JPMorgan Chase’s shareholders voiced strong discontent Tuesday with the company’s most recent executive compensation packages, which included a one-time award of $52.6 million in stock options to Chairman and CEO Jamie Dimon.
At the company’s annual meeting, only about 31% of shareholders voted for a nonbinding “say on pay” resolution in support of the 2021 pay packages for Dimon and other named executive officers, according to preliminary results. That’s down significantly from last year, when 90% of shareholders voted in favor of the bank’s 2020 pay packages.
The vote came after two large advisory firms, Glass Lewis and Institutional Shareholder Services, recommended that shareholders reject the bank’s advisory resolution on pay.
In an April 27 paper, Glass Lewis characterized the one-time grants to Dimon and Chief Operating Officer Daniel Pinto, who last year received $27.7 million in option awards, as “excessive.”
Glass Lewis urged shareholders at the nation’s largest bank by assets to “consider the company’s sustained disconnect between executive pay and performance over the last nine years.”
While JPMorgan’s size compared with peers “has helped to mitigate” some concerns about that disconnect, “the relative size of the company cannot fully mitigate concerns” about executive pay versus performance, Glass Lewis wrote.
After Tuesday’s vote, a JPMorgan spokesperson defended the company’s decision to grant the special award, which was designed to keep its 66-year-old CEO on the job for five more years. The company spokesperson pointed out that the stock options won’t vest for five years and noted that Dimon won’t be allowed to sell any vested shares for an additional five years.
The award, which was granted last July, was “extremely rare,” the JPMorgan spokesperson said. It was Dimon’s first such award in more than 10 years, and it reflected his “exemplary leadership” while also serving as an “additional incentive for a successful leadership transition” in the future, the spokesperson said.
Pinto's one-time award took into account his recent promotion to sole president and chief operating officer, two roles that he shared until
The award also reflected the desire of JPMorgan's board for Pinto to continue in his new role for at least five more years, the company said in its proxy statement.
The options granted to Dimon and Pinto cannot be exercised until 2026, the proxy statement notes. Except for certain limited exceptions, vesting of those options is subject to their continued leadership or employment at the company, according to the proxy statement.
While Tuesday's vote is not binding on its board of directors, JPMorgan said in its proxy statement that its compensation and management development committee would take the results into account in connection with future executive compensation decisions.
On Tuesday, the JPMorgan spokesperson said that the bank appreciates the feedback from shareholders, and that its board will continue to engage with investors on compensation decisions.
Shaun Bisman, a principal at the consulting firm Compensation Advisory Partners, said there are several reasons why JPMorgan's advisory resolution failed to garner more support.
In addition to the negative recommendations by Glass Lewis and ISS, the awards for both Dimon and Pinto were not tied to the bank’s performance, Bisman noted in an email.
What’s more, JPMorgan’s one-year total shareholder return lagged that of the S&P 500, he said. And on top of the retention awards, Dimon received a 10% year-over-year increase in his total compensation package for 2021, while Pinto received a 14% increase, Bisman noted.
Dimon, who has been JPMorgan’s top executive since 2006, was the highest-paid U.S. commercial banking CEO last year, receiving a compensation package worth $34.5 million.
Earlier this year, shareholders at other U.S. megabanks easily approved "say on pay" resolutions. Bank of America’s resolution received 94% support from shareholders. At Citigroup, a comparable measure got 80% support, and Wells Fargo’s version garnered 73% support.
Last year, "say on pay" votes failed at only 3.9% of the companies in the S&P 500, according to a report by the executive compensation consulting firm Semler Brossy. The average rate of support at S&P 500 companies was 88.3%, the report found.
Polo Rocha contributed to this report.
