Another banker foregoes his bonus

Posted by Marc Hodak on December 19, 2008 under Executive compensation | Be the First to Comment

Jamie Dimon of JP Morgan Chase has joined the growing list of highly visible banking CEOs giving up their bonus for 2008. JP Morgan has outperformed its sector by over ten percentage points, arguably preserving about $16 billion in market value that, on a comparable percentage basis, was lost by its peers. Most observers, inside and outside of the company, would give Dimon a good deal of credit for that performance, at least $10 million, which is about what I would estimate he has surrendered.

Dimon doesn’t play the heads-I-win-tails-you-lose compensation game. He was among the lowest paid Wall Street CEOs when times were good for JPM. Given his firm’s relative performance this year, he deserves to be among the highest paid for 2008, but that’s not happening, either. I would think the shareholders would not begrudge him an extra $10 million if that’s what it took to keep him from even the least bit of indifference to bottom line results or his employment at their firm. What would Citi pay to get Dimon back? If they thought they could get him for an extra $10 million, how many milliseconds would it take for them to throw the cash at him? This is, in fact, a case of shareholders exploiting their CEO, based on his work ethic, and his demonstrated willingness to go all out for the firm regardless of his personal opportunity cost.

Alas, the shareholders are not in control, right now; the mob is. The mob controls things partly because the government forced JPM to accept a $25 billion investment that they didn’t need. (The New York Times version is that “Dimon, agreed to take a $25 billion capital injection courtesy of the United States government,” but the New York Times has long since proved that it can’t distinguish courtesy from coercion.) This investment gave the press and the politicians a license to opine on what they think executives should be making. In other words, Barney Frank, Henry Waxman, et. al used taxpayer money to buy a $25 billion ticket to a heckling session.

The cynical among us will say, “so, what’s $10 million to a guy like that?” True enough. But I have yet to see a single congressman who contributed to this debacle giving up anything, not a dime, even as they call everyone else on the carpet.