Bank CEO pay creeping back to bad old days

March 15, 2011

By Antony Currie and Margaret Doyle
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

NEW YORK/LONDON — Compensation for bank chief executives is creeping back to the bad old days. Sure, virtually all of them now pocket a smaller amount each year than they did before the financial crisis. But after a year or two of relative restraint, their boards are starting to favor them over shareholders again.

Brian Moynihan’s pay package looks the most egregious: the Bank of America boss took home $10 million despite presiding over a $3.6 billion loss and negative total return of more than 11 percent. Goldman Sachs Chief Executive Lloyd Blankfein raked in 40 percent more than he did in 2009 even though earnings tumbled by the same quantum and total return was a piddling 2.5 percent. And while Barclays’ earnings from core operations increased by almost a third, new chief Bob Diamond’s 9 million pounds of total comp far outpaced that rate, jumping nine-fold from what he and predecessor John Varley received a year before.

Not all are so out of whack. JPMorgan has a better defense for Jamie Dimon’s 20 percent bonus bump: while the stock was essentially flat, the firm’s net income jumped by nearly half. Strip out lower credit costs, though, and the bank’s core earnings actually dropped by 14 percent.

Others were more mindful of the link between pay, earnings and stock performance. Deutsche Bank boss Joe Ackermann took a pay cut, though only of 6 percent despite earnings falling by more, even after allowing for the accounting hit from buying Postbank. Morgan Stanley returned to profitability, but CEO James Gorman received almost half his 2009 compensation as the stock dipped. Both men also took an outsize share of their company’s profits, however.

Gorman received 0.23 percent of income applicable to shareholders and Ackermann 0.27 percent, as much as a third more than rivals. Ken Chenault, over at American Express, trumped them both: his unchanged $20.5 million compensation for 2010 represented a cool 0.5 percent of earnings.

Only UBS and Citi, the biggest crisis losers, exhibited any modesty. Neither Oswald Gruebel nor Vikram Pandit, their respective CEOs, was paid a bonus, despite improved performance. For now, at least, they seem to have learned from the shock to the banking system that shareholders shouldn’t play second fiddle to management. Investors elsewhere would do well to take note.


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‘…shareholders shouldn’t play second fiddle to management…’

I’m not holding my breath.

Posted by Elektrobahn | Report as abusive

With liquidity glut thanks to the FED easy money at near zero percent ought to line the pockets of those who hold sway in the financial marketplace.They will not ponder but we do and wonder for how much longer it could sustain.This modern day edifice built on debt.

Posted by schadha100 | Report as abusive