JPMorgan: Could the Board Think of No Better Use for $50M?

Annual Meeting: May 17

Jamie Dimon’s total reported compensation for 2021 was $84,428,145 – representing a 167 percent increase in pay from the 2020, when JP Morgan Chase was number 62 on our list of companies with Overpaid CEOs. (The company ranked number 35 in 2021, and 12 in 2020. Dimon’s compensation includes a $52,620,000 special award. A similar grant worth $27,862,500 awarded to Daniel Pinto described as being part of succession planning means that there are two executive

Both ISS and Glass Lewis have recommended against this package. Nevertheless, JPMC is using all of its power to persuade proxy advisors that its compensation decisions are appropriate. On May 4, the company filed with the SEC a letter it had sent to Glass Lewis. The letter notes that the company has “addressed most of our concerns about accuracy, completeness, consistency and adherence to methodology through the Glass Lewis portal.” The company was not satisfied with using the tool Glass Lewis made available to public companies and went a step further with this unusual filing. The letter states:

“We believe that your analysis of Proposal 2: Advisory Vote on Executive Compensation does not give consideration to the distinguishing context of special awards awarded by JPMC in connection with succession planning, does not acknowledge or refer to significant features of the awards which align pay to performance and describes other features in a manner which may cause confusion absent more context.”

While the rest of the letter makes some interesting points, let me provide – at a much lower price than JPMC’s lawyers – some additional context.

The company notes that its massive $52.6 million grant “is focused on the Board’s desire for Jamie Dimon, our CEO, to continue leading the firm for a significant number of future years in light of the firm’s succession plans.” While the grant is performance-based and reasonably long-term (“requiring the CEO’s leadership for at least five years before the awards vest and another five years until he may sell any vested shares”), the question remains as to whether it was necessary at all. Jamie Dimon is an outspoken public figure in no hurry to retire. Given this, I believe the award was excessive and unwarranted.

I could stop there, but since the company clearly devoted an astonishing amount of time to this project, I’ll add a few additional points. For example, I was struck by the following line from the letter:

“We note that the Report’s D grade this year on Pay for Performance is an improvement from last year’s pay for performance grade of F, when Glass Lewis recommended shareholders vote FOR the firm’s executive compensation proposal.”

Applying this logic to any other context, this strikes me as an absurd claim by JPMC. Imagine a student insisting to their professor that they are in fact “not failing” because they moved from an “F” to a “D” grade. Clearly, the award itself was what swayed Glass Lewis to recommend against compensation.

It is also evident that JPMC’s highly-paid lawyers spent a great deal of time looking at how pay compared to company peers, stating:

“On page 23, its comparison is based on revenue and employees only, but on page 12, the comparison includes EPS and indicates that the firm’s EPS was approximately 3 times that of the median of Glass Lewis peers, which is closely aligned with the CEO’s compensation being 3.4 times that of peers. As disclosed on pages 39 and 66 of the 2022 proxy statement, the CEO has historically been the lowest paid of peers relative to the firm’s net income, with peers paying up to 270% more.”

What is clear to me from these statements is that with endless resources one can almost always find a point of comparison to use in an argument. I will also note here that last year when Dimon’s total compensation was $31,664,554 a significant number of shareholders still voted against it as excessive. Specifically, BPL Pensioen, which appears to use an individualized guidelines at ISS, noted that, “The CEO pay ratio against ISS-selected peer median exceeds 1.25 times.- The CEO pay ratio against company-selected peer median exceeds 1.25 times.”

There are indeed many questions raised by JPMC’s compensation package, but the main one is clearly whether awarding this massive grant and devoting extensive time to defending is really the best use of the Board’s time and resources.