According to the regulatory documents filed on Thursday, JPMorgan Chase & Co. (JPM) stated that it has raised its CEO, Mr. Jamie Dimon’s total compensation by more than 50% for 2010. The CEO’s pay surged to $ 23 million in 2010 as against $ 15.2 million in 2009.
JPMorgan announced that its CEO’s pay packet included $ 1 million as base salary (unchanged from prior-year), $ 17 million as restrictive stock awards (up 20% year over year), and $ 5 million as cash bonus (resumed after 2 years). The company had stopped bonus payments during the financial crisis, in keeping with the pressure from regulators to limit compensation.
Of the total $ 17 million restrictive stock awards by JPMorgan, $ 12 million represent restrictive stock units (RSUs) and would be vested in two equal installments in January 2013 and 2014. The remaining $ 5 million, representing stock appreciation rights (SARs), have a term of 10 years and will be exercisable in five installments starting from January 2012.
However, JPMorgan stated that these restricted stock awards to Mr. Dimon would be given only if certain financial targets are met. As per the Securities and Exchange Commission (SEC) guidelines, these stock awards are taken into consideration in the year when they are paid and not when announced. Therefore, after adjustments, JPMorgan paid $ 20.8 million to its CEO in 2010. Similarly, as per the SEC, the CEO had received $ 1.3 million as compensation in 2009.
Additionally, JPMorgan gave perks worth $ 579,624 to its CEO in 2010. This marks a substantial rise from $ 265,708 given in the prior year.
JPMorgan also granted its top executives nearly $ 73 million in restricted shares and stock options for their performance in 2010. This again marks a hike from $ 64.2 million restricted shares and stock options granted in 2009.
However, JPMorgan has also included the “clawback” provision while granting these stock awards. As per this provision, the stock awards can be withdrawn from the underperforming employees. The clawback provision is an important part of the financial reforms, which ensure that the short-term risks are avoided by the bankers.
Apart from JPMorgan, Goldman Sachs Group Inc. (GS) too has raised its Chairman and CEO Mr. Lloyd C. Blankfein’s total compensation, including a cash bonus, to $ 19 million for 2010. However, Bank of America Corporation (BAC) has lowered its CEO Brian T. Moynihan’s 2010 compensation to $ 1.94 million.
In March, the Federal Reserve assented to JPMorgan’s request to raise dividend and buyback shares. Following the approval, JPMorgan hiked its quarterly cash dividend to 25 cents per share, up 25% from the prior annual dividend of 20 cents. This dividend is payable on April 30, 2011 to the shareholders of record at the close of business on April 6, 2011. Additionally, JPMorgan announced a $ 15 billion multi-year stock repurchase program, of which up to $ 8 billion of common stock buyback is approved for this year.
The hike in pay package indicates that JPMorgan is optimistic about its growth prospects and wishes to reward its executives for their performance throughout the year.
JPMorgan currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Moreover, considering the company’s business model and fundamentals, we also maintain a long-term ‘Neutral’ recommendation on the stock.
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