NEW YORK -- JPMorgan Chase, the nation's largest bank, posted a record profit for 2011. That didn't translate into a bigger bonus for CEO Jamie Dimon. Morgan Stanley's latest quarterly results topped expectations as the bank trimmed costs and cleaned up problems dating from the financial crisis. But CEO James Gorman saw the value of his stock awards for the year fall by half.
Across their ranks, Wall Street banks are curbing bonus pay for last year's performance, which was marked by big drops in stock prices and still-hefty costs for mortgage-related problems. In the last three months of the year, fear about the European debt crisis made the stock and bond markets volatile, and clients of all the major banks shied away from mergers and acquisitions and public offerings of stock. That sharply reduced investment banking and underwriting fees. The banks also faced a surge in populist anger, as the Occupy Wall Street movement went national.
Financial stocks were some of the worst performing in 2011. While the S&P 500 Index finished the year flat, Morgan Stanley shares plunged 44 percent, JPMorgan dropped nearly 22 percent and Goldman Sachs Group Inc. tanked 46 percent.
Compensation followed the downward trend. In a closely watched and politically charged gauge, JPMorgan Chase & Co. revealed earlier this month that it set aside 36 percent less than the year before to pay its investment bankers. Morgan Stanley shed 700 workers last year and capped the amount that workers can get in their bonuses immediately, deferring anything over $125,000. Rival Goldman eliminated 7 percent of its employees and cut 2011 pay by 21 percent.
And it appears the banks' CEOs are not immune. On Friday, Morgan Stanley's regulatory filing showed that the value of Gorman's stock award for the year dropped to $5.1 million from $10.2 million in 2010.
Gorman, who became CEO two years ago, has been slimming down the bank, selling off units like a mortgage servicing division and an asset management business. He's been emphasizing divisions like wealth management, which provide smaller returns than some investment banking operations but also carry a lot less risk because they're based on fees rather than markets. Unlike JPMorgan and some other big banks, Morgan Stanley doesn't have a large consumer deposit base to rely on when its investment bank stumbles.
JPMorgan's Dimon received restricted stock worth $12.6 million and stock appreciation rights reportedly valued at roughly $5 million for 2011, according to a filing with the Securities and Exchange Commission Friday. That compares with about $17.1 million in stock and SARs that he was granted for 2010.
For the full year, JPMorgan posted a record profit of $19 billion, up from $17.4 billion in 2010. But the bank struggled amid the choppy financial markets, which hurt investment banking fees in the fourth quarter. The bank also disclosed that it spent $3.2 billion last year to fight lawsuits, almost all of them over poorly written mortgages. That's down from $5.7 billion in 2010, but Dimon acknowledged there's still a "huge drag" on earnings five years after the bubble burst.
Complete compensation details, including the value of the executives' 2011 cash compensation, perks and benefits weren't disclosed. None of the banks have filed annual proxy statements, which include those financial details.
Dimon received a total pay package for 2010 valued at $20.8 million, including a salary of $1 million and a cash bonus of $5 million. Gorman received compensation valued at $15.2 million, including a salary of $800,000 and a cash bonus of $3.9 million.
The Associated Press formula calculates an executive's total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.
The value that a company assigned to an executive's stock and option awards for 2010 was the present value that the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives depends on the performance of the company's stock in the years after the awards are granted. Most stock compensation programs require an executive to wait a specified length of time to receive shares or exercise options.