Analyst calls Dimon's pay cut at JPMorgan Chase 'ceremonial'
NEW YORK — America's best-known banker is getting a big pay cut.
JPMorgan Chase said Wednesday that it will dock the pay of CEO Jamie Dimon by more than half, to $11.5 million from $23 million.
It's the latest fallout from an embarrassing trading loss at the bank last year, one that eventually ballooned to $6 billion. Its ripple effects have already been numerous, forcing Dimon to appear contritely before Congress and putting the bank squarely in the cross hairs of regulators and lawmakers.
The pay cut didn't come as a surprise on Wall Street. What set it apart was that it amounted to a reprimand from the bank against a CEO who remains popular and well regarded, despite the stain of a trading loss that Dimon once dismissed as a “tempest in a teapot.”
And even as it cuts his pay, the board of directors praised Dimon for responding “forcefully” to the trading loss, presiding over an overhaul of the bank's risk management and booting out responsible executives. A report from a bank task force placed most of the blame on other executives and traders who have since left.
Compensation consultant James F. Reda was underwhelmed. He called Dimon's pay cut “ceremonial,” a way for the bank to show that it is paying penance.
“He doesn't need the money,” Reda said. “He was probably very proactive in accepting this to keep people off his back. To get punished, if you will, so he can then point to that and say, ‘Look, I was punished. Isn't that enough? Leave me alone. Let me run my business.'”
Dimon's job was never seriously in danger, even with the trading loss, and the pay cut hasn't changed that perception. Wall Street saw it less as an indictment of Dimon and more as a sign of the board's commitment to taking the trading loss seriously.
“It's bitter medicine, but he swallowed it and is moving on,” said James Post, an expert on corporate governance who teaches at Boston University.
“I think that still leaves him in a very strong leadership position in both the bank and the industry.”
JPMorgan, and Dimon, are essential players in U.S. banking. JPMorgan emerged from the financial crisis as one of the strongest banks in the country, a winner in a meltdown that forced other banks to their knees. Its blockbuster fourth-quarter earnings, which were released Wednesday, will almost certainly cement it as the most profitable U.S. bank of 2012.
Such accomplishments have made Dimon one of the best known, and most outspoken, bank leaders of his generation, even in a time of heightened scrutiny and public anger against the industry.
While some of his peers have tried to stay under the radar, he has spoken out against many new regulations — including some, the bank's critics say, that could have prevented the trading loss.
Dimon has publicly chafed at criticism of banking's big pay packages, including President Barack Obama's famous “fat-cat bankers” comment. “Acting like everyone who's been successful is bad and because you are rich, you are bad — I don't understand it, I don't get it,” he told an investment conference.
On calls with reporters and analysts Wednesday, he was his usual swashbuckling self, intensely proud of the bank he runs and sometimes impatient with critical questions.
He said the portfolio where the troubled bets were made is “very close to being a non-issue” as far as trading losses are concerned. Asked for thoughts on his pay cut, Dimon said he respected the board's decision. Pressed for his “gut feeling,” he replied, “Nope, you're not gonna get it.”
When analyst Guy Moszkowski asked about the “exotic investment strategies” of the Chief Investment Office, where the loss occurred, he shot back, “It has got not a damned thing to do with exotic investment strategies — zero, nada, nothing. OK?”
For 2012, Dimon will get $1.5 million in salary and $10 million in restricted stock awards. It likely means that he'll no longer be the highest-paid CEO among the country's six mega-banks.
Even with the pay cut, and even by the lofty standards of big-time CEOs, the 56-year-old Dimon will still be well paid. The median pay for CEOs of S&P 500 companies for 2011 was $9.6 million, according to the latest data from executive compensation firm Equilar.
Though Dimon made clear that he is eager to put the so-called London whale loss behind him, there could be more reminders in store.
The bank has said it received requests for information related to government inquiries and investigations by Congress, the Department of Justice, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the U.K. Financial Services Authority, the state of Massachusetts and others.
On Monday, the Federal Reserve and the Office of the Comptroller of the Currency, both bank regulators, slapped sanctions on JPMorgan for the trading loss and ordered it to tighten up its risk management procedures. The bank neither admitted nor denied wrongdoing, but said it was working to correct any issues identified by the regulators.
The bank released two reports Wednesday on the loss, one from bank executives and the other from the board of directors. These said that traders and executives in the Chief Investment Office didn't understand the risks they were taking, didn't adequately question risky decisions and didn't properly report ballooning losses.
The board of directors said executives didn't keep them adequately informed about potential problems and used unapproved models for calculating risk.
Despite the fallout from the trading loss, JPMorgan turned in a strong fourth quarter. Earnings shot up 55 percent over the same period a year ago to $5.3 billion after paying preferred dividends, up from $3.4 billion.
Per share, those earnings amounted to $1.40, blowing away the $1.16 expected by analysts polled by financial data provider FactSet. The bank's stock closed up 47 cents to $46.82.
Revenue also beat Wall Street's forecasts, rising 10 percent to $24.4 billion, after stripping out an accounting charge. Mortgage originations jumped 33 percent.
Dimon said the housing market “has turned,” echoing a statement he made in October after the third-quarter earnings report.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Education Management removes itself from Nasdaq listing
- Highmark seeks double-digit increase for more benefits, heavy use
- Mortgage rate slide’s impact could be minimal
- Amid struggles, top fiscal executive to leave EDMC
- PUC approves Columbia Gas pipeline extensions program for homeowners
- World’s 1st carbon capture power plant switches on in Canada
- Rule to close coal royalty loophole
- EQT Corp. boosts profits despite lower gas prices
- Falling fuel prices help airlines — not fliers
- Plastics, tech sectors crucial to cracker plants
- Toy sellers to enhance marketing as holidays approach