J.P. Morgan Chase & Co.
Summary:
If it wasn't for this last bit of good news, JP Morgan Chase would have failed miserably for their executive compensation program. Shareholders beware… the committee has gone insane! Can you imagine what the compensation would have been like if it were a good year?
Analysis:
The banks are really hurting. It is well publicized that the banking industry has suffered in many areas, most notably in mortgage lending. As a global financial services firm operating in over 50 countries, JP Morgan Chase & Company has been hurting as much as the rest of the industry. Their losses were really piling up in 2007: $2.6 billion in markdowns with another $86 million in losses for their investment banking sector, and $4.4 billion in loan losses.
These losses were partially offset by the money they received in selling their portion of Visa, Inc. ($1.5 billion), but it still can't be seen as a successful year by any means. The losses should continue into 2008 and 2009, while the increased volatility of the company's stock price will continue.
So… What Are They Paid?
Unfortunately, there's not a lot of good news to report to shareholders on the company's executive compensation program either. In spite of having a bad year, with a poor short-term outlook as well, the top execs received A LOT of money. The bonus given to the CEO was extremely high, in the amount of $14.5 million. This was, by a wide margin, the largest bonus we have seen. The NEOs won't exactly be struggling with gas prices either in 2008. They received an average of $5.6 million. The Compensation Committee also admits that they have a lot of discretion as to how much the bonuses will be. Is that the kind of decision-making you want at the top in times of crisis?
If we look at stock awards we will see more record breaking highs. The CEO received approximately $10.6 million, whereas the NEOs average of $9.6 million was almost on par with the CEO! Over the last two years alone the CEO has been given almost 600,000 shares for a total market value of $25.8 million. These shares have not yet vested.
The option awards given out were small for the year, a little over $1 million for the CEO and the NEOs. However, the CEO has an enormous amount of options outstanding, approximately 4.68 million. Of these options, only about 300,000 cannot currently be exercised.
The only good news we can find is the low base salaries (but they seem to be an arbitrary number at this point), the average amount of perquisites, and the termination clauses for having little to no severance payments and no change in control trigger.
Compensation Details:
| CEO | NEO Avg. | |
|---|---|---|
| Base Salary | $1,000,000 | $466,095 |
| Bonus | $14,500,000 | $5,587,500 |
| Stock | $10,666,688 | $9,562,176 |
| Options | $1,243,055 | $1,080,884 |
| non-Equity Incentives | N/A | N/A |
Reference Links:
(1) Annual
Proxy Statement
(2) Annual
Report