JP Morgan chairman paid 74% more while profits fall

JP Morgan Chairman and Chief Executive Jamie Dimon will be paid $20 million for the last 12 months’ work, a 74% increase from $11.5 million, even though the company’s profits fell 16% over the same period.

Dimon is being paid a basic salary of $1.5 million, plus $18.5 million in shares. His remuneration was approved by the bank’s board of directors, who believe most of the legal and regulatory issues the company faced are now sorted, and steps were taken to deal with the problems.

In 2012, Dimon’s salary was reduced to $11.5 million from the $23.1 million he earned in 2011, after the bank registered massive trading losses and several regulatory probes were ordered into various parts of the bank’s operations.

In 2013 JP Morgan’s profits were 16% lower than in 2012, because of costs resulting from legal issues. The company had to pay approximately $20 billion to regulators for a string of violations during the financial crisis.

The legal costs related to the Bernie Madoff case dented JP Morgan’s 2013 fourth quarter earnings considerably.

While some people are calling this a massive 74% pay rise, others point out that Dimon now earns no more than he used to a couple of years ago when he was paid $23.1 million. In 2006 he was paid $27 million and in 2007 he received $30 million.

JP Morgan chairman pay rise will irritate some shareholders

Dimon’s $20 million pay deal will draw questions from shareholders at the next annual meeting, many of whom wondered about his ability to manage Wall Street in light of its court cases.

Politico quoted Carol Bowie, head of Americas research at ISS, who said “I have no doubt that [Dimon’s pay hike] will come up. The question is will the explanations that they’ve heard before suffice?”

JP Morgan said Dimon’s $18.5 million incentive compensation came entirely in the form of restricted share units that vest over three years, half after two years and the other half after the third, i.e. his compensation is linked to how well the bank performs in years to come.

In a filing with the Securities and Exchange Commission, JP Morgan wrote:

“In determining Mr. Dimon’s compensation, the independent members of the Board took into account several key factors, among them: the Company’s sustained long-term performance; gains in market share and customer satisfaction; and the regulatory issues the Company has faced and the steps the Company has taken to resolve those issues, including those arising from events at Washington Mutual and Bear Stearns that predated the Company’s ownership.”

“Under Mr. Dimon’s stewardship, the Company has fortified its control infrastructure and processes and strengthened each of its key businesses while continuing to focus on strengthening the Company’s leadership capabilities across all levels.”

Writing in Forbes, Adam Hartung described Dimon’s massive pay rise as an example of callousness toward workers, “after the bank laid off some 7,500 employees in 2013, and recently announced it would not give employees raises due to the large fines.”