A year after the disastrous trading debacle led to a lower pay
JPMorgan Chase & Co.
) CEO Jamie Dimon, he is getting a 74% hike in pay for 2013.
Dimon will receive $20 million (in aggregate), of which $1.5
million is base salary (unchanged from 2012) and the remaining
$18.5 million is restricted stock units (RSUs).
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The jump in pay is a result of higher RSUs being given to Dimon.
For 2013, the rise in RSUs is 85% from the prior year. The RSUs
will be vested over the next three years, with 50% in 2015 and
the other 50% in 2016.
While determining Dimon's pay, JPMorgan's independent board of
directors had considered several factors. These included
sustainability of the company's long-term performance,
improvement in market share as well as handling and resolution of
various regulatory and legal issues.
Notably, 2013 had been a challenging year for JPMorgan. The
company announced approximately $23 billion in settlement for
investigation related to mortgage securities sale, energy
trading, derivative trading and failure to oversee banking
services offered to the Ponzi scheme run by Bernard Madoff, among
Additionally, under Dimon, JPMorgan even suffered a rare loss in
the third quarter of 2013 due to mounting legal expenses. This
also adversely impacted the company's full-year results, with net
income decreasing roughly 16% year over year.
However, with the resolution of each legal issue, JPMorgan's
share price rose. Overall, last year, the bank's share price
increased nearly 34% year over year, driven by investors'
confidence of there being lesser uncertainty regarding profits
Further, the board of directors believes that Dimon is managing
the company well. The CEO is taking appropriate measures to step
up risk management controls to prevent future lapses. Moreover,
several measures are being undertaken to right-size JPMorgan's
operations by moving away from unprofitable and non-core
Considering the resolution of several legal issues, we believe
that this pay hike is justified. However, JPMorgan's run-in with
regulators and other investigating agencies will likely continue
in the near term. Hence, higher litigation costs are expected to
continue weighing on the company's performance in the future.
Currently, JPMorgan carries a Zacks Rank #3 (Hold). However, some
better-ranked major banks include
Bank of America Corp.
Fifth Third Bancorp
). All these carry a Zacks Rank #2 (Buy).