Dimon's 2014 pay package gets lower shareholder support
Washington
ONLY 61.4 per cent of shareholders voted to support the pay package of JPMorgan Chase chief executive Jamie Dimon, the bank announced on Tuesday.
The preliminary tally from JPMorgan's annual shareholder meeting is less than the 77.9 per cent who approved Mr Dimon's package last year. It's also far lower than the average 92 per cent approval rate for other companies' executive-compensation proposals this year, according to the research firm Equilar.
"Shareholders are certainly sending a message to JPMorgan and want to see some changes," said Aaron Boyd, director of governance research for Equilar.
Unlike last year, when Mr Dimon's 74 per cent raise drew criticism, the pushback this year was not about the size of his pay. Mr Dimon's compensation remained flat, at US$20 million, while the median CEO's pay rose about 12 per cent, according to an analysis by Towers Watson.
Rather, two proxy advisory firms recommended a vote against the company's compensation plan because they say that the bank is not transparent enough about how it sets performance metrics that determine pay.
Institutional Shareholder Services (ISS) critiqued the company's pay practices in a recent report, saying Mr Dimon's US$7.4 million cash bonus was reintroduced "without a compelling rationale". ISS rebuked the bank's lack of specifics in awarding incentive pay and said that the decision to provide a hefty percentage of Mr Dimon's pay in the form of a cash bonus raised concerns.
Mr Dimon wasn't the only chief executive who saw more cash in his pay package. The Wall Street Journal reported that cash compensation for CEOs in 2014 was higher than it has been since 2010, rising to 37 per cent of total compensation. Yet Mr Dimon's was particularly high: With US$1.5 million in salary and US$7.4 million as a bonus, the cash portion made up about 45 per cent of his total package.
The proxy advisory firm Glass Lewis also recommended a vote against JPMorgan's pay plan, citing a disconnect between pay and performance. It also noted the lack of specific formulas in how the bank sets compensation levels and gave an "F" grade to its 2014 pay-for-performance plan.
A JPMorgan spokesman said in an e-mail on Tuesday that ISS and Glass Lewis advise on about 33 per cent of the company's share votes. That could help explain why shareholder approval for the package was as low as it was this year.
But even if the majority of investors had voted against the executive compensation packages at JPMorgan, the company could choose to ignore them. Although the 2010 Dodd-Frank Act requires companies to offer shareholders an opportunity to weigh in on executive pay each year, the votes are only advisory.
Yet because it is exceedingly rare for pay packages to receive low approval ratings, few companies have had to decide whether to heed shareholder advice. Just two of the 241 companies among the S&P 500 that have shared results this year have failed to win a majority vote for executive-pay plans. WP
