Austerity for us, double digit pay rises and champagne for them.

[financeguy]

Bank chiefs enjoy double-digit pay rises

By Daniel Schäfer in London


Top US and European bankers, including JPMorgan Chase’s Jamie Dimon and Citigroup’s Vikram Pandit, have enjoyed double-digit annual pay rises averaging almost 12 per cent, despite widespread falls in profits and share prices, Financial Times research shows.

The disclosure will stoke concern on both sides of the Atlantic over chief executive pay levels that has already led to several high-profile investor revolts, including at Citi and at Barclays. It comes as Europe’s leaders debate a cap on bank bonuses.

The analysis of total pay awarded to 15 bank chiefs by Equilar, a US pay research group, shows they received an average 11.9 per cent pay rise last year to $12.8m, the second increase in a row. However, the pace of growth has slowed.

Bankers such as Brian Moynihan at Bank of America, Citigroup’s Mr Pandit and JPMorgan’s Mr Dimon enjoyed the largest gains.

Mr Dimon, whose reputation as one of the best managers in banking has been hit by a $2bn trading loss in a supposedly safe division of JPMorgan, topped the list for the second year in succession with a $23.1m pay package that was 11 per cent higher.

The analysis by Equilar adds up base salaries, cash bonuses and certain other benefits. It also includes option and stock awards that were granted in 2011, some of which to reward performance in previous years.

It shows that fixed salaries continue to rise while variable cash payments are sinking as regulators clamp down on bonuses. But average stock and option awards increased by 22 per cent.

“Regulators try to prevent banks from taking the outsize risks that led to the financial crisis. But the problem is that shareholders still like outsize returns,” said Albert Laverge, head of the global investment banking practice at Egon Zehnder.

Mr Pandit’s pay soared to $14.9m after the $1 salary of the previous two years was ditched. He had pledged constraint until the bank would return to profitability, which it did in 2010.

His pay package, which ranks in the middle of the FT survey, sparked an investor revolt at Citigroup’s annual meeting in April that triggered a wider shareholder uprising against executives’ pay levels in Europe and the US.

In the UK, Bob Diamond at Barclays came second in the survey with a $20.1m pay package that was inflated by a contentious £5.75m tax bill covered by his employer. António Horta-Osório was awarded total pay of $15.7m in his first year at partly state-owned Lloyds Banking Group, thanks to a welcome package and despite giving up his cash bonus after a stress-related two months’ leave.

The European Union is debating a possible cap on bonuses that would maximise the variable payout at 100 per cent of fixed salary.

Tougher regulation has prompted many banks to increase fixed salaries, defer large parts of bonuses and subject them to clawbacks in the case of future losses.

The average pay rise came in a year when the FTSE world banks index fell by a quarter, more than the overall world index. Only three of the 15 banks in the survey – Wells Fargo, BBVA and JPMorgan Chase – have outperformed the world banks index while none has beaten the general index.

Bank chiefs enjoy double-digit pay rises - FT.com

I'm tired of this crap. When does the revolution start?

[LemonMelon]

I think you should start the revolution, financeguy.

[financeguy]

I think you should, Lemon Melon.

[maycocksean]

This does not bode well for the revolution. . .

[financeguy]

Originally Posted by maycocksean

This does not bode well for the revolution. . .

What doesn't?

[maycocksean]

That you and LemonMelon can't agree on who should start the revolution.

I was trying to be humorous.

[financeguy]

Originally Posted by maycocksean

I was trying to be humorous.

Do you find this topic amusing?

[maycocksean]

No sir.

[financeguy]

That's good. I don't either.

[bono_212]

I'm amused.

[purpleoscar]

Maybe a shareholder revolution?

[ladyfreckles]

I constantly hear about how Americans have an "entitlement" problem whenever there's talk of raising the minimum wage or stopping CEOs for cutting benefits and pay raises/bonuses. It annoys me to death. Many college graduates don't even make a living wage in America and they are making above minimum wage. Then you hear about this stuff... and it's just... ugh. It annoys me that dozens, hundreds, or even thousands of employees suddenly see a drop in benefits and have to pay for their own health just so some stuck up CEO can make a few extra hundred grand a year. Isn't the pay ratio 475:1 in America?

[mama cass]

it's truly disgusting... well, i think people are waking up and starting to gripe about the injustices at long last at least! they can't get away with it for too much longer can they?

[anitram]

Originally Posted by purpleoscar

Maybe a shareholder revolution?

Yarite.

Like most people care so long as their dividend cheques are coming in and their returns are greater than they would have been sitting in a bank account.

[purpleoscar]

Originally Posted by anitram

Yarite.

Like most people care so long as their dividend cheques are coming in and their returns are greater than they would have been sitting in a bank account.

The context is that the companies are not making money or are making less money than in the past (where would dividend cheques come from if there's no retained earnings?) yet big bonuses are being paid out. It's like getting a pay cheque without actually earning it or borrowing from the bank for the bonuses and not for the company. The problem is that in the past shareholders used to be larger owners of shares and could influence directors and CEOs didn't have an entitled job. Nowadays investors often don't even own the shares but just mutual fund units and so they are so divorced from the reality of companies that CEOs and directors and government insiders can create an entitled class of their own like an aristocracy via basic networking. A lot of shareholders are gamblers so they don't own the shares for that long. They just ride the train until they find another train that is better. Of course you could lose your shirt doing that. Basically the general public and powers-that-be are all greedy and want to make a killing so they can retire early because they don't like work and would rather play all the time. Since retained earnings on a Statement of Financial Position can only be collected over time all these large capital gains must be earned on the back of losers who bought at the wrong time. This mentality of "flipping" greedy consequences is pervasive in our society. Real capital gains are retained earnings. The rest is just a zero sum game. Profits happen with more efficiency and can be reinvested so that companies can grow, products become more numerous (cheaper standard of living) and products increase in quality. All the other stuff that doesn't fit into that often involves bad regulations that don't do anything, good regulations that aren't even being enforced and just plain robbery.

[anitram]

Originally Posted by purpleoscar

The context is that the companies are not making money or are making less money than in the past (where would dividend cheques come from if there's no retained earnings?) yet big bonuses are being paid out.

If you're making less money than in the past, but you're still making money, and your stock is holding up reasonably well and the dividend cheques are coming out, most shareholders don't give a half a crap that the CEO pay is increasing disproportionately compared to their returns.

There are some things that have been introduced, like say-on-pay resolutions and so on but most of these are without real teeth.

[purpleoscar]

Originally Posted by anitram

most shareholders don't give a half a crap that the CEO pay is increasing disproportionately compared to their returns.

They should or else they are crappy investors, which is probably the case.

Originally Posted by anitram

There are some things that have been introduced, like say-on-pay resolutions and so on but most of these are without real teeth.

That's the problem how do we get some teeth into resolutions or regulations without overdoing it? The board of directors don't seem to be scared of being fired by shareholders.

Then when you have low interest rates constantly there's not much incentive to invest in safe investments so it's another reason why investors don't mind risking more. And we are also talking about investors. Many people don't have much investments but larger amounts of debt so it's easy to see a shrinking middle class.

I guess the best revolution there is is a grassroots one where people force themselves to spend less and invest more (in safer low return investments) which will provide the incentive for companies to offer more to shareholders. Also when people are not over consuming companies have to adjust to clients who aren't addicted to their products and at some point the CEO pay will have to be addressed by the company themselves if they want to survive. When the economy recovers the government will have to slowly raise interest rates and try much harder to keep gambling bubbles misallocating a large portion of the economy's capital. The key is that the general public has to show some savings over time and the ability to retire. That's the best signal I can think of, otherwise there will be a pyramidal society where the bottom will revolt and maybe institute an even worse tyranny (Soviets, French revolution terror). That would be a shame to repeat that.

[Salome]

pparently our economy has dictated these people deserve an annual income of such a ridiculous amount

if they don't get these payrises someone else will offer it to them
free market and all

[financeguy]

Why can't large companies save money by exporting the top management jobs to India? As the cost of living is cheaper, an Indian, even a top manager, would work for much less. That's globalisation, right? Free market and all that?

[mama cass]

hey did you hear about Barclays getting fined 290 million today? 'bout time too!