Jamie Dimon’s bonus represents another whale of a fail for JPMorgan Chase. The board’s decision to give its chairman and chief executive a 73 percent raise, to $20 million, is unjustifiable after last year’s performance. Shareholders should have a loud say against this pay - and the lead director, Lee Raymond.
For starters, Mr. Dimon’s pay increased far faster than the company’s stock did. JPMorgan’s shares were up a third, just keeping pace with its universal banking rivals in the United States. Core earnings also weren’t anything to brag about. At $42 billion, before taxes and provisions and after adjusting for one-off items, according to Citigroup analysts, that represented a 2.4 percent decline from 2012.
Directors weren’t convincing with their rationale either. Gaining market share is only good if it comes with more profit. Improving customer satisfaction is encouraging but an inadequate metric on which to base a pay raise. Trying to deflect the legal bills by blaming much of them on pre-acquisition Washington Mutual and Bear Stearns ignores the fact that Mr. Dimon signed those deals. Claiming the bank has improved controls “under Mr. Dimon’s stewardship†is plain laughable. Regulators forced them on him.
The payout bonanza probably won’t help employee morale at JPMorgan. The bank set aside just 1 percent more for salaries and bonuses last year than in 2012. Shareholders, too, should be outraged by such unwarranted profligacy on executive compensation. Unlike staff, they at least get to vote on the matter at the coming annual meeting.
Though not binding, such ballots can have some influence. Citigroup’s board scrambled to appease investors after they rejected pitifully low targets in 2012 for Vikram Pandit, the chief executive at the time, to receive a big financial reward. Within months, he was gone.
Shareholders can also have their voices heard about JPMorgan’s directors, some of whom seem to have been browbeaten or wholly captured by Mr. Dimon, evidenced by a report in The New York Times that they feared they might “alienate the chief executive†by cutting his pay. The compensation committee members Stephen Burke and William Weldon deserve scrutiny. So, too, does Mr. Raymond, the onetime Exxon Mobil boss, who has the heightened responsibility of keeping watch over a boss with concentrated power. Their pay decision reveals an oversight failure as big as Mr. Dimon’s of his chief investment office.
Antony Currie is an associate editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.
