As we move through the final months of this tumultuous year, the news is almost unimaginable: 200,000-plus dead of Covid in the U.S. alone, crushing unemployment, hundreds of thousands of shuttered businesses across the nation. Given where we’ve been, it is easy to overlook the crisis that did not happen: Another global financial meltdown. A good bit of the credit for that belongs to Washington, of course, but more than a little also goes to Brian Moynihan, the low-key leader of Bank of America, the nation’s second-largest commercial bank.
Over the past 10-plus years, Moynihan and his team—most of whom have remained with him through this entire period—chipped away at the legal issues plaguing BofA in the wake of the Great Recession and instilled rigor and discipline to the institution’s approach to risk. As Moynihan incessantly preached a mantra of “responsible growth,” they shed more than $75 billion in costs, refocused on their consumer businesses, navigated endlessly shifting regulatory requirements, oversaw a $35 billion investment in new technology, and made talent development—especially diversity and inclusion initiatives—a core focus for his workforce of 208,000.
The result: A transformation that grew assets by more than $500 billion (to $2.38 trillion), restored the once-troubled bank to record profitability ($27.43 billion in 2019 versus a $2.2 billion loss in 2010), and, until Covid struck his entire sector hard, generated a 72.9 percent total return for shareholders since 2014—114.1 percent if you exclude 2020. Along the way, he’s become a statesman for the new-look Corporate America, leading highly public efforts to transform capitalism to be more expansive and inclusive.
It was exactly this kind of deliberate, considered leadership, a mix of analytical process-focus and deep-seeded humanism—practiced with meticulous consistency—that led a selection committee comprised of peer CEOs to name Moynihan our 2020 Chief Executive of the Year. “Through thick and thin and thin again, Brian Moynihan has led Bank of America with humility and a focus on the long term, delivering extraordinary results and strong team spirit,” said Arne Sorenson, CEO of Marriott International and Chief Executive’s 2019 CEO of the Year, who served as a member of this year’s selection committee.
“Even in difficult times today, he’s making sure that Bank of America stands by its principles and stands by Brian’s principles,” says Carmine Di Sibio, global chairman and CEO, EY Global, who was also a member of the selection committee. “Brian is a courageous leader, but, most of all, he’s a leader who cares about his people and his teammates.”
Moynihan, an Ohio native who graduated from Brown (where he met his future wife, Susan) and the University of Notre Dame Law School, got into banking through the side door, joining FleetBoston, one of New England’s largest banks, as deputy general counsel in 1993 after nine years as a practicing attorney in Providence, RI. By 1999, he was running Fleet’s brokerage and wealth management arm, and when Fleet was gobbled up by Bank of America in 2004, he became president of BofA’s wealth and investment management—just in time for the global financial meltdown.
In Wall Street’s ensuing game of musical chairs, BoA bought Merrill Lynch for $50 billion in 2008 and Moynihan took over leadership of the controversial acquisition. Two years later the reformed lawyer was running the company’s small business and consumer operations when the board named him CEO and charged him with turning the company around and pulling it through the ruins of the Great Recession.
He says he learned a lot about how to lead in that time—and in the Covid era—from leading through 9/11. “It was my first role managing a lot of people, and I had a lot of people right around the World Trade Center,” he says. “I learned about how you had to listen to what was on their minds, and then figure out how to get things sort of worked out over time as opposed to, ‘Here’s what we’re going to do,’ because that doesn’t work over time. You have to have a why. Middle management has to be able to say, ‘We did this because…’ and that it was the right thing for the company, the customer, the shareholder, or whatever. And even if you don’t agree with it, now you understand why. Let’s go do it.”
Chief Executive recently spoke with Moynihan at his office in Boston about how he does what he does, tackling transformation and what it means to be a CEO right now. Excerpts from that conversation, edited for length and clarity, follow.
What are you seeing in the economy, and what can the country be doing better from your vantage point?
Whenever I start a discussion on this, I always remind myself and the people I’m engaging with that, from the broadest perspective, this is a healthcare crisis, and the solution, ultimately, would be a solution to that healthcare crisis. The good news is everybody is facing it. We’re all fighting to win the battle against the virus. And frankly, since last February and March, we’re closer to that outcome than we were then. However far it is away, at least it feels like it’s on the horizon much more than not knowing what was going on.
When you think about it from the economic perspective, the second quarter was one of the steepest downdrafts in the U.S. economy in history. The third quarter is now predicted to be one of the biggest increases ever. And when you put it all together, you end up getting back to 90-some percent of where you were when you started.
The question is: where do you go from here? What we see is our prediction for the U.S. for 2020 is negative 4.3 percent. But that was just upgraded from negative 5 percent to negative 4 percent over the last few weeks. And for next year, the projection, which will obviously continue to shift, is currently 2.8 percent. What that really means is a recovery is coming a little faster than the economy has predicted.
Our consumer data shows that. Consumer spending across all the different forms that Bank of America customers spend money is strengthening again. It strengthened dramatically, then went a little flat as you got into the reopening back and forth in July and August, and it’s now kicked back up in the first part of September, so we look forward to that. That is a big sample of the American consumer. And at the end of the day, it drives economies.
In our commercial side, except for our customers in the worst industries—travel, airplanes, cruise ships, onsite entertainment venues and things like that—businesses are kind of okay, have plenty of credit availability and they’re doing fine and working their way through. So, we’re cautiously optimistic, not about the economy forever, but that most of the bad is behind us. Now the question is how fast the underlying growth rate can eat up the last 5 percent.
It’s been a tough year for banks, obviously. But why it isn’t worse? Why didn’t it turn into 2006, 2007 all over again?
The industry is just in much better condition. Due to the amount of capital that the industry had going into this crisis, the amount of liquidity, there was an ability to stand tall and help clients through the issues, whether it was the panic borrowing that went on in March and April when the markets closed down, the PPP product, a distribution of all the benefits and the stimulus bills. Banks were in good shape to withstand that and be there to help, not to be a problem so to speak.
Not only do we have the capital and liquidity, but because the stress test has been going on periodically every year, you also had objective proof that we were okay. And then we did a stress test right in the middle of it. Why is that important? Because if you go back and think about the last crisis, what you heard a lot about was, “How big is the hole at institution X or Y? Can they survive?” That wasn’t the case here because we did a stress test and we proved we can survive it. So that’s the major difference—the capital, liquidity and capabilities.
The second thing is what Congress, the Administration and the government did through the fiscal stimulus, taking care of the people most affected with the PPP, the $1,200 payment, the unemployment benefits. That helped build a bridge to recovery for people who were affected by the virus. And then the Feds stepping in and dropping rates quickly against the shock also helped stabilize the markets.
If you put that all together, it’s just a completely different atmosphere than it was in ’06, ’07, ’08 when people weren’t sure where the bottom was, who was in good shape or not. There was no objective measurement, and frankly the response was not as rapid and pointed by the administration.
What did you learn from that last crisis?
There’s a statement that your grandmother probably told you when you were probably eating too much candy: “all things in moderation.” That is actually a Roman proverb that goes back thousands of years.
I think our view of responsible growth and how my team runs this company is to make sure that we never depend upon the market’s liquidity. We have the capital. We have the [right] balance in our business. We have the responsible growth—meaning we grow the right risk, we grow the right customer bases, we grow with sustainable growth—that we’ve been after for years and years and years, not only because of lessons in the last crisis but the early crises, whether it was the dotcom blowup and the fallen angels in the ’99-2000 era or the real estate crisis in the late ’90s.
All the members of the management team, the board, agree with this. We gave up opportunities probably in ’15 through ’18 to make sure that we were positioned so that no matter what went wrong in a crisis, we would be okay, and the proof is in the pudding. In a year in which we had the deepest economic downdraft in the second quarter, we’ve made $8 or $9 billion after tax in a half year so far. We’ve put up $11 billion in reserves. Our capital ratios are higher than before this crisis started, and our liquidity is higher. That shows you that we’re handling the risk of the moment. It’s the testimony to how well the management team has run the company, but it really comes back to that question of responsible growth.
How did BofA handle the Covid crisis?
Our response to this was really delivered with three goals in mind—a teammate-centric approach, a customer-centric approach and a community-centric approach. So, the first thing we said is we have to get our teammates to be able to do their jobs and be safe. That meant getting them home, getting them computers, getting them the technology resources.
We took all the high-risk people and got them at home as fast as possible. Many of them had jobs that weren’t doable from home, but we redeployed them to do other jobs. 100,000 laptops and screens and thousands of MyWiFi-type of products to make sure connectivity worked in places like India were deployed.
Then we went and said, “Okay, how can it be effective?” That’s when we started on benefits like extra pay for the teammates that still had to come into work, extra commuting benefits so they didn’t have to take public transportation, meals brought in to all our branches. Then we did childcare so people working at home could be effective, $100 a day for persons with children to hire somebody to take care of their kids, so they can be effective at work.
And as schools shut down, we’ve done a million and a quarter days of childcare through this thing over the last six months, and we’ll continue that till the end of the year because of the school system being all over the place.
We just sat there and asked, “What do our employees need?” The first thing our employees needed was to know they weren’t going to lose their jobs, and we haven’t done any layoffs at all. And we’ve said no layoffs until we got to the other side of this. So, no layoffs, give the right resource to work from home mechanically, give the right benefit structure, free testing, increased mental health capabilities with Teledoc and other things to make it even more available because we knew it was going to be debilitating. Number one was take care of the employees.
Then we went to the customers and said, “How do we take care of you?” And it was, “Help me restructure my debt,” “Help me get my commercial paper paid up,” for larger companies. “Let me draw my lines and keep my liquidity going,” for the mid-sized companies. It was consumer deferrals. We added, at a high point, 2 million consumer deferrals.
So, we put together that customer-centric piece and then, ultimately, we started on the community. There was $900 million extra charity to help communities, 4 million masks, $250 million to the CDFI to help them fund their borrowers under PPP. We provided a lot of capital for them to do that, and then that turned into a $1 billion program.
So that’s what we did right from the start—protect the risk, run the company well, we’ve also got to protect the people who do that. We’ve got to make sure the customers get what they need out of us, and we’ve got to protect our communities because that’s where the economy comes from.
How did you communicate all of this?
We have a function that runs all the time because something is always going on. Even in the middle of the Covid crisis, we’re tracking five tropical storms, wildfires and other things. So, we have a team—the ER team, enterprise response team—whose job is to make sure that the employees are all taken care of and the communications are done. We have a program that we call ENACT where we can contact everybody. We started that whole engine up literally every day saying, “What do people need?”
So, you pull a team together. You say, “We’ve got to take care of the people. We’ve got to take care of the customers. We’ve got to take care of the risks. We’ve got to have, at the moment, information.” And then you start meeting at a pace that you just don’t usually meet. We met twice a day, 7:30 in the morning, 4:30 in the afternoon. Obviously, we connected in between so the 50 or 60 top managers, we all heard from each other. Now we’re down to one a day just because the urgency is out of it.
It’s basically to exchange real-time information to figure out what people are hearing, what resources they might need. As PPP took off, we pulled 10,000 resources from around the company and dedicated it to PPP. It didn’t exist as a product until April 3. And 60 days later, we’ve done 300,000 of those type of loans. You couldn’t do that through one unit. You had to have all the units saying, “I understand the problem. Let me give you this. I got x, I got y.”
It’s really that communication, gathering the team, but running along the principles of responsible growth and of our first order of business—to serve our teams, serve the clients, and then make sure we’re taking care of the risk. The key to that is constant communication, constant understanding and driving at that understanding of all the different things going on and trying to make sure we’re managing the company into it.
Can you talk us through the transformation that you made at Bank of America coming out of Countrywide in 2008?
I had an advantage when I became CEO January 1, 2010. I’d managed many of the businesses. A substantial number of employees had worked for me at given times in the company. And I had a view of what we needed to do that the board agreed with, so I didn’t have to convince the board or do a strategic review.
We sat down and said, “We’ve got to focus on the core business. We have to get out of all the other businesses, those where you took on risks that third parties generated, your correspondent mortgages and things like that, and focus only on the customers we touch and see. We’ve got to really focus on client selection.”
We started that in 2010, and we basically separated the company into two pieces. We had a triage group that had to deal with the litigation and those types of issues and figuring out a way through this morass of litigation and lawsuits about the mortgages and the foreclosure practices.
Then we had the rest of the people who were led by people like [now COO] Tom Montag. His businesses were less affected. David Darnell [who retired in 2015], Tom and others drove the businesses while [former CFO] Bruce Thompson and Geoff Greener [now BofA’s chief risk officer] and Terry Laughlin [who died in 2018] worked more on the mortgage crisis. So we sort of bifurcated.
Underneath that were the principles. We said to the board that we’re going to have these eight lines of business. We’re going to get rid of every product that doesn’t add substantial value or that customers don’t expect us to have and then we’re going to invest in technology to drive digitization. We’ll invest in technology to drive our risk management understanding. We’ll invest in technology to drive our ability to get work done faster. We did an initiative called Project New BAC where we took out more than $8 billion in costs. We announced that in 2011. And then we did one called SIM [Simplify and Improve]. These were all improvements against that basic template of eight lines of business core products, drive at it, and drive responsible growth. That team bought into that, and we just drove it.
Terry Laughlin at the time was trying to get us out of the mortgage litigation. Tom Montag was basically making sure our international business was well-put because internationally was a place we had to grow. To give an example, we’ve gone from $20 billion in outstanding international loans to $100 billion, and it was all done with the right customers at the right level so we had no issues in this crisis… our loans came down but we were growing them where we wanted them and getting out where we didn’t want them.
But underneath that, what I told the board at the time—and it’s true—we have the best franchise and financial services in the world in terms of the positions in the business. The question was I’ve got to get rid of all the stuff that’s distracting just to drive at this. It was all there, you just had to really do it. You had to stick to it. You had to not be distracted.
I think my management team did a great job of sticking to it. And it was largely the same team, only replaced by replacements after retirements. We were able to build a team that regenerated itself and drove that competitive advantage, risk management, and responsible growth so that when we hit this thing, we just managed right through it. Now, it’s still ahead of us. Things could go right or wrong, but we’ve managed through a lot of it.
How did you measure the culture and whether or not it was moving in the direction that you wanted it to go in?
We have dashboards that are not only the classic operational metrics but also go into responsible growth. You’ve got to grow mean balances and things like numbers of customers, satisfaction of those customers, diversity. It’s all embedded in the metrics and measured at different levels, the risk measurements, etc. It’s all in there.
One of the challenges all CEOs have is that, no matter how many times you say the same thing, you have to remember that with a 10 percent turnover rate in your company, 10 percent of people have never heard it, so you have to constantly reinforce the basic principles and north stars.
We have a thing we call a placemat, which is our purpose, the eight lines of business, how we go to market, responsible growth, our values, and it’s all in one placemat. I start every meeting, every town hall with that. Frankly there are a lot of people who look at me and say, “Do we have to do that again?” but it’s a reminder of how we run the company.
In our employee survey, to make sure that’s getting through, we actually ask questions about people’s understanding of what responsible growth meant for the last five or six years, literally asking, “What do you think? Give us your thoughts on it.” There’s honest debate about, “Are we being too responsible and not growing enough? Should we take this risk or that risk? Are we not taking [enough] risk?”
That’s what you want because that means people are actually thinking about it, right? You’ve got to not only put a dashboard, a KPI and a communications platform in place and stick to it, but you have to frankly be introspective and say, “I’m going to actually measure to make sure six to eight layers away from me”—which is the last layer in a company—that people have the same understanding of what responsible growth means to them and how they drive it. That took redesigning our survey process and looking at it.
This year, we had all-time highs in teammate satisfaction and [diversity and inclusion], a score we built 15 years ago to measure diversity inclusion in a company. They jumped a lot. We do a peer comparison and we’re 500, 600, 700 basis points ahead on this because of many years of the culture developing in the company even through numerous acquisitions.
You’ve been forceful about pushing digital transformation. What did you see that made you say, “we need to move on this”? And then how did you get that to happen?
Well, we were already a leader in digital banking and what became mobile banking because frankly we made decisions early in—on the consumer side especially—about how we built our platform that allowed us to be available on a smartphone when smartphones were invented. That just drove our thinking, and it drives our thinking today.
What we really found out is simplification combined with the digitization of practice is just so impactful. We’re high-touch and high-tech across the platforms, but we saw early on the benefits of spending money to digitize the platforms and capabilities, while at the same time having extreme discipline on getting the cost structure down through simplification and utilizing those products.
I’ll give you a stat. In 1999, the Bank of America from California merged with the NationsBank in North Carolina and formed what is known as Bank of America. At the time, it was about $500 billion in total assets and about $400 billion in deposits. It had 4,800 branches. Today, 21 years later, we have 4,300 branches and $1.7 trillion in deposits. That is through digitization.
From that time till now, the company acquired FleetBoston. It acquired LaSalle Bank. We acquired a bunch of banks after that. We ended up at the highest peak at 6,100 branches, and we were able to bring that down by digitizing activity.
On the commercial side, the same thing. It’s getting paper out of the system of paying bills and stuff, and we’re driving that in wealth management statements.
One of your big pushes has been a focus on diversity and inclusion. How do you approach that?
We think of diversity and inclusion as two pieces. Diversity is the representation, and so we look at it at all levels in the company and try to bring it to societal levels. Outside the United States, it’s different, obviously. But inside the United States, we’re trying to match the representation in society of all the different ethnicities. We’ve made massive gains and we’re more diverse than most other companies, but we know there’s room to work.
So, we drive analytics and scorecards about everything that happens from me to the last layer of the company through my direct reports, through their business review, whether it transfers in or out of people, hires, terminations, whatever, where are you moving, and we just want constant progress to the goal of getting our teammates to represent the same distribution in society.
On inclusion, the way we define inclusion is something we started about 15 years ago before I was CEO. We said we’re going to define inclusion, build metrics against it, measure it. People said let’s hire some firm to look at that. I said forget that. Just go ask people what they want. If we want to be the best place our teammates to work with, what do they want from inclusion?
And a young lady said, “Look, what I really want is I want to be able to come to your office and bring myself through that door and be as successful as I want to be and not have to leave myself outside and pick it up on the way home.” And we have used that as a way to think about inclusion. We want people to feel they can be successful in our company and be themselves at work. That’s how we drive it, and that’s how we measure it.
Now how do you that? Well, there has to be governance on it. So, we have a GDIC group. How do you do that? You have to have networks of affinity so people can be supported, whether it’s LGBTQ, African-American, Hispanic. We have networks with 160,000 people in them—disability network, parenting network, intergenerational network, they meet and decide on agenda items and often come to the company with ideas.
And then you have to score it. So we actually had measurements and see how people are doing and how they compare. And take D&I scores and see how they rank and then look to push up anyone below the average so the average moves. And you have a method for management of that. Four or five years ago, we started having “courageous conversations,” very raw, very direct conversations with teammates and outsiders about what it’s like for that teammate or outsider of that ethnicity, whether it’s a transgender person talking about the bathroom bill in North Carolina, a Black teammate talking about policing, or parents talking about their disabled kid, about what that’s like and trying to get the rest of the teammates to understand. That helps you drive that inclusive feeling up.
You’ve been at the vanguard of the push for “stakeholder capitalism.” Can you talk about your sense of what the role of the corporation is in society right now?
From a historical basis, bank institutions have always had a heavy community impact side to them just because of who we are and how we, for lack of a better term, make money and have success. We are the product of the economy and the community in supporting itself.
From back in the mid-1990s, the plan always had four constituencies—customers, employees, shareholders and communities. So, this is not something that we arrived at lately. The point we’re trying to make is we have to deliver for our shareholders and deliver for society. It’s not “or” because we do one and not the other. You have to deliver for both. That is not a new concept. Jim Collins wrote about it and called it the “Genius of the AND,” and I use his phrase.
But why do we need that? Back in 2015, [United Nations Member States] developed sustainable development goals (SDGs), and 192 countries signed on and said, “This is what balanced inclusive growth means for the world.” The problem with that is it costs $6 trillion a year to achieve that. Governments don’t have the money. All the charitable givers in the world, including individuals, give away $1 trillion a year. It’s marvelous. It’s wonderful but it does not hit the $6 trillion.
So, the reality is the only way to actually make the progress in SDGs is to align capitalism behind them. The metrics we designed are against those SDGs and measure a company doing something to make progress on delivering SDGs and then also delivering to the shareholder.
The way I come at this is that the only way you can solve the problem is to get capitalism aligned [with these goals]. Capitalism is one of the best systems of ingenuity, capital and talent to do it but you have to drive that alignment. And if you drive that alignment incrementally, you will achieve the Paris goals on carbon reduction, the goals on housing development.
You are not going to achieve them by charity because there’s just not enough money. You’re not going to achieve them by governments because they don’t have money to spend, especially now. You’re going to achieve them by getting capitalism aligned. And if capitalism aligns to that, the growth in that society, that’s how we make money. It’s mathematical. There’s no way we’re going to achieve balanced, conclusive growth in the world unless capitalism drives it.
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