Average pay of top bankers in the U.S. and Europe including JPMorgan Chase & Co.’s Jamie Dimon and Royal Bank of Scotland’s Stephen Hester dropped by a 10th last year after banks bowed to investor and regulatory pressure, Financial Times research shows.
The fall comes after a wave of high-profile shareholder revolts last year and a number of legal scandals and fines that have forced banks’ boards on both sides of the Atlantic to rethink executive pay.
The analysis of total pay awarded to the heads of 15 banks, exclusively compiled for the FT by Equilar, a U.S. pay research group, shows that they took home $11.5-million (U.S.) on average in 2012, 10 per cent less than in the previous year.
This marked the first pay cut for bank chiefs in three years, a period in which their profit growth and investor payouts have underperformed many other sectors.
Last year’s fall in pay coincides with an average drop in net income by more than a fifth across those 15 lenders. But it also comes amid a share price recovery in the sector, with all but two of the banks - BBVA and Credit Suisse - outperforming the FTSE World index in 2012.
Of the 10 bankers that were in office since the beginning of 2011, only three - John Stumpf at Wells Fargo & Co., Stuart Gulliver at HSBC Holdings PLC and Brady Dougan at Credit Suisse Group - enjoyed pay rises.
With a pay package of $19.3m, Mr Stumpf, toppled JPMorgan’s Mr Dimon as the best paid bank chief after the latter saw his rewards cut by almost a fifth.
Mr Dimon, who received $18.7-million, is likely to drop even further in the 2013 ranking after JPMorgan gave him sharply lower stock awards this year to reflect the “London Whale” trading debacle.
The analysis by Equilar adds up base salaries, cash bonuses and certain other benefits. It also includes option and stock awards that were granted in 2012, some of which were to reward performance in previoU.S. years.
It shows that performance-based cash and stock awards fell in tandem as regulators and investors clamped down on bonuses.
The reduction comes as chief executive pay across other sectors remained stable, indicating a narrowing of the pay premium that financial services companies built up in the credit-fuelled pre-crisis years. Average pay for S&P 500 chief executives serving at least two full years was $11-million, a 0.3-per-cent decrease according to Equilar.
The decline in bankers’ rewards foreshadows a cap on bonuses that will come into effect across the EU next year.
As many investors do not back those rules, experts expect that they will push up base salaries rather then further bringing down overall pay, as intended by lawmakers.
“Such regulation is driving shareholders to align themselves with bank boards [against the new rules],” said Mark Quinn, a partner at the reward practice of Mercer, the consultancy.
HSBC’s Mr. Gulliver came out as the best-paid U.K. bank chief in the survey after his pay soared almost a quarter to $12.9-million, despite a lower net profit. In his first year as chief executive, Barclays’ Antony Jenkins ranked last of all top bankers with a $4.1-million pay package. It comes after he had foregone his bonus amid various scandals at the bank.