American Banker quoted Principal Shaun Bisman in their article on JPMorgan’s low Say on Pay support. He explained that there are several reasons as to why JPMorgan received such low support. Some reasons could include negative recommendations from Proxy Advisory Firms Glass Lewis and Institutional Shareholder Services (ISS) or that Jamie Dimon and Daniel Pinto received one-time stock option awards not tied to performance. Finally, despite JPMorgan returning less to shareholders than the S&P 500, both Dimon and Pinto received Total Compensation increases along with the one-time stock option awards.

CAP recently provided research to American Banker regarding CEO compensation at large and regional banks. The data featured CEO Compensation for 18 banks. Every single one of those banks reported that their CEO received an increase in Total Direct Compensation (TDC). This increase ranged from 4.8% to 100% above last year’s TDC values. The hikes in compensation were mostly due to higher cash bonuses, and increases in long-term incentive awards.

Partner Kelly Malafis and Principal Shaun Bisman were quoted in a published article discussing Citigroup executives defending the decision to tie bonuses with compliance fixes. Shaun Bisman revealed it is somewhat unusual to see companies put incentive programs in place that are tied to satisfying regulatory concerns. In addition, Kelly Malafis explained how Citigroup is sending a strong message of what is important to them by developing a program that is clearly tied to the issues the company is facing.

Partner Kelly Malafis notes that for now, most bank compensation committees will feel more comfortable awarding diversity and inclusion bonuses when they are attached to a range of improvement on certain diversity metrics, as opposed to meeting more specific targets. Principal Shaun Bisman says that this is really in the beginning stages where companies and boards want to see how these diversity and inclusion incentives are working before they set these more quantifiable goals.

In 2020, bank boards and compensation committees relied less on numbers and formulas, and more on their perceptions of how well CEOs led their banks through the pandemic. Partner Kelly Malafis explains that some companies that had discretion built into their bonus plans were able to use a more holistic approach to determining CEO bonus pay. Others with entirely formulaic methods looked at measures such as relative performance to determine their results and in most cases adjusted results upward, thus lifting bonus pay. Principal Shaun Bisman adds that there could be even more use of discretion in bonus pay for 2021, as the timing of a full economic recovery remains unclear, making it hard to set financially based performance goals. He imagines that in two or three years the plans would look very similar to what they looked like pre-COVID.

Two factors played major roles in shaping compensation trends for bank CEOs in 2020. One was the COVID-19 pandemic, which led to big increases in loss reserves, in turn causing net income to fall at many banks. The other big factor was the ongoing wave of mergers and acquisitions, which increased the size of companies like First Horizon and First Citizens Bancshares. American Banker cites data compiled by CAP to examine which CEOs saw pay cuts and which saw substantial pay hikes last year.

Will the new accounting standard, known as Current Expected Credit Loss, have the desired impact of discouraging excessive risk-taking by CEOs? Partner Eric Hosken explains how this legislation may be a major determinant of CEO pay for publicly traded banks when it takes effect in 2020.