In 2005, Bank of America unveiled a new profit sharing program, Rewarding Success, which links cash bonuses for 85% of its employees – those whose cash compensation is less than $ 100,000 and those not paid exclusively by commission or variable pay – to corporate performance goals. Aims of the program included: attracting and retaining employees, motivating performance, and creating a sense of shared destiny, especially after the bank ’s merger with FleetBoston in 2004 (Davis, 2005 ; Ruiz, 2005). When the company meets or exceeds annual business targets, all eligible employees receive equal bonuses, which they can take as cash or defer in whole or part to their 401(k) accounts (Bank of America, 2008). The minimum per- employee payout when the earnings trigger is reached is $ 500, and employee bonuses rise with bank earnings to a potential maximum of $ 3000. The bank originally considered offering equity as part of the new program, but a survey of employees showed that they preferred cash. Also, because companies would have to begin expensing stock options on their grant date beginning in 2006, the choice of cash over stock options was considered wise (Davis, 2005 ).

Davis (2008) reports that in 2006, eligible employees received bonuses of $ 1175, and in 2007 they received $ 1820. However, after lower- than - expected earnings in 2007 due to deteriorating credit quality and capital market difficulties, Bank of America informed employees that it would not pay bonuses under the program. Commented a company spokeswoman: “ It ’s disappointing to all of us. ” Given the crisis in US financial markets in 2008, future bonus payments are uncertain at best. What is your assessment of the Rewarding Success program, from both the bank ’s and the employees ’ perspectives? What recommendations would you make to Bank of America?