Bank CEO pay suggests Wall Street may be waking up
By Antony Currie
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Wall Street may be starting to get it – “it” being the post-crisis contempt over excessive bonuses for chief executives. In 2010, some banks unduly increased compensation for their bosses. The Goldman Sachs board, for one, doubled Chief Executive Lloyd Blankfein’s total pay even though the firm’s earnings, returns and stock price all fell. Based on the first few to release information about 2011, executive handouts are less out of whack.
James Gorman, the boss at Morgan Stanley, is taking home $10.5 million, or a quarter less than he did a year earlier. That could even arguably be more pain than was necessary. It’s almost twice the percentage drop in the bank’s net income and Gorman is actually shouldering more pain than employees. Compensation and benefits across the bank increased in 2011 by a couple of percentage points.
On the face of it, JPMorgan CEO Jamie Dimon is also making something of a sacrifice. His $18.8 million package represents a 17 percent cut on 2010, even though the bank’s net income and return on equity grew a bit last year, enough for the Federal Reserve to allow the bank to increase its dividend. And Vikram Pandit’s pay for his work leading Citi last year came to just $5.5 million against the nominal $1 he pocketed for the previous two years.
The restraint can’t be fully praised, however. Shares of all three banks tanked last year – 22 percent at JPMorgan and twice that at Citi and Morgan Stanley. And though Gorman took some charges to improve his firm’s balance sheet and earnings, without the gains from its own liabilities, Morgan Stanley’s bottom line plummeted by 73 percent. That means the board could easily have been stingier with Gorman.
There are also potentially cash bonuses to come at JPMorgan and Citi. If Dimon gets the same $5 million as he did a year ago, he’ll actually make slightly more than in 2010 thanks to an increase in his base salary, even though JPMorgan’s pre-provision profit fell 17 percent. But for now, at least, it seems possible that last year’s protest movements to some extent occupied the minds of compensation committees on Wall Street.