JPMorgan CEO Jamie Dimon gets pay cut for trading lapse
JPMorgan Chase said Wednesday it will dock the pay of CEO Jamie Dimon by more than half, to $11.5 million from $23 million, in the latest fallout from an embarrassing trading loss at the bank last year.
The Associated Press
NEW YORK — America’s best-known banker is getting a big pay cut.
JPMorgan Chase said Wednesday 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 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 surprise Wall Street. What set it apart was that it amounted to a reprimand from the bank against a CEO who remains well regarded, despite the stain of a trading loss 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 Reda was underwhelmed. He called the pay cut “ceremonial,” a way for the bank to show 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 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, released Wednesday, will almost certainly cement it as the most profitable U.S. bank of 2012.
On calls with reporters and analysts Wednesday, Dimon was his usual swashbuckling self, intensely proud of the bank and sometimes impatient with critical questions.
He said the portfolio that had the troubled bets is “very close to being a nonissue” 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 he’ll no longer be the highest-paid CEO among the country’s six megabanks.
Though Dimon made clear he is eager to put the so-called “London whale” loss behind him, there could be more reminders.
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 slapped sanctions on JPMorgan for the trading loss and ordered it to tighten up its risk management. The bank neither admitted nor denied wrongdoing, but said it was working to correct any issues identified by the regulators.
Despite the fallout from the trading loss, JPMorgan turned in a strong fourth quarter. Earnings shot up 55 percent over a year earlier 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 rose 47 cents to $46.82, up 1 percent.
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.