Jaime Dimon, the CEO of JPMorgan Chase & Co., suffered a rebuke on May 18 after shareholders voted against a controversial $52.6 million one-time retention bonus, after key investors objected to the bank’s compensation plan for its long-serving chief who has been in charge since 2005.
This is the first time an executive pay package vote has failed to earn shareholder approval since the “say on pay” vote was instituted in 2009.Only 31 percent of shareholders voted in favor of the bank’s pay plans, according to a preliminary count at the annual shareholder meeting.
However, the shareholder objection is not binding for Dimon, who will likely keep the award. It is, however, a rare symbolic rebuke of the compensation plan of America’s largest bank.
Two major advisory firms, Institutional Shareholder Services (ISS) Inc. and Glass Lewis & Co., which advise shareholders on voting, had both recommended a “no” vote on the package because of a lack of performance criteria for Dimon’s retention bonus, in addition to a smaller grant given to Daniel Pinto, JP Morgan’s president and chief operating officer.ISS also noted that the two award packages were not tied closely enough to the bank’s annual performance.
JP Morgan shareholders had awarded Dimon the special retention bonus in 2021, which together with his normal annual compensation, totaled $84.4 million, placing the CEO among the highest paid leaders in the S&P 500 for last year.
The failed vote comes after the bank faced recent criticism over its spending and investments.
JPMorgan has faced criticism after its share price fell roughly 30 percent from its high in October 2021, and is now below pre-pandemic levels.“Excessive one-off grants to the CEO and COO amid tepid relative performance worsen long-standing concerns regarding the company’s executive pay program,” said Glass Lewis, in its letter urging shareholders to reject Dimon’s pay package.
Shareholders in February criticized Dimon for offering sparse details on his ambitious plan to spend $15 billion mostly on new technologies meant to fend off disruptive fintechs.
The bank reported $48.3 billion in net income last year, a 66 percent increase from 2020 and a third more than its previous high record.
JP Morgan stock rose 25 percent, but its has underperformed compared to the S&P 500 and the KBW Nasdaq Bank Index.
Dimon and the rest of the bank’s heads are expected to address the latest critiques at the next May 23 investor presentation.
JP Morgan disclosed in January that Dimon was paid $34.5 million mostly in the form of stock for his 2021 annual compensation, besides the suggested bonus package.
The bank’s directors said before the vote that the special bonus package would not be recurring and that a final decision “reflects the board’s desire for him to continue to lead the firm for a further significant number of years.”
The board of directors said that the award was proposed out of consideration of Dimon’s performance, his long time service, and his “management succession planning amidst a highly competitive landscape for executive leadership talent.”
The bonus will be granted in the form of 1.5 million restricted stock options, which require shares to trade above certain levels and that he remain the bank’s chief executive until 2026.
Dimon is forbidden to sell any of the awarded stock until 2031.
The board did prevail in its recommendations on most other issues, with each director, including Dimon, being reelected with more than 92 percent of the votes cast, according to preliminary figures.
Two shareholder proposals on fossil fuel financing, however, received only 11 and 15 percent of votes cast.
Reuters has contributed to this report.
