JPMorgan Shareholders Unhappy About CEO Pay

In its annual meeting yesterday, a mere three-quarters of shareholders supported JPMorgan's (NYSE: JPM  ) executive pay program, well down from over 90% last year.

At the other two main Wall Street banks, support for pay programs was substantially higher. On May 16, 83% of shareholders voted for Goldman Sachs' (NYSE: GS  ) Say on Pay proposal, the management resolution that asks shareholders to approve or disapprove of executive pay each year, and on May 13, 92% of Morgan Stanley's (NYSE: MS  ) shareholders supported pay.

Major proxy advisory firm Glass Lewis, which advises big investors on how to cast their votes at annual meetings, had advised its clients to vote against pay at all three companies, citing a lack of correlation between pay and performance. Major public pension fund The Florida State Board of Administration (FSBA), which manages the Florida Retirement System Trust Fund, was one of the major shareholders that announced that it would oppose the pay package for Dimon. FSBA is a client of Glass Lewis, but receives voting advice from several other firms, as well as performing its own analysis of the pay-performance link. Clearly, JPMorgan failed this analysis.

Big payouts

What is certain is that all three CEOs received substantial rises this year, but only Morgan Stanley really delivered on performance, reflected in a higher share price gain over 2013, although admittedly it had further to climb. Goldman Sachs CEO Lloyd Blankfein earned a $21 million cash and equity bonus for 2013, as well as a $2 million salary. Morgan Stanley CEO James Gorman earned a salary of $1.5 million and a cash and equity bonus of $16.5 million.

And JPMorgan CEO James Dimon's salary was the same, at $1.5 million, but his bonus was higher: $18.5 million. Recent losses at the bank, and its lower net income in 2013 compared to 2012, will have made that $18.5 million bonus a little hard to swallow, especially with the billions of dollars in fines that the bank has had to pay out for missteps under Dimon's watch.

This year's meeting was also the first in many that did not require shareholders to vote on taking the chairmanship away from Dimon to improve oversight at the bank. Last year Dimon threatened to leave if the chairmanship was removed from his list of job titles. Only around a third of shareholders supported separating the role last year, and this year, according to reports, Dimon has said that he will stick around for another five years ... as long as he stays chairman.

Pay, governance, and performance

The drive behind separating the CEO and chairman positions comes from shareholders' desire to have a strong, independent chairman leading the board, which would then be able to challenge management if it saw fit. Such challenges may have prevented some of the many actions that led to some of the largest fines in U.S. corporate history.

And as far as the link between pay and performance goes, the key is that shareholders are willing to pay for great performance. But if pay goes up in a year that has held so much bad news, the disconnect is glaring. It encourages executives to think that they will be paid, and paid well, regardless of whether they are actually delivering value to shareholders.

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