Thursday, July 12, 2012

James Dimon's Compensation Package - How the Other Half Lives

Since JPMorgan Chase has been in the news a lot lately, I thought it was time to take a bit of a look at the compensation package for one James Dimon, Chairman and CEO of the company.

Let's start by looking at the Board approved compensation package for 2011 vs. 2010 in graphical form:

Notice that there was very little change over the two years, however, the total size of the package reached $23 million both years with the only difference being half a million dollars in salary and cash incentive which totalled $6 million both years. 

This package was justified based on:

1.) Record net earnings in 2011 of $19 billion.
2.) Return on equity of 11 percent.
3.) Strong performance compared to its competitors.
4.) Maintenance of a "fortress balance sheet".

Going back a bit further, here is a screen capture from the 2012 Proxy Statement showing how Mr. Dimon's compensation package has changed since 2009:

Notice his raise of 51 percent from 2009 to 2010.  Nice.  The RSUs granted in 2011 vest in two equal installments on January 13, 2014 and 2015 and represent the right of the holder to receive one share of common stock on the vesting day plus dividends paid during the vesting period.  The SAR's issued on January 18, 2012 have an exercise price of $35.61 and 20 percent will be exercisable each year over the following five years.

If you take out the RSUs and SARs, here's what Mr. Dimon's compensation looks like:

Here is more detail on Mr. Dimon's equity awards issued during 2011 for the 2010 year:

Here are his outstanding equity awards and the value of the vested and unvested portions:

The market value of all units that have not vested is nearly $15 million, most of which expire on January 22, 2018.

As shown here, during 2011, Mr. Dimon exercised options and stock awards, raking in nearly $8.5 million:

JPM prides itself on having no golden parachutes and no special severance plans for its executive team and that its executive equity awards vest on their original schedule with no acceleration.

JPM's executives also get no matching of 401(k) savings plans, no special medical, dental or disability benefits, no private club dues, no car allowances, no financial planning assistance and no pension credits for incentives although, one would have to imagine that on $23 million annually, Mr. Dimon could well afford whatever he needs to get through life.

In closing, here's what JPM has to say about their approach to executive compensation:

In light of recent news about JPM and its "irregularities", one has to love the phrase "The Firm's compensation system plays a significant role in the Firm's ability to attract, retain and motivate the highest quality workforce.".  As well, in light of the "London Whale" $4.4 billion worth of trading losses, it will be interesting to see if the clawback rises all the way to the top of the highest quality heap.


  1. Most people just feel sick when these numbers are outlined. Mostly we get numbed. There are too many of these bloodsuckers to count these days, which is one of the serious problems. Eventually the parasites threaten the existence of the host.

    1. "Eventually the parasites threaten the existence of the host."

      I think we've already seen it in the financial crises that started in 2008 and continues now. Banking has to go back to being the boring, smaller sector it had been, or we'll continue to be in danger from its excesses. (I don't usually write like this, but I'm fed up with the damage the financial sector has done.)

      I'd like to see "Too big too fail" regulated and reversed, so that we don't need to bail out financial firms again.