JPM’ CeO pay with performance share units
JPMorgan Chase has given with one hand and taken away with the other — bumping up Jamie Dimon’s pay by more than a third, while subjecting the chairman and chief executive to three years of tests before he is paid out in full.
In a filing on Thursday afternoon the board of the New York-based bank said Mr Dimon’s total pay for 2015 would rise to $27m from $20m last year. His base salary remains at $1.5m, while he receives a cash bonus of $5m, down from $7.4m last year. The remaining $20.5m comes in the form of (PSUs), earned only if the bank hits certain profit targets over a three-year period.
Last year Mr Dimon’s $11.1m share award came in the form of restricted stock, with no performance hurdles attached.
This marks the first year JPMorgan is using PSUs as part of the variable pay for top management — a move that it says it made in response to a challenge by investor groups at its annual meeting last year. Then, more than a billion votes — a record 38 per cent — were cast against the bank’s pay policy after ISS and Glass Lewis, the proxy advisory firms, called for stronger ties between pay and performance. The firms also queried the chief executive’s $7.4m cash bonus for 2014, a year in which the bank’s shares trailed rivals, saying that it lacked “a compelling rationale”.
Still, the big increase risks stoking criticism among shareholder factions concerned about spiralling pay in the C-suite and its trickle-down effects. Bart Naylor of Public Citizen, a consumer advocacy group, said that it was fine for the proxy firms to push for stronger links between pay and performance at technology firms such as Apple — but not at banks.
“If Apple goes bust the world will survive, but a bank is a different breed of corporation,” he said. “There is a basic toxin when you incentivise through stock, which motivates management to be risk-hungry rather than risk-averse.”
Another governance analyst at a big public pension fund said the award seemed “odd,” in a climate of cost-cuts and flat revenues.
Mr Dimon’s pay award peaked at $30m in 2007, comprising $15.5m in cash and the rest in restricted stock. The following year, after Lehman blew up, it dropped to a salary of $1m and no incentives.
Mr Dimon’s rise also comes as regulators are still thrashing out rules arising from the Dodd-Frank Act that are designed to curb pay at financial-services firms. Under Section 956, banks would be banned from offering any type of incentive-based pay that the final rule says is “excessive,” or that could expose the firm to material financial loss as a result of “inappropriate” risk taking.
Finalising the rule requires agreement between half a dozen agencies including the Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve.
JPMorgan said that other senior executives including Daniel Pinto, head of the corporate and investment banking unit, and Matt Zames, chief operating officer, would receive equal shares of PSUs and restricted stock.
The PSUs will be earned based on the bank’s return on tangible common equity over a three-year performance period ending on December 31 2018. Earned PSUs will settle in shares that range from zero to 150 per cent of the number of PSUs awarded on Tuesday’s grant date, the bank said, depending on its ROTCE both on an absolute basis and relative to 11 peers over that period.
Executives must then hold the stock for an additional two years before they can sell it. Mr Dimon, 59, who has just passed a 10-year milestone at the helm of the bank, has not sold a single share of common stock so far, according to filings.