By Greg Ruel, Research Associate
JPMorgan Chase & Co. CEO James Dimon received $17k in security costs in 2010. The security figure represented a diminutive portion of his nearly $600k in perks for the year, though he could be looking to beef up security soon after being approached by Occupy Seattle protesters Wednesday afternoon. According to this article from the Los Angeles Times, Mr. Dimon was booked a year ago as the keynote speaker for a dinner at the University of Washington’s Foster School of Business. Protesters marched with arms locked down the street toward the hotel where Mr. Dimon was speaking and attempted to block entrances to the building. Several injuries were reportedly sustained by police officers. The next day, the “Occupy Jamie Dimon” movement sprang up in Portland, Oregon, as the CEO arrived for a Business Alliance lunch. Finally, we are seeing a tangible reason for all these CEO security costs, though we’d still argue the CEO can afford to pay them on his own. Big banks are now generally free of TARP restrictions and the cash began to roll in again during the 2010 compensation year.
Mr. Dimon, for instance, made $42 million in realized compensation in 2010. He received two bonuses for the year, including a discretionary cash bonus of $5 million awarded “with respect to his performance and contribution to the Firm in 2010 and in recognition of his leadership over the past several years.” His equity grants of restricted stock units and stock appreciation rights were awarded for the same reasons, absent performance restrictions or metrics, and totaled $17 million in 2010. Mr. Dimon exercised more than 2.7 million options in 2010 and his profit on stock and options was more than $35 million for the year. He is also receiving a $500,000 salary raise for 2011, bringing it up to $1.5 million.
Goldman Sachs and CEO Lloyd C. Blankfein have faced similar attention from the occupy movement, including a “March on Goldman Sachs” Thursday afternoon. In 2009, Mr. Blankfein received uncharacteristically modest compensation of $1.1 million, including a $600,000 base salary and no bonus, in a second consecutive restrained year for big bank executive compensation under TARP. In 2010, not only did Mr. Blankfein receive a $5.4 million discretionary bonus, but so did the CFO, President, and two Vice Chairmen named in the proxy statement. No methodology for the bonuses is explained. Mr. Blankfein received $464,067 in perks for 2010, including $128,676 in security costs, and finished with $21.8 million in realized compensation. Included among compensation changes for 2011 is a base salary hike for CEO Blankfein from $600,000 to $2 million.
Last month, BlackRock CEO and co-founder Laurence D. Fink said he understood the protests against financial firms, as reported by Pensions & Investments:
“The protesting is a statement the future is very clouded for a lot of people,” Mr. Fink said earlier this week during an event in Toronto. “These are not lazy people sitting around looking for something to do. We have people losing hope and they’re going into the street, whether it’s justified or not. People are afraid of the future,” Mr. Fink said. “We have some structural issues we have to fix.”
For his part, Mr. Fink made about $40 million in 2010, and there are certainly “structural issues” in Blackrock’s compensation policy. According to Blackrock, “significant discretion is used to determine individual compensation…[and]…no set formulas are established and no fixed benchmarks are used in determining annual incentive awards.” The “structure” of Blackrock’s board is classified and includes designees from PNC, Bank of Americall/Merrill Lynch (BAC), and Barclays, which would seemingly make it hard for independent directors to provide a true impact. In addition to a bonus of $10 million, Mr. Fink also profited nearly $29 million on exercised options and vested stock in 2010, yet still received about $13 million in fresh equity grants.
Big bank CEO pay has rebounded in 2010 and protesters have undoubtedly taken notice. It's difficult to justify all the pay mentioned here when so much of it is discretionary. Pay that is awarded at the discretion of the compensation committee. The 2010 proxy statements for these banks make a point of noting how much compensation had been reduced in the prior two years, you know, when they needed government bailouts and were looking for remedies to catastrophic financial failures. But TARP is largely a thing of the past and big bank CEO pay is back on the rise, seemingly regardless of what is going on in the rest of the country.
GMI will be releasing its annual CEO Pay Survey soon with details on the 2010 compensation year as well as changes in CEO Pay since last year. The report will feature a top 10 list of highest earners, with the top two top spots occupied by CEO's in the Health Care Providers & Services industry who combined to make more than $243 million in 2010. Also, changes in perks in the S&P 500 and fluctuations in equity granting practices over the last two years.