February 16, 2018 / 8:13 PM / a year ago

Breakingviews - Wall Street turns CEO pay into snowboard cross

Snowboarding – Pyeongchang 2018 Winter Olympics – Women's Snowboard Cross Finals – Phoenix Snow Park – Pyeongchang, South Korea – February 16, 2018. REUTERS/Mike Blake

NEW YORK (Reuters Breakingviews) - Wall Street is turning the task of paying chief executives into something akin to snowboard cross. The Winter Olympics sport features half-a-dozen contestants hurling themselves down a narrow, twisting course with massive jumps, each trying to grab a few inches of advantage over the other while avoiding collisions. The pay race for six of America’s top bank bosses is becoming similarly bunched up.

JPMorgan (JPM.N) CEO Jamie Dimon is the winner with $29.5 million after a 5 percent bump for 2017. His top spot on the podium reflects the bank’s long-term superior performance and last year’s return on equity of more than 11 percent, adjusted for the effects of U.S. tax changes.

Shareholders are unlikely to quibble with who his lowest-paid main rivals are – Mike Corbat at Citigroup (C.N) and Brian Moynihan at Bank of America (BAC.N). Returns at both lenders have lagged for years, though they have improved. Each earned $23 million last year, which leaves them trailing less far behind than form might suggest.

To get there Corbat needed a big-air boost of 48 percent from his pay for 2016 – a trick that’s out of sync with Citi’s performance last year, but which the bank justifies in part by comparing his compensation to that of his peers.

Similar thinking may have persuaded Goldman Sachs’ (GS.N) board to bump up Lloyd Blankfein’s compensation by 9 percent to $24 million for last year. That seems a big raise considering revenue and profit increased by less than 5 percent, once adjusted for tax head- and tailwinds. And Goldman’s trading unit did poorly last year.

Still, Blankfein’s pay hike ensures his overall package edges out Moynihan’s and Corbat’s. Even so, he remains in bronze-medal position after Morgan Stanley (MS.N) slid a 20 percent silver-winning increase James Gorman’s way, taking his pay to $27 million. That was in part a reward for hitting his ROE target. But at 9.2 percent, excluding various tax one-offs, Morgan Stanley was off the pace compared with Goldman’s 9.8 percent adjusted return.

The sixth competitor, Wells Fargo (WFC.N), has yet to say what it’s paying Tim Sloan. After all the fresh problems his own investigations unearthed last year – and last month’s censure from the Federal Reserve – chances are he could be the one who wipes out.


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