Morgan Stanley reduced Chief Executive Officer James Gorman’s 2011 pay by 25 percent from a year earlier as JPMorgan Chase & Co. held Jamie Dimon’s compensation steady, said two people familiar with the plans.
Dimon is likely to receive $23 million, more than double Gorman’s $10.5 million package, said the people, who spoke on condition of anonymity because the total pay amounts aren’t public. Dimon got about $17.3 million in stock and options, while Gorman received $5.1 million of shares, according to Jan. 20 regulatory filings.
The pay reflected the divergence in performance in a difficult year for bank stocks. JPMorgan posted record earnings in 2011, helped by releases of loan-loss reserves as revenue fell 5 percent, while Morgan Stanley’s profit dropped 13 percent. Morgan Stanley shares dropped 44 percent, double JPMorgan’s 22 percent decline.
“It was a very, very volatile year, not only on Wall Street but in capital markets as well,” said Frank Glassner, CEO 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.
Biggest U.S. Bank
JPMorgan surpassed Bank of America Corp. as the largest U.S. lender by assets last year and was the most profitable U.S. bank as net income climbed 9 percent to about $19 billion. The provision for credit losses dropped 54 percent as the U.S. economy improved and net charge-offs fell by $11 billion.
Dimon’s pay package last year consisted of $1 million in salary, a $5 million cash bonus and $17 million in stock and options. JPMorgan increased his salary in March to $1.5 million.
A majority of Dimon’s wealth is in JPMorgan stock. Before Jan. 20, he and his wife owned directly or through trusts and retirement plans more than 5.1 million shares valued at more than $184.1 million as of Jan. 13, when his total holdings were last disclosed. The amounts exclude stock options.
Morgan Stanley’s profit fell to $4.11 billion last year as the firm had a 4 percent return on equity, below Gorman’s goal of “mid-teens.” The firm, the sixth-largest U.S. bank by assets, posted the only trading revenue increase among the major U.S. lenders, excluding accounting gains.
Morgan Stanley had per-share losses in two of the past three quarters as it took charges to eliminate swap contracts purchased from MBIA Inc. and to convert Mitsubishi UFJ Financial Group Inc.’s preferred stake to common shares.
Gorman won’t receive an immediate cash bonus, and the rest of his pay is composed of his $800,000 salary, deferred cash and compensation tied to company performance measures, one of the people said.
Gorman got total compensation last year of $14 million, including salary, a $1.6 million cash bonus, $3.9 million of restricted stock, $3.5 million of options and $2.3 million of deferred cash. The package also included $1.9 million of stock awards that are tied to company performance measures such as ROE and relative shareholder return.
Morgan Stanley is cutting pay for senior investment bankers and traders an average of 20 percent to 30 percent, people with knowledge of the decision said last week. The New York-based firm is capping immediate cash bonuses at $125,000 as it defers a greater share of awards, a person briefed on the plan said.
Total compensation for each member of Morgan Stanley’s operating committee fell at least 20 percent, and none will get an immediate cash bonus, one of the people said.
Lee Raymond, former CEO of Exxon Mobil Corp. and a JPMorgan board member since 1987, heads the lender’s compensation committee. Erskine Bowles, former White House chief of staff and a Morgan Stanley director since 2005, leads that firm’s committee.
Jes Staley, 55, CEO of JPMorgan’s investment bank, received the second-biggest share of the firm’s compensation pool, among the executives disclosed, with about $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 $7.1 million in restricted shares and 224,972 options. She was followed by Chief Investment Officer Ina Drew, 55, with $7.1 million in restricted shares and 168,729 options.
Morgan Stanley Chief Financial Officer Ruth Porat was awarded restricted shares valued at $3.2 million, according to a filing. Greg Fleming, who runs the firm’s brokerage and asset-management businesses, received 187,234 restricted stock units valued at $3.4 million.
Colm Kelleher, co-president of the institutional securities group who oversees trading, received restricted shares valued at $2.6 million. Paul J. Taubman, the co-president of ISG who runs investment banking, was granted shares valued at $3.4 million. Total compensation for the two co-presidents was the same, one of the people said.