It looks like compensation committees at J.P. Morgan Chase and Citigroup Inc. are keenly aware of the role that public perception and company performance plays in setting executive compensation, particularly in light of the financial industry’s recent poor performance (and the massive $5.8 billion in losses J.P. Morgan took in the so-called “London Whale” trading fiasco earlier this year).
According to a report in the Wall Street Journal (subscription required), J.P. Morgan directors are considering lower 2012 bonuses for CEO James Dimon and other top execs. And at Citigroup, where shareholders in April rejected management’s pay structure (albeit in a non-binding vote), the board has hired a new compensation consultant to help them “fine-tune next year’s compensation plan to win broader support among investors.”
The challenge at these two banks, according to the Journal, “is to satisfy disgruntled investors without signaling a loss of faith in their heavily criticized CEOs.”
Many big U.S. banks are wrestling with executive pay amid soft financial-industry performance, weak economic growth and widespread cost-cutting. Revenue was down from a year earlier at many institutions in the first half of 2012, including at J.P. Morgan and Citigroup, and many banks are setting aside less for salaries, bonuses and benefits.
Executives looking to maximize their pay at a time when investors are skeptical—to say the least—of high executive compensation need to ensure that their pay packages balance the executive’s desire for a competitive salary and bonus structure with the shareholders’ desire for transparency and accountability. It’s a delicate balancing act, to be sure.