Investment bankers' pay packages reflect firms' varying results

By Michael J. Moore

Morgan Stanley cut chief executive James Gorman's pay for 2011 by 25 per cent as JPMorgan held Jamie Dimon's compensation steady, say two people familiar with the plans.

Dimon is likely to receive US$23 million ($28.5 million), more than double Gorman's US$10.5 million package. Dimon got about US$17.3 million in stock and options, while Gorman received US$5.1 million of shares, according to regulatory filings yesterday.

The pay reflected the divergence in performance in a difficult year for bank stocks. JPMorgan posted record earnings last year, helped by releases of loan-loss reserves as revenue fell 5 per cent, while Morgan Stanley's profit dropped 13 per cent. Morgan Stanley shares dropped 44 per cent, double JPMorgan's 22 per cent decline.

"It was a very, very volatile year, not only on Wall St but in capital markets as well," said Frank Glassner, chief executive of Veritas Executive Compensation Consultants in San Francisco.

"We're still suffering the backlash from a very poor world economy."

Financial stocks were the worst performing among the Standard & Poor's 500 Index's 10 sectors last year.

Concerns that Europe's sovereign debt crisis would spread to lenders sapped deal activity and trading volume and the Federal Reserve's low interest rates helped to bring down margins.

JPMorgan surpassed Bank of America as the largest US lender by assets last year and was the most profitable US bank as net income climbed 9 per cent to about US$19 billion. The provision for credit losses dropped 54 per cent as the US economy improved and net charge-offs fell by US$11 billion.

Dimon's pay package last year consisted of US$1 million in salary, a US$5 million cash bonus and US$17 million in stock and options.

JPMorgan increased his salary in March to US$1.5 million.

Most of Dimon's wealth is in JPMorgan stock. Before last week, he and his wife owned more than 5.1 million shares valued at around US$184.1 million.

Morgan Stanley's profit fell to US$4.11 billion last year as the firm had a 4 per cent return on equity, below Gorman's goal of "mid-teens". The firm, the sixth-largest US bank by assets, posted the only trading revenue increase among the major US lenders, excluding accounting gains.

Gorman won't receive an immediate cash bonus, and the rest of his pay is composed of his US$800,000 salary, deferred cash and compensation tied to company performance measures, one of the people said.

Gorman got total compensation last year of US$14 million, including salary, a US$1.6 million cash bonus, US$3.9 million of restricted stock, US$3.5 million of options and US$2.3 million of deferred cash. The package also included US$1.9 million of stock awards that are tied to company performance measures.

Morgan Stanley is cutting pay for senior investment bankers and traders an average of 20 to 30 per cent. The New York-based firm is capping immediate cash bonuses at US$125,000 as it defers a greater share of awards.

Total compensation for each member of Morgan Stanley's operating committee fell at least 20 per cent, and all members won't receive an immediate cash bonus, one of the people said.

Jes Staley, 55, chief executive of the investment bank, received the second-biggest share of JPMorgan's compensation pool, among the executives disclosed, with US$8 million in restricted shares and 224,972 stock options, the filings show.

Mary Erdoes, the 44-year-old head of asset management, got the next-highest payout with US$7.1 million in restricted shares and 224,972 options. She was followed by chief investment officer Ina Drew, 55, with US$7.1 million in restricted shares and 168,729 options.

Morgan Stanley chief financial officer Ruth Porat was awarded restricted shares worth US$3.2 million. Greg Fleming, who runs the firm's brokerage and asset-management businesses, received 187,234 restricted stock units worth US$3.4 million.

Colm Kelleher, co-president of the institutional securities group who oversees trading, received restricted shares valued at US$2.6 million. Paul J. Taubman, the co-president of ISG who runs investment banking, was granted shares worth US$3.4 million. Total compensation for the two co-presidents was the same.

- BLOOMBERG

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