standards, published on our website at http://investor.bankofamerica.com, to assist it with determining each director’s independence. Our Board considers a director “independent” if he or she meets the criteria for independence in both the NYSE listing standards and our Categorical Standards.

Our Board, in coordination with our Corporate Governance Committee, evaluated the relevant relationships between each current director (and his or her immediate family members and affiliates) and Bank of America Corporation and its subsidiaries and affirmatively determined that 13 of our 15 directors are independent. Specifically, the following directors are independent under the NYSE listing standards and our Categorical Standards: Ms. Allen, Ms. Bies, Mr. Bovender, Mr. Bramble, Mr. de Weck, Mr. Donald, Mr. Holliday, Ms. Hudson, Ms. Lozano, Mr. May, Mr. Nowell, Dr. Rose and Mr. Yost.

In making its independence determinations, our Board considered the following ordinary course, non-preferential relationships that existed during the preceding three years and determined that none of the relationships constituted a material relationship between the director and our company:

 

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Our company or its subsidiaries provided ordinary course financial products and services to all of our directors. Our company or its subsidiaries also provided ordinary course financial products and services to some of their immediate family members and entities affiliated with some of our directors or their immediate family members (Mr. Donald, Mr. May and Dr. Rose). In each case, the fees we received for these products and services were below the thresholds of the NYSE listing standards and our Categorical Standards, and were less than 2% of the consolidated gross annual revenues of both our company and the other entity

 

10					BANK OF AMERICA CORPORATION					2015 PROXY STATEMENT

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CORPORATE GOVERNANCE

 

 

Ÿ

Our company or its subsidiaries purchased products or services in the ordinary course from entities where some of our directors are executive officers or employees or their immediate family members serve as executive officers (Mr. Donald, Mr. May and Dr. Rose). In each case, the fees paid to each of these entities were below the thresholds of the NYSE listing standards and our Categorical Standards, and were less than 2% of the consolidated gross annual revenues of both our company and the other entity

Mr. Gifford and Mr. Moynihan are not independent directors. Mr. Gifford, former Chairman of Bank of America Corporation, receives office space and secretarial support from our company with an aggregate incremental cost exceeding the thresholds of the NYSE listing standards and our Categorical Standards. Mr. Moynihan is not independent due to his employment with our company.

BOARD LEADERSHIP

Our Board is responsible for overseeing our company’s businesses and affairs and for exercising reasonable business judgment on behalf of our company. In discharging this obligation, our Board relies on the judgment, business acumen, and experience of the company’s management. Our Board is committed to strong, independent Board and Committee leadership and the objective oversight of management as a critical aspect of effective Board leadership. Our directors believe that the appropriate leadership structure for our Board will vary depending on the strategy and environment in which our company operates. Our independent Corporate Governance Committee’s charter provides that it shall “[e]nsure that a proper succession planning process is in place to select a Chairman of the Board, and assure that such process is effectively administered.” Accordingly, at least annually, the Corporate Governance Committee deliberates on and discusses the appropriate leadership structure for the Board based on the needs of our company. Since the annual stockholders’ meeting in 2009, these deliberations and discussions have considered the results of the stockholder vote in 2009 to amend our bylaws to require an independent Chairman, in which 50.3% of the votes cast or approximately 29% of the then-outstanding shares supported that amendment.

Our Board’s Audit, Compensation and Benefits, Corporate Governance and Enterprise Risk Committees are each chaired by and composed solely of independent directors. In October 2014, our Board appointed Mr. Moynihan, the CEO, as Chairman of the Board, and the independent directors of the Board elected Mr. Bovender, a seasoned leader and independent director, to serve in the newly established Lead Independent Director role. Our Board determined that this leadership structure is appropriate given Bank of America’s present characteristics and circumstances.

In implementing our Board’s current leadership structure, our Board amended our bylaws to require the Chairman either to be independent or, if not, to be complemented by a Lead Independent Director. Amending our bylaws to remove the provision requiring an independent Chairman was a decision our Board considered carefully, in particular in view of the 2009 stockholder vote referenced above, and followed months of thorough deliberation by our Corporate Governance Committee and Board. A critical element for our Board in supporting this determination is the simultaneous adoption of robust and transparent duties for the independent director who leads our Board. These duties help facilitate our Board’s independent, objective, effective and efficient oversight of our company. They are codified in our Corporate Governance Guidelines, extend beyond those of a traditional lead director and, depending on the board leadership structure in place at the time, apply to either an independent Chairman or a Lead Independent Director.

 

Our Board appointed Mr. Moynihan to serve as Chairman of the Board based on the leadership qualities, management capability, knowledge of the business and industry, and a long-term, strategic perspective he has demonstrated as CEO over a period of nearly five years after running each of our company’s operating units. The independent directors unanimously supported Mr. Bovender’s appointment as our Lead Independent Director. They believe Mr. Bovender possesses the characteristics and qualities critical for a Lead Independent Director. As the former chairman, chief executive officer, and chief operating officer of a highly regulated company, Mr. Bovender is respected among the directors and has the qualities and experience desired for a Lead Independent Director – high personal integrity, a

 

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CORPORATE GOVERNANCE

 

breadth of knowledge in management, operations, and corporate governance, a willingness to listen and to engage with substance and impact, and a readiness to challenge management. The Corporate Governance Committee and our Board believe that Mr. Bovender’s Lead Independent Director role, tasked with duties consistent with those of an independent Chairman, creates a strong independent voice in the boardroom and serves our stockholders’ best interests.

The Committee’s recommendation to appoint Mr. Moynihan as Chairman of the Board and Mr. Bovender as Lead Independent Director culminated from an orderly, well-researched, and probing independent review and deliberation by our Board and the Corporate Governance Committee. In considering the most suitable leadership structure for our Board, the Committee assessed the appropriateness of leadership by an executive Chairman and a Lead Independent Director, completed its review, and made its recommendation to our Board in sufficient time to allow for public announcement of our Board’s decision and our engagement with stockholders regarding the decision in advance of the 2015 annual meeting.

In its review, the Committee examined relevant stockholder voting policies and voting practices, empirical studies regarding performance of companies having executive and independent board chairs, and other benchmarking data, and sought the counsel of corporate governance advisors. The Committee recognizes that there is a variety of viewpoints concerning a board’s optimal leadership structure. The Committee concluded that empirical data concerning the impact of board leadership on stockholder value is inconclusive and does not prove any correlation between a board having an independent chair and superior corporate governance or performance. The Committee also analyzed the historical Board leadership structure at our company, the stockholders’ vote of 2009 and the developments at our company since 2009, including enhancements to the Board’s governance and composition, the company’s management team, business and performance. Our Board and the Committee believe the 2009 stockholder vote for an independent Chairman reflected concerns particular to the Bank of America of 2009, in the midst of the financial crisis. Specifically, we understand the 2009 stockholder support for separating the roles of the Chairman and CEO to have been due primarily to dissatisfaction with the then Board’s governance and oversight, the company’s performance, and management decisions at that time. Our Board and the Committee recognize some stockholders who supported the 2009 proposal believe that the Chairman and CEO roles should always be separated.

Our company today, compared with 2009, has evolved significantly. The company’s own transformation has been accompanied by a significant evolution in our Board’s composition, notably the presence today of strong independent leadership among its members and committees. Our Board has made significant advances in its processes, systems and structures. Our 15-member board includes 13 independent directors, eight of whom joined our Board in the last three years. The directors bring significant depth and breadth of financial, operational, risk, and other areas of expertise relevant to our company and, through their varied lengths of tenure, a blend of historical and new perspectives about our company. Together, they have demonstrated a record of independent oversight, actively engaging with and challenging management. The composition of the Executive Management Team has also changed significantly since the beginning of 2009. Under this Board oversight and management leadership structure with Mr. Moynihan as CEO, the company has rebuilt capital and liquidity, streamlined and simplified its operations, reduced the scope of activities by exiting non-core businesses and products, stabilized performance, increased the return of capital to stockholders, settled its most significant legacy mortgage-related litigation matters, and reduced expenses. The company has also made other governance changes, including providing additional information to our Board regarding significant investors’ voting policies and procedures on key governance matters and a more robust stockholder engagement program. Our Board believes the strength and record of this team enables Mr. Moynihan to take on the additional responsibilities of Chairman and return our Board to a leadership structure in line with most peers.

Based on extensive review and consideration by our Corporate Governance Committee and Board, our Board believes a Board leadership structure comprised of an executive Chairman and CEO, balanced with a strong Lead Independent Director role tasked with significant specified duties, is in the best interests of our company and stockholders at this time. In line with its commitment to best practices and its charter responsibilities, the Committee will continue to review and assess Chairman succession planning, including the best leadership structure for our Board to account for Bank of America’s evolving needs and business environment circumstances.

 

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BOARD MEETINGS, COMMITTEE MEMBERSHIP AND ATTENDANCE

Directors are expected to attend our annual meetings of stockholders and our Board and committee meetings. Each of our directors who served on our Board during 2014 (including Mr. Holliday and Dr. Rose) attended at least 75% of the aggregate meetings of our Board and the committees on which they served during 2014. In addition, 14 of the 15 directors serving on our Board at the time of our 2014 annual meeting attended the meeting.

Our non-management directors meet in executive session at each regularly scheduled Board meeting. Separately, our independent directors meet in executive session at least once a year. Our Lead Independent Director leads Board executive sessions.

Our Board has six committees, including Audit, Compensation and Benefits, Corporate Governance, Credit and Enterprise Risk. Our Board’s sixth committee, Corporate Development, was formed by our Board in 2013 as the result of a litigation settlement and did not hold any meetings in 2014. The duties of each of these committees are summarized below. Charters describing the responsibilities of each of the Audit, Compensation and Benefits, Corporate Governance, Credit and Enterprise Risk Committees can be found at http://investor.bankofamerica.com. Our Board, considering the recommendations of the Corporate Governance Committee, reviews committee membership at least annually. Committee membership is set forth above under the heading “Proposal 1: Electing Directors” on page 1.

Our committees regularly make recommendations and report on their activities to the entire Board. Each committee may obtain advice from internal or external financial, legal, accounting or other advisors as desired.

 

 

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BOARD OVERSIGHT OF RISK

Risk is inherent in every material business activity that we undertake. Our business exposes us to strategic, credit, market, liquidity, compliance, operational and reputational risks. To support our corporate goals and objectives, risk appetite, and business and risk strategies, we maintain a governance structure that delineates the responsibilities for risk management activities, and the governance and oversight of those activities, by management and our Board. The Board is committed to strong, independent oversight of management and risk through a governance structure that includes the Enterprise Risk Committee and other Board committees. Annually as part of our risk governance process, the Enterprise Risk Committee and the Board approve our Risk Framework and Risk Appetite Statement. Our Risk Framework serves as the foundation for consistent and effective risk management and our Risk Appetite Statement defines the parameters under which we plan to undertake risk. Our Risk Framework outlines our risk management activities, including employees’ roles and accountabilities. It also defines how risk management is integrated into our core business processes, and it defines the risk management governance structure. Our Chief Risk Officer, our senior-most risk manager, reports jointly to the CEO and Enterprise Risk Committee and participates in Board, Credit Committee and Enterprise Risk Committee meetings. The governance structure is designed to align Board and management interests with those of our stockholders and to foster integrity over risk management throughout the company. (Details of our company’s risk management policies and practices are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2014 annual report.)

Senior management develops for Board and Enterprise Risk Committee approval our Risk Framework, described above, our Risk Appetite Statement, and our capital, strategic and financial operating plans. Management monitors, and our Board oversees directly and through its committees, our financial performance, execution against the capital, strategic and financial operating plans, compliance with the risk appetite parameters and the adequacy of internal controls.

As described above, our Enterprise Risk Committee, Audit Committee and Credit Committee have the principal responsibility for enterprise-wide oversight of our company’s risk management. Each of these committees regularly receives risk management updates on risk-related matters within the committee’s responsibilities and reports on these updates to our Board to provide our Board with integrated, thorough insight about our enterprise risk management. We believe this holistic Board and committee risk oversight process complements and remains consistent with our Board’s commitment to maintaining a strong independent Board and committee leadership structure. In addition, our Compensation and Benefits Committee oversees, among other things, our compensation policies and practices so that they do not encourage unnecessary and excessive risk-taking by our employees.

COMPENSATION GOVERNANCE AND RISK MANAGEMENT

Compensation Governance. Our Compensation and Benefits Committee follows procedures intended to promote strong governance of our pay-for-performance philosophy. The Committee regularly reviews: (i) company performance; (ii) executive compensation strategy, approach, trends and regulatory developments; and (iii) other related topics as appropriate. Each year, the Committee reviews, and makes available to the Board, an executive compensation statement, or “tally sheet,” for each executive officer. The tally sheets include each executive officer’s total

 

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compensation, including base salary, cash and equity-based incentive awards, accumulated realized and unrealized stock option gains and the value of prior restricted stock awards (including the status of achieving any performance goals), qualified and nonqualified retirement and deferred compensation benefit accruals, and the incremental cost to our company of the executive’s perquisites. The Committee uses this information to evaluate all elements of executive officer compensation and benefits. Annually, the Committee reviews its compensation decisions (including cash and equity-based awards, if applicable) with our Board for executive officers and other senior executives who report directly to our CEO.

Generally, our executive officers do not engage directly with the Committee in setting the amount or form of executive officer or director compensation. As part of the annual performance reviews for our named executive officers (other than our CEO), the Committee sets the compensation for our named executive officers after considering our CEO’s perspective and recommendations of our CEO for each individual’s incentive awards. In addition, the Committee considers the performance of our various lines of business, business segments and functions, as well as performance feedback from our Global Head of Human Resources and our independent control functions (audit, compliance, finance, human resources, legal and risk).

The Committee has the sole authority and responsibility under its charter to approve engaging any compensation consultant it uses and the fees for those services. The Committee retained Farient Advisors LLC (Farient) as its 2014 independent compensation consultant. Farient’s business is limited to providing independent executive and director compensation consulting services. Farient does not provide any other services to our company. For 2014, Farient provided the Committee external market and performance comparisons, advised the Committee on senior executive, CEO and director compensation and assisted with other executive and director compensation-related matters. In performing these services, Farient met regularly with the Committee without management present and alone with the Committee chair.

In addition, the Committee may delegate to management certain duties and responsibilities, including adopting, amending, modifying or terminating benefit plans. Significant Committee delegations to management include authority to (i) the Management Compensation Committee to direct the compensation for all of our employees except for our CEO and his direct reports and (ii) the Corporate Benefits Committee to oversee substantially all of our employee benefit plans.

The Committee also reviews the form and amount of compensation paid to our non-management directors and recommends any director compensation changes to our Board for approval.

Compensation Risk Management Policies and Practices. We believe that our company applies prudent risk management practices to its incentive compensation programs across the enterprise. Our Compensation and Benefits Committee is committed to a compensation governance structure that effectively contributes to our company’s overall risk management policies.

The Committee has adopted and annually reviews our Compensation Governance Policy that governs our incentive compensation decisions and defines the framework for company-wide incentive compensation program design oversight. The Compensation Governance Policy is consistent with global regulatory initiatives so that our incentive compensation plans do not encourage excessive risk-taking. It specifically addresses the:

 

Ÿ

Definition and process for identifying “risk-taking” employees

Ÿ

Process and policies for incentive compensation plan design and governance to appropriately balance risks with compensation outcomes, including:

^O funding incentive compensation pools

^O determining individual incentive compensation awards

^O use of discretion as part of those processes

Ÿ

Policies on incentive compensation plan effectiveness through testing and monitoring to confirm the plans appropriately balance risks with compensation outcomes, including developing processes to administer incentive compensation clawback features

Ÿ

Policies that provide for the independence of our company’s independent control functions and their appropriate input to the Committee

 

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Our compensation governance structure allocates oversight, review and responsibility to the appropriate management level, so that the most relevant management level or our Board, as applicable, makes compensation decisions, with documented input from the independent control functions. Our following four levels of governance each have identified roles and responsibilities in our compensation decisions: (i) our Board; (ii) our Compensation and Benefits Committee; (iii) our Management Compensation Committee; and (iv) our Lines of Business Compensation Committees.

Consistent with our Compensation Governance Policy, our annual incentive plan certification and review process provides a comprehensive review, analysis and discussion of incentive design and operation. As part of the governance for these incentive plans, each of the CEO’s direct reports, along with their management teams and independent control functions (including their respective risk officers), meet periodically to discuss how business strategy, performance and risk align to compensation. The relevant participants certify that their respective incentive programs (i) are aligned with the applicable business line and our company’s business strategy and performance objectives, (ii) do not encourage excessive risk-taking beyond our company’s ability to effectively identify and manage risk and (iii) are compatible with effective controls and risk management. Farient and the Committee review these management certifications. The Committee also meets with our Chief Risk Officer to review and assess any risks posed by our incentive compensation programs so that the programs appropriately balance risks and rewards in a manner that does not encourage excessive risk-taking.

Corporate Audit reviews all incentive plans at least every three years, using a risk-based approach that includes reviewing governance, payment and processing against each incentive plan’s design, and validating incentive plan design and operation against regulatory requirements. Since 2010, Corporate Audit has reviewed all incentive plans at least once, and reviewed incentive plans with higher risk-rankings more frequently.

For performance year 2014, in addition to reviewing the individual incentive compensation awards for executive officers and other senior executives who report directly to the CEO, the Committee also reviewed the individual incentive compensation awards for certain highly compensated employees. The Committee met with our independent control function heads, Vice Chairman of Global Wealth & Investment Management, Co-Heads of Consumer Banking and Chief Operating Officer before making its 2014 incentive compensation decisions.

As a result of these reviews and processes, and in combination with the risk management and clawback features of our compensation programs, we believe that our compensation policies and practices appropriately balance risks and rewards in a way that does not encourage excessive risk-taking or create risks that are reasonably likely to have a material adverse effect on our company.

CEO AND SENIOR MANAGEMENT SUCCESSION PLANNING

Our Board, in coordination with our Corporate Governance Committee, oversees CEO and senior management succession planning, which is reviewed at least annually. Our CEO and our Global Head of Human Resources provide the Board with recommendations on, and evaluations of, potential CEO successors, including reviewing development plans recommended for potential successors. Our Board reviews potential internal senior management candidates with our CEO and our Global Head of Human Resources, including the qualifications, experience and development priorities for these individuals. Directors engage with potential CEO and senior management successors at Board and committee meetings and in less formal settings to allow directors to personally assess candidates. Further, our Board periodically reviews the overall composition of our senior management’s qualifications, tenure and experience.

Our Board, in coordination with our Corporate Governance Committee, also establishes steps to address emergency CEO and senior management succession planning in extraordinary circumstances. Our emergency CEO succession planning is intended to enable our company to respond to unexpected position vacancies, including those resulting from a major catastrophe, by continuing our company’s safe and sound operation and minimizing potential disruption or loss of continuity to our company’s business and operations.

BOARD EVALUATION AND EDUCATION

Each year, our Board and our Audit, Compensation and Benefits, Corporate Governance, Credit and Enterprise Risk Committees evaluate their own effectiveness. Our Board views self-evaluation as an ongoing process designed to

 

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achieve high levels of Board and committee effectiveness, independence, performance and engagement. Our Board also encourages directors to annually participate in continuing director education programs, and our company reimburses directors for their expenses associated with this participation.

During 2014, our Audit Committee held several continuing education sessions focused on key financial processes, general audit topics and certain company-specific matters. All new directors also participate in our director orientation program during their first six months on our Board.

STOCKHOLDER ENGAGEMENT

Our Stockholder Engagement Program

We conduct stockholder outreach throughout the year to inform our management and our Board about the issues that our stockholders tell us matter most to them. Our management meets with our stockholders to discuss the governance and compensation practices that are a priority for our stockholders. We share stockholder feedback with our Board and its committees to enhance our governance practices, and transparency of those practices to our stockholders. We review the voting results of our most recent annual meeting of stockholders, the stockholder feedback received through our engagement process, the governance practices of our peers and other large companies, and current trends in governance as we consistently consider enhancements to our governance practices and disclosure.

Governance Enhancements in Response to Stockholder Feedback

After considering feedback received from our stockholders, our company:

 

Ÿ

Adopted a proxy access right to permit a stockholder, or a group of up to 20 stockholders, owning continuously for at least 3 years shares of our company representing an aggregate of at least 3% of the voting power entitled to vote in the election of directors, to nominate and include in our proxy materials director nominees constituting up to 20% of our Board, provided that the stockholder(s) and the nominee(s) satisfy the requirements in our bylaws

Ÿ

Announced that we will produce a Business Standards report by March 31, 2016 to increase transparency around our processes and standards, corporate culture, governance and business practices

Ÿ

Agreed to develop an incentive compensation recoupment and forfeiture disclosure policy during 2015 to be effective beginning January 1, 2016

Ÿ

Enhanced our political activities disclosure to include a more detailed discussion of our participation in the political process; current and historical reports of our PACs contributions; a list of trade associations to which we paid more than a de minimis amount; a list of tax exempt organizations organized under Section 527 of the U.S. Internal Revenue Code to which we made contributions; and included information regarding the management, compliance and monitoring of our political activities, including our Corporate Governance Committee’s oversight of our significant policies and practices. See the “Political Activities” page of our Investor Relations website at http://investor.bankofamerica.com

Ÿ

Enhanced our proxy statement disclosure regarding our Board leadership structure, including a discussion of the robust and transparent independent board leader duties. See “Board Leadership” beginning on page 11 for a detailed discussion

Ÿ

Enhanced our greenhouse gas emissions disclosure related to our operations and our business activities by reporting Scope 1 and 2 emissions and reporting on 10 of the 11 categories of Scope 3 emissions that are relevant to our business. Also we provide detailed disclosure relating to the emissions profile of the U.S. electric power utilities to which we extend credit. See our Corporate Social Responsibility (CSR) Report on our website at http://about.bankofamerica.com. In addition, in 2014, the Carbon Disclosure Project acknowledged our company’s leadership and transparency on climate change with a score of 100 (out of 100) on its disclosure score and ranked us in Performance Band A (the highest possible)

Also see “Stockholder Outreach & Say on Pay Results” on page 26 for a discussion of our compensation related stockholder engagement and our historical say-on-pay vote results.

 

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COMMUNICATIONS WITH OUR BOARD

Stockholders and other parties may communicate with our Board, any director (including our Chairman of the Board or Lead Independent Director), non-management members of our Board as a group or any committee. Communications should be addressed to our Corporate Secretary, Bank of America Corporation, Hearst Tower, 214 North Tryon Street, NC1-027-18-05, Charlotte, North Carolina 28255. Depending on the nature of the communication, the correspondence either will be forwarded to the director(s) named or the matters will be presented periodically to our Board. The Corporate Secretary or the secretary of the designated committee may sort or summarize the communications as appropriate. Communications that are commercial solicitations, customer complaints, incoherent or obscene will not be communicated to our Board or any director or committee of our Board. For further information, refer to the “Contact the Board of Directors” section on our website at http://investor.bankofamerica.com.

 

 

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RELATED PERSON AND CERTAIN OTHER TRANSACTIONS

 

RELATED PERSON AND CERTAIN OTHER TRANSACTIONS

Our Related Person Transactions Policy in our Corporate Governance Guidelines sets forth our policies and procedures for reviewing, and approving or ratifying any transaction with related persons (directors, director nominees, executive officers, stockholders holding 5% or more of our voting securities or any of their immediate family members or affiliated entities). Our policy covers any transactions where the aggregate amount involved will or may be expected to exceed $120,000 in any fiscal year, our company is a participant and a related person has or will have a direct or indirect material interest.

Under our Related Person Transaction Policy, our Corporate Governance Committee must approve or ratify any related person transactions, and when doing so, considers the related person’s interest in the transaction; whether the transaction involves arm’s-length bids or market prices and terms; the transaction’s materiality to each party; the availability of the product or services through other sources; the implications of our Code of Conduct or reputational risk; whether the transaction would impair a director or executive officer’s judgment to act in the company’s best interest; the transaction’s acceptability to our regulators; and in the case of a non-management director, whether the transaction would impair his or her independence or status as an “outside” or “non-management” director.

Our Board has determined that certain types of transactions do not create or involve a direct or indirect material interest on the part of the related person and therefore do not require review or approval under the policy. These include transactions involving financial services, including loans and brokerage, banking, insurance and investment advisory or asset management services, and other financial services we provide to any related person, if the services are provided in the ordinary course of business, on substantially the same terms as those prevailing at the time for comparable services provided to non-affiliates and comply with applicable law, including the Sarbanes-Oxley Act of 2002 and Federal Reserve Board Regulation O.

A number of our directors and executive officers, their family members and certain business organizations associated with them are or have been customers of our banking subsidiaries. All extensions of credit to these persons have been made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time in comparable transactions with persons not related to our company and did not involve more than the normal risk of collectability.

Our company and Mr. Moynihan are parties to an aircraft time-sharing agreement, as disclosed in prior proxy statements and approved by our Corporate Governance Committee in December 2010.

Based on information contained in separate Schedule 13G filings with the SEC, each of BlackRock, Inc. (BlackRock), The Vanguard Group (Vanguard) and Berkshire Hathaway Inc. (Berkshire Hathaway), each through certain of its subsidiaries, believed that it beneficially owned 5% or more of the outstanding shares of our common stock as of December 31, 2014 (see “Stock Ownership of Directors, Executive Officers and Certain Beneficial Owners” on page 21).

In the ordinary course of our business during 2014, our subsidiaries provided and are expected to continue to provide financial advisory, sales and trading, treasury and other financial or administrative services to BlackRock and its affiliates and clients, Vanguard and its affiliates and Berkshire Hathaway and its affiliates. These transactions were entered into on an arm’s-length basis and contain customary terms and conditions. We and our subsidiaries may also, in the ordinary course, invest in BlackRock or Vanguard funds or other products or buy or sell assets to or from BlackRock or Vanguard funds and separate accounts.

In addition, before BlackRock became a beneficial owner of 5% or more of our outstanding common stock, it entered into a global distribution agreement on September 29, 2006 with our former subsidiary, Merrill Lynch & Co., Inc. (which merged into Bank of America Corporation on October 1, 2013) in connection with its purchase of Merrill’s investment management business. The agreement provides a framework under which our company distributes BlackRock’s investment advisory products and includes certain pricing, sales incentive restriction and product availability provisions that offer economic terms to each party that are at least as favorable as those offered to its competitors. It was negotiated at arm’s length and was amended and restated on July 16, 2008 and again on November 15, 2010. The agreement’s initial term expired on January 1, 2014, was renewed pursuant to its terms for one additional three-year term and may be renewed thereafter as the parties may agree. In accordance with our Related Person Transactions Policy, the agreement, as amended and restated, was reviewed and ratified by our Corporate Governance Committee in March 2013.

During 2014, payment from BlackRock to our company relating to our distribution and servicing of products covered by the global distribution agreement was approximately $187.4 million and payment from our company to BlackRock for certain products pursuant to the agreement was approximately $3.2 million.

 

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STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS

 

STOCK OWNERSHIP OF DIRECTORS,

EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS

Our voting securities are our common stock, Series B Preferred Stock and Series 1-5 Preferred Stock. The following table shows the number of shares of our common stock beneficially owned as of March 11, 2015 by (i) each director, (ii) each named executive officer, (iii) all directors and executive officers as a group and (iv) beneficial owners of more than 5% of any class of our voting securities (as determined under SEC rules). As of that date, none of our directors and executive officers owned any shares of any class of our voting securities, other than as reported in the table below. Each director, each named executive officer and all directors and executive officers as a group beneficially owned less than 1% of our outstanding common stock. Unless otherwise noted, all shares of our common stock are subject to the sole voting and investment power of the directors and executive officers.

 

Name		Beneficial Ownership												Stock      Units (1)(2)				Total
		Shares and   Restricted   Shares				Options/ Warrants Exercisable   within 60 days   of 3/11/2015				Total Beneficial   Ownership
Directors and Executive Officers
Sharon L. Allen(3)			38,251				—				38,251				—				38,251
Susan S. Bies			126,839				—				126,839				—				126,839
Jack O. Bovender, Jr.			49,199				—				49,199				—				49,199
Frank P. Bramble, Sr.			111,680				—				111,680				98,071				209,751
David C. Darnell			432,672				288,750				721,422				1,390,135				2,111,557
Pierre J. P. de Weck			17,962				—				17,962				—				17,962
Arnold W. Donald			27,028				—				27,028				—				27,028
Charles K. Gifford(4)			232,907				—				232,907				107,644				340,551
Charles O. Holliday, Jr.			169,272				—				169,272				—				169,272
Linda P. Hudson			19,507				—				19,507				10,879				30,386
Monica C. Lozano			3,000				—				3,000				98,633				101,633
Gary G. Lynch			478,400				—				478,400				721,470				1,199,870
Thomas J. May(5)			2,142				—				2,142				205,173				207,315
Thomas K. Montag(6)			1,905,010				2,102,216				4,007,226				2,590,552				6,597,778
Brian T. Moynihan			774,284				546,667				1,320,951				2,402,561				3,723,512
Lionel L. Nowell, III			3,930				—				3,930				23,280				27,210
Clayton S. Rose(7)			25,515				—				25,515				10,879				36,394
Bruce R. Thompson			905,244				127,400				1,032,644				1,756,778				2,789,422
R. David Yost			64,153				—				64,153				34,921				99,074
All directors and executive officers as a group (23 persons)(8)			6,334,691				3,315,374				9,650,065				11,332,324				20,982,389
Name		Beneficial Ownership												Stock      Units (1)(2)				Total
		Shares and   Restricted   Shares				Options/ Warrants Exercisable   within 60 days   of 3/11/2015				Total Beneficial   Ownership
Certain Beneficial Owners
Warren E. Buffett /Berkshire Hathaway Inc.(9)			—				700,000,000				700,000,000				—				700,000,000 6.2%
BlackRock, Inc.(10)			599,692,793				—				599,692,793				—				599,692,793 5.7%
The Vanguard Group(11)			539,166,283				—				539,166,283				—				539,166,283 5.1%

 

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(1)

For non-management directors, includes stock units credited to their accounts pursuant to deferrals made under the terms of the Director Deferral Plan. These stock units do not have voting rights and are not considered beneficially owned under SEC rules. Each unit has a value equal to the fair market value of a share of our common stock. These units, which are held in individual accounts in each director’s name, will be paid in cash upon the director’s retirement if vested at that time.

(2)

Includes the following stock units, which are not treated as beneficially owned under SEC rules because the holder does not have the right to acquire the underlying stock within 60 days of March 11, 2015 and/or the stock units will be paid in cash and therefore do not represent the right to acquire stock:

 

Name		Time-Based RSUs (TRSUs)				Cash-Settled RSUs (CRSUs)				Performance RSUs (PRSUs)				Total  Stock Units
Brian T. Moynihan			303,887				212,963				1,885,711				2,402,561
Bruce R. Thompson			402,429				—				1,354,349				1,756,778
David C. Darnell			324,200				—				1,065,935				1,390,135
Gary G. Lynch			284,695				—				436,775				721,470
Thomas K. Montag			491,300				—				2,099,252				2,590,552
All executive officers as a group			2,769,073				212,963				7,760,808				10,742,844

 

Each stock unit has a value equal to the fair market value of a share of our common stock, but does not confer voting rights. Time-based restricted stock units (TRSUs) include the right to receive dividend equivalents and will be paid in shares of our common stock at vesting or, in certain circumstances, after termination of employment. Cash-settled restricted stock units (CRSUs) do not include the right to receive dividend equivalents and will be paid in cash as described in “Compensation Discussion and Analysis” on page 25. Performance restricted stock units (PRSUs) include the right to receive dividend equivalents and vest subject to attaining pre-established performance goals. To the extent earned, (i) PRSUs granted in February 2011 will be settled 40% in cash and 60% in shares of our common stock, (ii) PRSUs granted in February 2012 will be settled 100% in shares of our common stock, and (iii) PRSUs granted in February 2013, February 2014 and February 2015 will be settled 100% in cash. The stock units shown include the number of PRSUs granted assuming 100% of the award will be earned; however, the actual number of stock units earned may vary depending upon achieving performance goals. Because they are economically comparable to owning shares of our common stock, certain of these stock units currently qualify for purposes of compliance with our stock ownership and retention requirements, except for PRSUs, which qualify only when earned. The reported stock units do not include any stock units held in the 401(k) Restoration Plan.

(3)	Includes 1,000 shares of our common stock for which Ms. Allen shares investment power with her spouse.

(4)	Includes 1,090 shares of our common stock held by Mr. Gifford as a custodian for two of his children, and 77,840 shares of our common stock, for which Mr. Gifford shares investment power with BAC, as trustee.

(5)	Includes 22,548 stock units held by Mr. May under the FleetBoston Director Stock Unit Plan, 3,130 stock units held under the Bank Boston Director Retirement Benefits Exchange Program, and 5,499 stock units held under the Bank Boston Director Stock Award Plan.

(6)	Includes 470,724 shares of our common stock held by Mr. Montag in a family trust for which Mr. Montag shares investment power with his wife, who is trustee.

(7)	Includes 17,100 shares of our common stock for which Dr. Rose shares investment power with his wife.

(8)	Such persons had sole voting and investment power over 8,758,310 shares of our common stock and shared voting or investment power or both over 891,755 shares of our common stock.

(9)

Consists of warrants exercisable within 60 days for 700,000,000 shares of our common stock, held indirectly by Warren E. Buffett, 3555 Farnam Street, Omaha, NE 68131 and Berkshire Hathaway Inc., 3555 Farnam Street, Omaha, NE 68131, including through the following entities, which are deemed to share beneficial ownership of greater than 5% of a class of our voting securities (as determined under SEC rules) as follows: OBH LLC, 3555 Farnam Street, Omaha, NE 68131 (666,960,000 of the warrants); and National Indemnity Company, 3024 Harney Street, Omaha, NE 68131 (621,040,000 of the warrants). According to a Schedule 13G filed with the SEC on September 12, 2011, Mr. Buffett and Berkshire Hathaway Inc. had shared voting and investment power with respect to all 700,000,000 shares. Information about other entities deemed to share beneficial ownership of the shares, including their voting and investment power, is disclosed in the Schedule 13G.

(10)

Consists of common stock held by Blackrock, Inc., 40 East 52nd Street, New York, NY 10022. According to a Schedule 13G/A filed with the SEC on February 9, 2015, BlackRock, Inc. had sole voting power with respect to 509,702,675 shares, sole investment power with respect to 599,520,176 shares and shared voting power and shared investment power with respect to 172,617 shares.

(11)

Consists of common stock held by The Vanguard Group, 100 Vanguard Blvd., Malvern, PA 19355. According to a Schedule 13G filed with the SEC on February 10, 2015, The Vanguard Group had sole voting power with respect to 18,102,517 shares, sole investment power with respect to 521,981,446 shares and shared investment power with respect to 17,184,837 shares.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our directors, executive officers and anyone holding 10% or more of a registered class of our equity securities (reporting persons) to file reports with the SEC showing their holdings of, and transactions in, these securities. Based solely on a review of copies of such reports, and written representations from each reporting person that no other reports are required, we believe that for 2014 all reporting persons filed the required reports on a timely basis under Section 16(a).

 

22					BANK OF AMERICA CORPORATION					2015 PROXY STATEMENT

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DIRECTOR COMPENSATION

 

DIRECTOR COMPENSATION

Our director compensation program is designed to appropriately compensate our non-management directors for the time and effort required to serve as a director of a large, complex and highly regulated global company and to align directors’ and long-term stockholders’ interests.

The primary elements of annual compensation for our non-management directors are:

 

Ÿ

cash award of $80,000 ($150,000 for the Lead Independent Director)

Ÿ

restricted stock award of $160,000 ($300,000 for the Lead Independent Director)

Ÿ

cash retainer of $40,000 for the chairs of the Audit and Enterprise Risk Committees and $20,000 for the chair of each of the Compensation and Benefits, Corporate Governance and Credit Committees

The annual payments are made after the non-management directors are elected by stockholders. Non-management directors who begin their Board or committee chair service other than at the annual meeting of stockholders receive a pro-rated amount of annual compensation.

The annual restricted stock award is made pursuant to the Bank of America Corporation Directors’ Stock Plan. The number of restricted shares awarded is equal to the dollar value of the award divided by the closing price of our common stock on the NYSE on the grant date, rounded down to the next whole share, with cash paid for any fractional share. Dividends are paid on the award when they are paid on shares of our common stock. The annual award is subject to a one-year vesting requirement. If a director retires before the one-year vesting date, a pro-rated amount of the award vests based on the number of days the director served during the vesting period before retirement. Any unvested amount of the award is forfeited.

Non-management directors may elect to defer all or a portion of their annual restricted stock or cash compensation through the Bank of America Corporation Director Deferral Plan. When directors elect to defer their restricted stock award, their “stock account” is credited with a number of whole and fractional “stock units” that are equal in value to the restricted stock award and subject to the one-year vesting requirement applicable to restricted stock awards under the Directors’ Stock Plan. Each stock unit is equal in value to a share of our common stock but because it is not an actual share of our common stock it does not have any voting rights. When directors elect to defer their cash award or any committee chair retainers, they may choose to defer into either a stock account or a “cash account.” Deferrals into a stock account are credited with dividend equivalents in the form of additional stock units and deferrals into the cash account are credited with interest at a long-term bond rate. Following retirement from our Board, a non-management director may receive the stock account balance (to the extent vested) and cash account balance in a single lump sum cash payment or in five or 10 annual cash installments, depending on the director’s prior election.

Stock Ownership and Retention Requirements for Non-management Directors. We have formal stock ownership requirements that apply to our non-management directors. Under these requirements, each non-management director is required to hold and cannot sell the restricted stock they receive as compensation (except as necessary to pay taxes upon vesting) until termination of their service. All non-management directors are in compliance with these requirements.

Hedging Prohibition. Our Code of Conduct prohibits our directors from hedging and speculative trading of company securities, including short sales and trading in options and derivatives.

During 2014, Mr. Moynihan was our sole management director. As a management director, he received no compensation for his services as a director. The following table shows the compensation our non-management directors earned for their services in 2014:

 

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DIRECTOR COMPENSATION

 

2014 DIRECTOR COMPENSATION

 

Director		Fees Earned or      Paid in Cash ($)(1)				Stock   Awards ($)(2)				All Other   Compensation  ($)(3)				Total     ($)
Sharon L. Allen(4)			114,603				160,000				0				274,603
Susan S. Bies			80,000				160,000				169,095				409,095
Jack O. Bovender, Jr.(5)			121,615				243,230				0				364,845
Frank P. Bramble, Sr.(4)			109,206				160,000				0				269,206
Pierre J. P. de Weck			80,000				160,000				5,000				245,000
Arnold W. Donald			80,000				160,000				0				240,000
Charles K. Gifford			100,000				160,000				272,526				532,526
Charles O. Holliday, Jr.(2)			167,000				333,000				0				500,000
Linda P. Hudson			80,000				160,000				0				240,000
Monica C. Lozano			100,000				160,000				0				260,000
Thomas J. May			100,000				160,000				0				260,000
Lionel L. Nowell, III			80,000				160,000				0				240,000
Clayton S. Rose			80,000				160,000				0				240,000
R. David Yost			80,000				160,000				0				240,000

 

(1)

The amounts in this column represent the annual cash award plus any committee chair cash retainers paid in 2014, including amounts deferred under the Director Deferral Plan. For 2014 cash awards deferred under the Director Deferral Plan, Mr. May was credited 6,756.76 stock units with a grant date fair value of $100,000 and Mr. Yost was credited 5,405.41 stock units with a grant date fair value of $80,000. The grant date fair value is based on the closing price of our common stock on the NYSE on the date of deferral.

(2)

The amounts in this column represent the aggregate grant date fair value of restricted stock awards granted during 2014, whether or not those awards were deferred under the Director Deferral Plan. The grant date fair value is based on the closing price of our common stock on the NYSE on the grant date. As of December 31, 2014, our non-management directors held the number of unvested shares of restricted stock or, if deferred, unvested stock units shown in the table below. For Mr. Holliday, the amount in the Stock Awards column, as well as the number of units shown in the table below, includes 3,715 unvested restricted shares which were subsequently forfeited in February 2015 in connection with the cessation of his service as Chairman of the Board.

 

Director		Unvested Shares of   Restricted Stock or   Stock Units (#)				Director		Unvested Shares of   Restricted Stock or Stock Units  (#)
Sharon L. Allen			10,810			Charles O. Holliday, Jr.			22,500
Susan S. Bies			10,810			Linda P. Hudson			10,810
Jack O. Bovender, Jr.			15,758			Monica C. Lozano			10,810
Frank P. Bramble, Sr.			10,810			Thomas J. May			10,810
Pierre J. P. de Weck			10,810			Lionel L. Nowell, III			10,810
Arnold W. Donald			10,810			Clayton S. Rose			10,810
Charles K. Gifford			10,810			R. David Yost			10,810

 

(3)

Our directors are eligible to participate in our matching gifts program, under which our charitable foundation matches up to $5,000 in donations made by our employees and active directors to approved charitable organizations. This program is also available to all U.S.-based, benefits eligible employees. The values above reflect that $5,000 was donated to charities on behalf of Mr. Gifford and Mr. de Weck, respectively, under the matching gifts program.

 

In connection with our company’s Board meeting in September 2014, spouses and guests of directors were invited. Pursuant to SEC rules, which do not require disclosure of perquisites for any director that in the aggregate are less than $10,000, the value of the spouse business-related travel expenses, including ground transportation, commercial or third-party vendor aircraft travel (if any), meals and any other incidental meeting-related expenses, is not included in the table above, except in the case of Mr. Gifford.

 

Ms. Bies serves as chair of the board of directors of Merrill Lynch International (MLI), a United Kingdom subsidiary of Bank of America Corporation. For her services as a non-management director of MLI in 2014, Ms. Bies received annual cash retainers totaling £100,000. These retainers are reported in the table above based on an exchange rate of 0.59 pounds sterling to one dollar, which was the exchange rate in effect on the date that the retainers were earned.

 

Mr. Gifford receives office space and secretarial support, which for 2014 had an aggregate incremental cost to our company of $267,483; we expect that he will continue to receive such office space and secretarial support in the future.

 

(4)

In November 2014, the level of annual cash retainer for the chairs of the Audit and Enterprise Risk Committees was increased to $40,000. Previously, the annual cash retainer had been $30,000 for the chair of the Audit Committee and $20,000 for the chair of the Enterprise Risk Committee. The amount in the cash award column for Ms. Allen and Mr. Bramble includes the additional chair retainer prorated for the portion of the year following the approval of that increase.

 

(5)

In October 2014, the level of annual compensation for the Lead Independent Director was established at the time Mr. Bovender was appointed to this position. Mr. Bovender received additional cash and restricted stock awards at that time to reflect the higher level of annual compensation for the position, prorated for the portion of the year following his appointment.

 

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PROPOSAL 2: APPROVING OUR EXECUTIVE COMPENSATION (AN ADVISORY, NON-BINDING “SAY ON PAY” RESOLUTION)

 

PROPOSAL 2: APPROVING OUR EXECUTIVE COMPENSATION (AN ADVISORY, NON-BINDING “SAY ON PAY” RESOLUTION)

We are seeking an advisory vote to approve our executive compensation for 2014. At our 2011 annual meeting of stockholders, a majority of stockholders voted to have a say on pay vote each year. As a result, we will conduct an advisory vote on executive compensation annually at least until the next stockholder advisory vote on the frequency of such votes.

Although the say on pay vote is advisory and is not binding on our Board, the Compensation and Benefits Committee will take into consideration the outcome of the vote when making future executive compensation decisions. At the 2014 annual meeting of stockholders, more than 93% of the votes cast favored our say on pay proposal. The Committee considered this result, and, in light of the strong support, maintained a consistent overall approach for 2014.

Our Board believes that our current executive compensation program appropriately links compensation realized by our executive officers to our performance and properly aligns the interests of our executive officers with those of our stockholders. The details of this compensation for 2014, and the reasons that we awarded it, are described in “Compensation Discussion and Analysis,” starting below.

Our Board recommends that our stockholders vote in favor of the following resolution:

“Resolved, that our stockholders approve, on an advisory basis, the compensation of our company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables, and any related material disclosed in this proxy statement.”

 

Our Board recommends a vote “FOR” approving our executive compensation (an advisory, non-binding “say on pay” resolution) (Proposal 2).

COMPENSATION DISCUSSION AND ANALYSIS

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

1. EXECUTIVE SUMMARY

a. Executive Compensation Philosophy

Our compensation philosophy ties our executive officers’ pay to company, line of business and individual performance over the short and long term. In addition, our executive compensation program provides a mix of salary, incentives and benefits paid over time that we believe aligns executive officer and stockholder interests. The Compensation and Benefits Committee has the primary responsibility for approving our compensation strategy and philosophy and the compensation programs applicable to our named executive officers listed below. With respect to Mr. Moynihan’s compensation, the Compensation and Benefits Committee makes a recommendation that is further reviewed and approved by the independent members of the Board.

 

Named Executive Officers
Brian T. Moynihan		Chairman & Chief Executive Officer
Bruce R. Thompson		Chief Financial Officer
David C. Darnell		Vice Chairman, Global Wealth & Investment Management
Gary G. Lynch		Global General Counsel
Thomas K. Montag		Chief Operating Officer

b. 2014 Executive Compensation Highlights

 

Ÿ

2014 design consistent with 2013, which received over 93% stockholder support at our 2014 annual meeting

 

Ÿ

Mix of fixed and variable pay; majority of variable pay consisted of equity-based incentives

 

Ÿ

Strong risk management practices, including clawback features that encourage sustainable performance over time

 

Ÿ

Comprehensive Committee review of performance against financial and non-financial goals

 

Ÿ

Mr. Moynihan was awarded $13 million of total compensation for 2014, compared to $14 million for 2013

 

Ÿ

50% of Mr. Moynihan’s variable pay awarded as performance restricted stock units

c. Stockholder Outreach & Say on Pay Results

We conduct stockholder outreach throughout the year and provide stockholders with an annual opportunity to cast an advisory say on pay vote. We heard strong support for our 2013 compensation program and maintained a consistent overall approach for 2014.

 

Ÿ

Over 93% of the votes cast at our 2014 annual meeting of stockholders favored our say on pay proposal, which we believe affirms our stockholders’ support of our company’s 2013 executive compensation program

 

Ÿ

Stockholder feedback and the outcome of say on pay vote results will continue to inform future compensation decisions

 

Say on Pay Results
2011		2012		2013		2014
92.9%		92.9%		93.8%		93.5%

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

2. 2014 COMPANY & LINE OF BUSINESS PERFORMANCE

In 2014, we remained focused on streamlining and simplifying our company to serve the financial needs of people, companies and institutional investors. Our core businesses continued to make progress or show stability in a challenging environment. We also resolved the most significant remaining legacy mortgage-related litigation matters that were overshadowing the underlying progress the company has made. For the year, we earned $4.8 billion. This reflects the costs of resolving those legacy issues. Furthermore, we continued to connect all of our capabilities across our businesses by focusing on our operating principles, which serve as guideposts for achieving our goals.

Following are financial highlights and key measures of company and line of business performance that the Compensation and Benefits Committee considered in evaluating the performance of our named executive officers.

Company Performance

 

Line of Business Performance

 

2014 Business Performance
Business ($ in Millions)		Total Revenue(1)								Provision for Credit Losses								Noninterest Expense								Net Income (Loss)
		2014				2013				2014				2013				2014				2013				2014				2013
Consumer & Business Banking			29,862				29,864				2,633				3,107				15,911				16,260				7,096				6,647
Global Wealth & Investment Management			18,404				17,790				14				56				13,647				13,033				2,974				2,977
Global Banking			16,598				16,479				336				1,075				7,681				7,551				5,435				4,973
Global Markets			16,119				15,390				110				140				11,771				11,996				2,719				1,153
Consumer Real Estate Services			4,848				7,715				160				(156	)			23,226				15,815				(13,395	)			(5,031	)
Total Corporation(2)			85,116				89,801				2,275				3,556				75,117				69,214				4,833				11,431

 

(1)	Revenue reported on fully taxable-equivalent basis.

(2)	Includes “All Other,” which consists of Assets Liability Management activities, equity investments, the international consumer card business, liquidating businesses, residual expense allocations and other items not shown in the table above.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

Consumer & Business Banking (CBB)

Ÿ

Revenue increased 5% for Deposits and decreased 4% for Consumer Lending

Ÿ

Average deposits increased by 5% and client brokerage assets increased 18%

 

Ÿ

Mobile banking customers increased while the number of banking centers and ATMs declined as we continue to optimize our network and lower the cost-to-serve

 

Ÿ

4.5 million new credit cards were issued in 2014; 65% to customers with an existing banking relationship

 

Ÿ

U.S. credit and debit card purchase volumes increased 3% and 2%, respectively

Global Wealth & Investment Management (GWIM)

Ÿ

Maintained industry leading profit margins of more than 25%

 

Ÿ

Revenue increased 3% for Merrill Lynch Global Wealth Management and 4% for U.S. Trust

 

Ÿ

Client balances increased 6% due to higher market levels and net inflows

 

Ÿ

Record long-term assets under management (AUM) flows of $49.8 billion in 2014

Global Banking

Ÿ

Business Lending revenue remained relatively steady compared to 2013

 

Ÿ

Global Transaction Services revenue increased by over 3% driven by growth in deposit balances

 

Ÿ

Average loans and leases increased 5%; average deposits increased 10%

 

Ÿ

Total Corporation investment banking fees, including self-led deals, remained steady at $6.3 billion

Global Markets

Ÿ

Net income was relatively stable, excluding the adoption of funding valuation adjustments (FVA) in 2014, charges in 2013 related to the U.K. corporate income tax rate, and net debit valuation adjustments (DVA) in both periods

 

Ÿ

Fixed-income, currency and commodities (FICC) sales and trading revenue, excluding net DVA/FVA, decreased by 4% in a challenging trading environment

 

Ÿ

Equities sales and trading revenue, excluding net DVA/FVA, decreased by 2% over a strong 2013 period of growth

 

Ÿ

Average trading related assets decreased 4% as we continued to optimize our balance sheet

Consumer Real Estate Services (CRES)

Ÿ

Department of Justice settlement and the settlement with Federal Housing Finance Agency (FHFA) resulted in an $11.4 billion increase in litigation expense

 

Ÿ

Excluding litigation, noninterest expense decreased as a result of reducing costs of servicing delinquent loans as well as lower production costs

 

Ÿ

The number of 60+ day delinquent first mortgage loans serviced by Legacy Assets and Servicing declined 42% to 189,000 loans

 

Ÿ

Core production revenue decreased 54% due to lower origination volumes and industry-wide margin compression

The Committee believes the company and line of business performance highlights discussed above, as well as other company and business results, reflect management’s progress in reducing complexity and making our company stronger. Although financial results were decreased by the cost of settling legacy mortgage-related litigation matters, the Committee believes that management has built a stable foundation and platform for growth.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

3. EXECUTIVE COMPENSATION PROGRAM FEATURES

a. Executive Pay Components & Variable Pay Mix

Each year the Compensation and Benefits Committee makes pay decisions for each named executive officer. The compensation is delivered as salary, annual cash incentive, cash-settled restricted stock units (CEO only) and restricted stock units. This pay structure, with an emphasis on variable pay, serves a role in motivating our executives to deliver sustained stockholder value and achieve long-term goals. The restricted stock units are divided into two components: time-based and performance-based. Our time-based component vests ratably over three years, and our performance based component is tied to achievement of performance metrics and is only earned if goals are achieved over the defined performance period. Consequently, under this structure, actions taken in the current year that may affect the future performance of the company will impact the amount of pay each named executive will earn in the future.

The following chart provides an overview of the 2014 pay components for our named executive officers:

Performance Year 2014 Pay Components

 

Base Salary
Ÿ  Base salary is based on job scope, experience and market comparable positions; provides fixed income to attract and retain executives and balance risk-taking		Ÿ  Semi-monthly cash payment made through 2014
Annual Cash Incentive
Ÿ  Granted to named executive officers other than the CEO: Cash incentives provide short-term variable pay for the applicable performance year		Ÿ  Single cash payment made in February 2015
Cash-Settled Restricted Stock Units (CRSUs)
Ÿ  Granted only to the CEO: CRSUs track stock price performance over 1-year vesting period		Ÿ  Vests in twelve equal installments over a 1-year period from March 2015 through February 2016   Ÿ  Cash-settled
Performance Restricted Stock Units (PRSUs)
Ÿ  Vesting requires achieving specific return on assets and growth in adjusted tangible book value goals over 3-year performance period   Ÿ  Track stock price performance   Ÿ  Encourage growth of earnings during the performance period		Ÿ  If performance goals are achieved, the amount granted for 2014 will be earned and vested at end of the 3-year performance period (2017)   Ÿ  If goals are not achieved, the entire award is forfeited   Ÿ  Cash-settled to the extent earned
Time-based Restricted Stock Units (TRSUs)
Ÿ  Track stock price performance over 3-year vesting period   Ÿ  Aligned with sustained longer-term earnings		Ÿ  Vests in three equal annual installments beginning in February 2016   Ÿ  Stock-settled

Performance Year 2014 Variable Pay Mix

 

Ÿ

A majority of variable pay is delivered as equity-based awards that balance short-term and long-term results

Ÿ

The charts illustrate the variable pay mix for our CEO and other named executive officers

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

b. Compensation Risk Management Features

The Compensation and Benefits Committee believes that the design and governance of our executive compensation program encourages executive performance consistent with the highest standards of risk management.

i. Pay Practices

Below we highlight the key features of our executive compensation program, including the pay practices we have implemented to drive sustainable results, encourage executive retention and align executive and stockholder interests. We also identify certain pay practices we have not implemented because we believe they do not serve our risk management goals or stockholders’ long-term interests.

 

What We Do		What We Don’t Do
Ÿ    Pay for performance and allocate individual awards based on actual results and how results were achieved   Ÿ    Use balanced, risk-adjusted performance measures   Ÿ    Review feedback from independent control functions in performance evaluations and compensation decisions   Ÿ    Provide appropriate mix of fixed and variable pay to reward company, line of business and individual performance   Ÿ    Defer a significant portion of variable pay as equity-based awards   Ÿ    Apply clawback features to all executive officer variable pay   Ÿ    Require stock ownership and retention of a portion of equity-based awards   Ÿ    Engage with stockholders on governance and compensation   Ÿ    Prohibit hedging and speculative trading of company stock, including short sales and trading in options and derivatives		Ÿ    No severance or change in control agreements for executive officers   Ÿ    No severance benefits to our executive officers exceeding two times base salary and bonus without stockholder approval (per our policy limiting future severance agreements)   Ÿ    No accrual of additional retirement benefits under any supplemental executive retirement plans (SERPs)   Ÿ    No excise tax gross-ups upon change in control   Ÿ    No discounting, reloading or re-pricing stock options without stockholder approval   Ÿ    No single-trigger vesting of equity-based awards upon change in control   Ÿ    No multi-year guaranteed incentive awards   Ÿ    No fixed-duration employment contracts with executive officers

Additionally, refer to the “Compensation Governance and Risk Management” discussion on page 15 for more information about our Compensation Governance Policy and our compensation risk management practices. This section describes our Chief Risk Officer’s review and assessment of any risks posed by our incentive compensation programs and our Corporate General Auditor’s risk-based review of our incentive plans. We also describe the extent to which our CEO participates in determining executive officer compensation, and the role of Farient Advisors LLC, the Committee’s independent compensation consultant.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

ii. Multiple Clawback & Cancellation Features

Our equity-based awards are subject to three separate and distinct “clawback” features that can result in the awards being canceled or prior payments being recouped in the event of certain detrimental conduct or financial losses. We believe these features encourage appropriate behavior. Our named executive officers are subject to all three clawback features.

 

		Detrimental Conduct Clawback		Performance-Based Clawback		Incentive Compensation Recoupment Policy
Who		Ÿ   Applies to approximately 22,000 employees who received equity-based awards as part of their 2014 compensation		Ÿ   Applies to approximately 4,500 employees who are deemed to be “risk takers” and received equity-based awards as part of their 2014 compensation   Ÿ   “Risk takers” defined according to banking regulations and company policies		Ÿ   Applies to all of our executive officers   Ÿ   Our policy covers a broader group of executives than required by the Sarbanes-Oxley Act, which covers only the CEO and Chief Financial Officer
When		Ÿ   An employee engages in certain “detrimental conduct,” including:   O   illegal activity   O   breach of a fiduciary duty   O   intentional violation or grossly negligent disregard of BAC’s policies, rules and procedures   O   trading positions that result in a need for restatement or significant loss, and   O   conduct constituting “cause”		Ÿ   Our company, a line of business, a business unit or an employee experiences a loss and the employee is found to be accountable based on:   O   the magnitude of the loss   O   the decisions that may have led to the loss   O   the employee’s overall performance		Ÿ   When fraud or intentional misconduct by an executive officer causes our company to restate its financial statements
What		Ÿ   All unvested equity awards will be canceled   Ÿ   Any previously vested award may be recouped, depending on the conduct		Ÿ   All or part of the next vesting tranche of the award may be canceled		Ÿ   Any incentive compensation may be recouped as determined by the Board or a Board committee   Ÿ   Any action necessary to remedy the misconduct and prevent its recurrence may be taken

Additionally, since 2011, all of our equity-based awards provide that they are subject to the compensation clawback provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and any implementing rules and regulations thereunder that the SEC and NYSE may adopt under that law. We intend to update our policies to reflect any final rules implementing the Dodd-Frank Act clawback requirements when those rules are finalized, released and become effective.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

iii. Stock Ownership & Retention Requirements

Our stock ownership and retention requirements align executive officer and stockholder interests by linking the value realized from equity-based awards to sustainable company performance. Beginning with awards granted for 2012, our Corporate Governance Guidelines require:

 

Minimum Shares of Common Stock Owned				Retention

 

Chief Executive Officer		500,000 shares		50% of net after-tax shares received from equity-based awards retained until one year after retirement

 

Other Executive Officers		300,000 shares		50% of net after-tax shares received from equity-based awards retained until retirement

For purposes of the stock ownership requirement:

 

Ÿ

New executive officers have up to five years to be in compliance

 

Ÿ

Full-value shares or units owned, awarded or shares deemed beneficially owned are included in the calculation; PRSUs are included in the calculation only when earned; stock options are not included

iv. Equity Grant Timing

We generally grant equity-based awards on a pre-established award date that coincides with the date we pay cash incentive awards for the performance year to avoid any coordination of the timing of our grants with the release of material non-public information.

4. COMPENSATION DECISIONS AND RATIONALE

a. Pay Evaluation & Decision Process

Each year, the Compensation and Benefits Committee uses a balanced and disciplined approach to review the performance of our named executive officers and determines their base salaries and may award variable compensation. The approach includes a full year assessment of financial results and the contributions of the executives to overall company and line of business performance, progress for delivering on the five operating principles, and driving a strong risk culture. The Committee considers various factors that collectively indicate successful management of our business, including:

 

Ÿ

Year-over-year company, line of business and individual performance, including financial and non-financial measures

 

Ÿ

The manner in which results are achieved, adherence to risk and compliance policies, and the quality of earnings

 

Ÿ

Accountability in driving a strong risk management culture and other core values of our company

 

Ÿ

Our company’s year-over-year performance relative to our established risk metrics

 

Ÿ

Our performance relative to our primary competitor group

The Committee’s evaluation includes a robust review of a performance scorecard aligned to the company’s operating principles:

 

Deliver for Stockholders		Customer Driven		Manage Risk		Operational Excellence		Great Place to Work

For each operating principle, the scorecard includes metrics tailored for each named executive officer based on company, line of business, risk, financial and strategic priorities. The Committee evaluates individual performance without assigning weightings to these priorities.

The Committee also reviews market pay practices, compensation risk management and governance practices. In addition, feedback from our independent control functions (i.e., audit, compliance, finance, human resources, legal and risk) informs the Committee’s assessment. For named executive officers other than our CEO, the Committee also considers our CEO’s perspective. For 2014, the Committee also considered changes in role and scope of responsibility for some named executive officers.

The Committee’s assessment of the factors above informs its compensation decisions. Compensation decisions are generally determined on a year-over-year basis without pre-set target levels of total compensation and without formulaic benchmarking. For the CEO, the Committee’s pay recommendation is further reviewed and approved by the independent members of the Board.

 

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b. Individual Performance

Highlights of the Committee’s assessment of individual performance are included for each of our named executive officers.

 

 

 

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c. 2014 Compensation Decisions

For 2014, the Compensation and Benefits Committee continued to emphasize equity-based awards and did not change our named executive officers’ base salaries. The Committee determined 2014 variable compensation in February 2015 after completing its review of annual performance as described in “Pay Evaluation & Decision Process” on page 32. The following table summarizes performance year 2014 compensation:

 

Name		Base Salary  ($)				Annual Cash Incentive ($)				Cash-Settled Restricted Stock Units ($)				Performance Restricted Stock Units ($)				Time-Based Restricted Stock Units ($)				Total ($)
Brian T. Moynihan			1,500,000				—				3,450,000				5,750,000				2,300,000				13,000,000
Bruce R. Thompson			850,000				3,960,000				—				2,970,000				2,970,000				10,750,000
David C. Darnell			1,000,000				3,100,000				—				2,325,000				2,325,000				8,750,000
Gary G. Lynch			850,000				2,920,000				—				2,190,000				2,190,000				8,150,000
Thomas K. Montag			1,000,000				5,200,000				—				3,900,000				3,900,000				14,000,000

Note: Some of the 2014 compensation above differs from the Summary Compensation Table on page 38. SEC rules require that the Summary Compensation Table include equity compensation in the year granted, while the Committee awards equity compensation after the performance year. Therefore, equity-based incentives granted in 2014 for the 2013 performance year are shown in the Summary Compensation Table as 2014 compensation. The equity-based incentives above will be included in the Summary Compensation Table in next year’s proxy statement, assuming our named executive officers remain the same. The Summary Compensation Table also includes other elements of compensation not shown in the table above.

For a description of the pay components above, see “Executive Pay Components & Variable Pay Mix” on page 29.

d. Goals for Performance Restricted Stock Units

The PRSUs granted in February 2015 (based on 2014 performance) generally are not earned until the conclusion of a three-year performance period from 2015 to 2017. They are earned only if we meet certain return on assets (ROA) and adjusted tangible book value (TBV) growth goals. These metrics encourage focus on the efficient creation of net income for the long-term benefit of our stockholders.

The performance year 2014 PRSU goals are outlined in the chart below:

 

Three-year Average ROA(1) (50% Weighting)										Three-year Average Growth in Adjusted TBV(2) (50% Weighting)
Goal				% Earned						Goal				% Earned
	Less than 50bps				0	%					Less than 5.25	%			0	%
	50bps				33 1/3	%					5.25	%			33 1/3	%
	65bps				66 2/3	%					7.00	%			66 2/3	%
	80bps				100	%					8.50	%			100	%
	100bps				125	%					11.50	%			125	%

 

(1)

Three-year Average ROA means the average “return on assets” for the three calendar years in the performance period. For this purpose, “return on assets” means our return on average assets as reported in our Form 10-K, determined in accordance with generally accepted accounting principles (GAAP) in effect as of January 1, 2015.

 

(2)

Three-year Average Growth in Adjusted TBV means the average for the three-year performance period of the year-over-year percentage change in “adjusted tangible book value” measured as of December 31 each year. For this purpose, “adjusted tangible book value” will equal our total common stockholders’ equity, less the impact of any capital actions approved by the Federal Reserve Board and our company’s Board and taken by our company during the performance period, and less the sum of the carrying value of (a) goodwill and (b) intangible assets excluding mortgage servicing rights, adjusted for (c) deferred tax liabilities directly related to (a) and (b). These amounts are to be measured using the ending balance as of December 31 each year and determined based on GAAP in effect as of January 1, 2015.

PRSUs are forfeited if results are below the minimum goals. Any portion of the PRSUs achieved above 33 ¹/₃% will be interpolated on a straight-line basis between the two nearest goals. For any portion of the PRSU goals achieved up to 100%, payment will be at the end of the performance period. For any portion of the PRSU goals achieved above 100%, up to a maximum of 125%, payment will be deferred an additional two years.

 

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5. OTHER COMPENSATION TOPICS

a. Performance Results for Outstanding PRSU Awards

Our named executive officers had four outstanding Performance Restricted Stock Unit (PRSU) awards granted in February of each year from 2011 through 2014. Mr. Lynch received PRSU awards only for the 2013 and 2014 grants.

 

Ÿ

The 2011 and 2012 PRSUs are earned based on return on assets, measured each quarter based on a rolling four-quarter performance period

 

Ÿ

The 2013 and 2014 PRSUs are earned based on return on assets and adjusted tangible book value growth

^O Results for 2013 and 2014 were below target and will factor into the 3-year average

^O No amounts can be earned until the end of the three-year performance period

The key features of these outstanding PRSU awards by performance year (PY) are shown below:

 

PRSU Award		Performance Period		Performance Measure		% Earned in 2014		Total % Earned
2011 Grant (For PY2010)		Rolling four-quarters 2011 through 2015		Return on Assets		0%		40% (35% in 2012 & 5% in 2013)
2012 Grant (For PY2011)		Rolling four-quarters 2012 through 2016				0%		40% (40% in 2013)
2013 Grant (For PY2012)		2013 through 2015		50% 3-year average Return on Assets   50% 3-year average Growth in Adjusted Tangible Book Value		Not Applicable – award cannot be earned until the conclusion of the 3-year performance period
2014 Grant (For PY2013)		2014 through 2016

b. Competitor Groups

The Compensation and Benefits Committee periodically reviews compensation practices of three competitor groups:

Ÿ

Our primary competitor group includes five leading U.S financial institutions—we compete directly with them for customers, employees and investors, and they follow similar economic cycles to our own

Ÿ

Leading international financial institutions for perspectives on the global financial services industry

Ÿ

Leading U.S. headquartered companies of similar size and global scope for perspective across industries

The Committee uses the following 2014 competitor groups periodically to evaluate market trends in executive compensation and relative performance, but without any formulaic benchmarking.

 

Primary Competitor Group: Leading U.S. Financial Institutions		Leading International Financial Institutions		Leading Group of Global Companies Headquartered in the U.S. Spanning all Industries
Citigroup		Banco Santander		Abbott Laboratories		IBM
Goldman Sachs		Barclays		AT&T		Intel
JPMorgan Chase		BNP Paribas		Chevron		Johnson & Johnson
Morgan Stanley		Credit Suisse		Cisco		PepsiCo
Wells Fargo		Deutsche Bank		Coca-Cola		Pfizer
		HSBC		ConocoPhillips		Philip Morris International
		Royal Bank of Scotland		Exxon Mobil		Procter & Gamble
		UBS		General Electric		Verizon
				Hewlett-Packard		Wal-Mart

 

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c. Retirement Benefits

We provide our named executive officers the opportunity to save for their retirement via employee and employer contributions to qualified and nonqualified defined contribution plans on the same terms as other U.S.-based salaried employees. These plans help us attract and retain key personnel by providing a means to save for retirement.

Certain named executive officers also participate in various frozen qualified and nonqualified defined benefit pension plans. For more information about these plans, see “Pension Benefits Table” and “Nonqualified Deferred Compensation Table” on pages 45 and 47, respectively.

d. Welfare Benefits & Perquisites

Our named executive officers receive health and welfare benefits, such as medical, life and long-term disability coverage, under plans generally available to all other U.S.-based salaried employees. Because we have internal expertise on financial advisory matters, we make those services available at no cost to our named executive officers for their personal needs. We also may provide certain named executive officers with secured parking. In limited circumstances, we allow spouses to accompany executives traveling for a business-related purpose and pay for other incidental expenses. Our policy provides for the use of corporate aircraft by senior management for approved emergency travel. Our CEO is also allowed limited personal use of our aircraft, provided that he reimburses the company for certain costs, pursuant to his aircraft time-sharing agreement.

e. Tax Deductibility of Compensation

Under the Internal Revenue Code, a public company is limited to a $1 million deduction for compensation paid to its CEO or any of its three other most highly compensated executive officers (other than the Chief Financial Officer) who are employed at year-end. This limitation does not apply to compensation that meets the tax code requirements for qualifying performance-based compensation (compensation paid only if the individual’s performance meets pre-established objective goals based on performance criteria approved by stockholders). For 2014, payments of annual cash incentive awards and equity-based incentive awards under the Executive Incentive Compensation plan, and certain PRSUs under the Stock Plan, may satisfy the requirements for deductible compensation, but the Committee retains the discretion to make awards and pay our executives amounts that do not qualify as deductible compensation.

 

 

 

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EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table shows compensation paid, accrued or awarded with respect to our named executive officers during the years indicated:

2014 Summary Compensation Table⁽¹⁾

 

Name and  Principal Position(2)		Year				Salary      ($)(3)				Bonus      ($)(3)(4)				Stock      Awards      ($)(5)				Non Equity Incentive Plan  Compensation  ($)(6)				Change in Pension Value and Nonqualified Deferred   Compensation   Earnings ($)(7)				All Other  Compensation  ($)(8)				Total         ($)
Brian T. Moynihan
Chairman and Chief Executive Officer			2014				1,500,000				0				12,545,091				0				764,849				532,459				15,342,399
			2013				1,454,167				0				11,142,643				0				44,796				497,751				13,139,357
			2012				950,000				0				5,920,635				0				930,152				520,513				8,321,300
Bruce R. Thompson
Chief Financial Officer			2014				850,000				3,960,000				6,714,134				0				18,997				56,914				11,600,045
			2013				850,000				4,460,000				6,141,050				0				19,599				52,497				11,523,146
			2012				850,000				4,060,000				6,165,292				268,024				32,590				47,920				11,423,826
David C. Darnell
Vice Chairman, Global Wealth & Investment Management			2014				1,000,000				3,100,000				5,419,484				0				408,690				56,164				9,984,338
			2013				987,500				3,600,000				5,233,508				0				538,883				53,384				10,413,275
			2012				850,000				3,460,000				4,208,054				0				363,433				42,937				8,924,424
Gary G. Lynch
Global General Counsel			2014				850,000				2,920,000				4,907,662				502,814				0				51,974				9,232,450
			2013				850,000				3,260,000				3,720,952				1,346,840				0				48,366				9,226,158
			2012				850,000				2,460,000				3,611,095				1,750,854				0				34,656				8,706,605
Thomas K. Montag
Chief Operating Officer			2014				1,000,000				5,200,000				8,731,394				0				0				17,500				14,948,894
			2013				987,500				5,800,000				8,258,655				0				0				20,146				15,066,301
			2012				850,000				5,460,000				8,122,522				0				0				10,148				14,442,670

 

(1)

SEC rules require the Summary Compensation Table to include in each year’s amount the aggregate grant date fair value of stock awards granted during the year. Typically, we grant stock awards early in the year as part of total year-end compensation awarded for prior year performance. As a result, the amounts for stock awards generally appear in the Summary Compensation Table for the year after the performance year upon which they were based, and therefore the Summary Compensation Table does not fully reflect the Compensation and Benefits Committee’s view of its pay-for-performance executive compensation program for a particular performance year. For example, amounts shown as 2014 compensation in the “Stock Awards” column reflect stock awards granted in February 2014 for 2013 performance. See “Compensation Discussion and Analysis” on page 25 for a discussion about how the Committee viewed its 2014 compensation decisions for the named executive officers.

(2)

For all of 2014, Mr. Lynch served as the Global General Counsel and Head of Compliance and Regulatory Relations. In February 2015, Mr. Lynch became Global General Counsel. All other listed named executive officer positions are those held as of December 31, 2014. Mr. Darnell and Mr. Montag served as Co-Chief Operating Officers until September 2014, at which time they were appointed to their listed positions.

(3)	Includes any amounts deferred under our qualified and nonqualified 401(k) plans. See “Nonqualified Deferred Compensation Table” on page 47.

(4)	Amounts reflect annual cash incentive awards received by the named executive officers for performance in the applicable year.

 

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(5)

Amounts shown are the aggregate grant date fair value of CRSUs, PRSUs and TRSUs granted in the year indicated. Grants of stock-based awards (including RSUs and PRSUs but not CRSUs) include the right to receive cash dividends only if and when the underlying award becomes vested. The grant date fair value is based on the closing price of our common stock on the applicable grant date. For the PRSUs granted in 2014, the actual number of PRSUs earned (0% up to the maximum level of 125%) will depend on our company’s future achievement of specific ROA and growth in adjusted TBV goals over a three-year performance period ending December 31, 2016. Values in the Stock Award column assume that 100% of the PRSUs granted would vest as the probable outcome for purposes of determining the grant date fair value. See “Grants of Plan-Based Awards Table” on page 41 for a description of the CRSUs, PRSUs and TRSUs granted in 2014. The following table shows the grant date fair value of the PRSUs included in the Stock Award column at the level assumed as the probable outcome (100%, or the target level). The value of the PRSUs assuming that the highest level of performance conditions will be achieved is 125% of the values shown below:

 

Name		Target       PRSUs       ($)
Brian T. Moynihan			6,272,537
Bruce R. Thompson			3,357,067
David C. Darnell			2,709,742
Gary G. Lynch			2,453,831
Thomas K. Montag			4,36