It looks as if public outrage and shareholder sentiment against huge pay packages for bank CEOs who don't deliver the goods is finally starting to garner attention in the executive boardrooms of big banks all over the world.
Lousy business decisions and financial losses irk investors
The Wall Street Journal recently noted that board members at JPMorgan Chase (NYSE: JPM ) are giving serious thought to changing the compensation for CEO Jamie Dimon because of the huge losses the bank suffered after the London Whale trading fiasco earlier this year. Of course, the Journal also noted that directors are trying to figure out a way to pull it off "without drastically reducing the executives' take-home pay."
Likewise, Citigroup (NYSE: C ) is working on a new pay plan with its compensation consultant, brought on board after this past spring's embarrassing annual meeting in which Citi shareholders voted down the proposed pay package for CEO Vikram Pandit.
This new idea is catching on across the pond, as well. A new face at Barclays (NYSE: BCS ) is calling for changes at the London bank in a post-LIBOR scandal shakeup. David Walker, the new board chair, has suggested publishing pay schedules for the highest-paid positions at banks and other large companies, in the spirit of transparency. In addition, Walker wants to see salaries divorced from revenue, a relationship that he thinks helped fuel the mis-selling of bank products in the past.
Deutsche Bank (NYSE: DB ) is currently in the throes of a painful reorganization as well. The two new co-CEOs have pledged to reform the bank's bonus system and cut risky activities in the wake of LIBOR manipulation allegations. Any savings will come in handy: The two CEOs recently announced a plan to save 4.5 billion euros over the next three years as it watches investment-banking income sink to new lows.
Always slow to spot a trend, bailed-out insurance giant AIG (NYSE: AIG ) is drooling over the prospect of finally getting out from under the Treasury Department's watchful eye -- and salary caps. With recent sales of the government's stake in the company, visions of ballooning bonuses are dancing in the heads of AIG execs. With newly reduced U.S. ownership, however, stress tests will follow, maybe as soon as next year. Depending on the test results, AIG may have to wait a little longer to bloat its compensation packages.
If true, the trend toward a more responsible attitude regarding pay and performance is certainly a breath of fresh air. Of course, it took stockholder revolts and massive scandals and losses to bring this change of heart about, but never mind. Banks are hopefully beginning to realize that they are nowhere without their shareholders, and that they need to listen to their concerns if the sector is to survive in a post-crisis world. Even where banks are concerned, it's better late than never.
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