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JPMorgan Chase CEO Jamie Dimon took a huge pay cut following the “London Whale” trade. His 2012 compensation is $11.5 million, which is half of what he took home for 2011.
In an SEC filing the went along with today’s earnings report, and an internal investigation into the ‘Whale’ loss, the firm explained the logic behind Dimon’s compensation cut.
Basically, it ws a strong year on many fronts, but due to the loss.
- Application in respect of Mr. Dimon. As noted above, the Board took into consideration both the continued strong performance of the Firm (including progress on its long-term strategic priorities, actual financial results, financial performance relative to competitors and qualitative factors) and the CIO losses, including Mr. Dimon’s responsibility as the Firm’s Chief Executive Officer. Mr. Dimon’s leadership and management abilities are reflected in the Firm’s overall performance and progress, as reflected in the:
- Strength of the Firm’s 2012 operating results and financial performance • Third consecutive year of record net earnings and 15% ROTCE • Record net earnings of $21.3 billion, a 12% increase from 2011 • ROE of 11% • Record EPS of $5.20 per share, a 16% increase from 2011 • Common share price increase by 32% in 2012; total return with dividends of 36%
- Strong performance of the Firm relative to key competitors
- Uninterrupted record of delivering quarterly and annual earnings throughout the financial crisis, subsequent recession, and CIO losses
- Maintenance of a fortress balance sheet
- Continued investment in organic growth and the strengthening of the Firm’s major businesses
With respect to the losses incurred in CIO, the Board views the CIO losses as a serious mistake by the Firm, but believes that one of the marks of a successful company and its leadership is how it addresses its mistakes, learns from them and implements meaningful remedial actions. As Chief Executive Officer, Mr. Dimon bears ultimate responsibility for the failures that led to the losses in CIO and has accepted responsibility for such failures. Importantly, once Mr. Dimon became aware of the seriousness of the issues presented by CIO, he responded forcefully by directing a thorough review and an extensive program of remediation. The Firm:
- replaced the CIO senior management responsible for the losses;
- took the maximum compensation clawback actions for those most immediately involved;
- formed the Management Task Force to review and address the circumstances related to the CIO losses; and
- has implemented, or is in the process of implementing, the remedial enhancements noted in the Management Task Force Report and the recommended improvements set forth in the Board Review Committee Report. In light of the above considerations, the Board has approved 2012 compensation for Mr. Dimon in the amount of $11.5 million, including salary of $1.5 million (flat with the prior year) and incentive compensation of $10 million, all in the form of restricted stock units (RSUs) (down 53.5% from the prior year). Mr. Dimon’s compensation for 2011 was $23 million, including salary of $1.5 million and incentive compensation of $21.5 million (of which $4.5 million was in cash, $12 million was in the form of RSUs, and $5 million was in the form of SARs). The RSUs vest over a period of three years, half after two years and the other half after three years.