Jamie Dimon, His $50 Million Worth of Options, and the Real Reason He Received a Valuable Retention Bonus

Last Updated on July 22, 2021

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JPMorgan Chase, according to a regulatory filing July 20, had granted its chief executive, Jamie Dimon, a valuable retention bonus. For agreeing to stay with the bank another five years, he has received 1.5 million stock options that he can exercise at the end of that time. 

This new cache of options is valued at about $50 million, and Dimon will receive it in addition to his usual annual compensation, which is reportedly above $31 million a year.  

Dimon is 65 years old and he had emergency heart surgery in March 2020, which kept him out of the office for several weeks. 

Dimon is also a leftover from an earlier age. He has been at the helm of JPMorgan since 2006. He led the bank to and through the subprime crisis of 2007 and its sequel, the global financial crisis of 2008. He was apparently considered for a position in President Biden’s cabinet, and most estimates of his net worth make him a billionaire. 

Is Jamie Dimon Worth It? 

Is Jamie Dimon’s compensation, especially this $50 million bonus, warranted or excessive? 

It is actually unlikely that, from the standpoint of building shareholder value, he can be said to be worth it. Indeed, one of the reasons for the huge bonus is, from management’s point of view, in-house. Were he to leave, there would likely be a brutal battle to become his successor. 

The most logical successor might be executive director Gordon Smith, who has been Dimon’s right-hand man for his whole tenure at JPMorgan. But Smith is 62 himself, and has signaled an interest in retiring, and he is unlikely to receive a retention bonus of $50 million as an inducement not to.   

Beyond Smith, the field of possible replacements gets contentious. It is possible the Board is willing to give Dimon what he wants to stay on to kick the fight over his successor down the road a few years. 

Jamie Dimon Has Been at JPMorgan For a Long Time
Jamie Dimon is also a leftover from an earlier age. He has been at the helm of JPMorgan since 2006. Photo credit: Shutterstock.com

Are the Other Wall Street CEOs Worth It? 

Though the retention bonus is extraordinary, Jamie Dimon’s $30 million annual “regular” compensation is not out of line with his peers. According to a regulatory filing by Wells Fargo earlier this year, their CEO and President, Charles Scharf, received $20.4 million in 2020. That was down from 2019, when he was first named to lead the bank and received $34.3 million. In effect, some of that was a signing bonus.  

The CEO of Citi, Michael Corbat, received $19 million in 2020. That was a cut of 20.7% from 2019. The CEO of Bank of America, Brian Moynihan, also took a cut: of just 7.5% in his case, the $24.5 million. [Discussion of a recent development at Bank of America here.]

But James Gorman, the CEO of Morgan Stanley, tops the field. He received a 22% increase from 2019 to 2020 to receive $33 million in 2020.

The Wall Street banks are more-or-less officially considered “too big to fail” by Washington — although a more accurate phrase would be “too well connected to fail.” The demonstration of the consequences of this became clear in 2008-09. In a crisis, shareholders will be underwritten by the US Treasury. 

Overpaid Chief Executives

Arguably, that makes for overpaid chief executives. After all, part of a typical CEO’s job is supporting the confidence of his or her shareholders. The holders are equity are the bearers of residual risk. They are the ones who will almost surely be left with nothing in the event of a bankruptcy.

Yet with bankruptcy off the table (“too big to fail”) it turns out that much of a CEO’s traditional job has been done for him before he walks into the office at one of the top-tier Wall Street banks, otherwise known as “systemically important financial institutions.”

So what kind of pay would be warranted? That is a complicated question. But if you look to the market pay that is given to mid-tier banking executives, those whose institutions cannot depend on the Treasury as a backstop, and then assign a sizable discount, you may be in the ballpark.