Exec pay: Less vroom at the top
June 3, 2013 by Andrew Osterland
The fortunes of large financial services companies have improved dramatically from the dark days of the financial crisis, but paychecks for the leaders of those companies still aren’t what they used to be.
Compensation at broker-dealers and asset management firms generally has increased along with the recovering financial markets over the past two years, but it remains substantially below pre-crisis levels, consultants said.
“There’s usually a premium to work on Wall Street, but it’s shrunk,” said Alan Johnson, managing director of compensation consultant Johnson Associates Inc.
He characterized last year as “so-so” overall for financial services executives and suggested that the fallout from the financial crisis continues to suppress executive pay levels.
“Some people still believe that executives in this industry should make very little,” Mr. Johnson said.
Little by Wall Street standards, of course.
UP AND DOWN
“Executive pay in the industry was relatively flat last year, subject to under- or outperformance at specific companies,” said Joe Sorrentino, a managing director at compensation consultant Steven Hall Partners LLC. “Compensation has not reached pre-financial-crisis levels, but it has increased significantly from the trough in 2010.”
The pay of chief executives was up at Bank of America Corp., UBS and Wells Fargo & Co., and down at The Goldman Sachs Group Inc. and Morgan Stanley, which both paid their chief executives 18% less in total compensation last year.
James Gorman, who has unapologetically told his troops at Morgan Stanley that their compensation would drop, didn’t spare his own paycheck. His pay fell to $10.67 million last year, from $12.98 million in 2011.
Goldman chief executive Lloyd Blankfein received total compensation of $13.3 million, down from $16.2 million.
Joseph Stumpf, chief executive of Wells Fargo, on the other hand, was the highest-paid executive at the 15 companies examined — taking home $22.87 million last year.
Brian Moynihan, chief executive of BofA, saw his pay increase slightly last year to $8.3 million. Still in the midst of restructuring the sprawling giant, he hasn’t been paid a bonus for the past three years and was the fifth-highest paid executive at the bank last year.
UBS chief executive Sergio Ermotti was paid substantially more last year for his success in shrinking the Swiss bank and making it more profitable. His $8.87 million in pay was slightly higher than that of Robert McCann, chief executive of Wealth Management Americas, who was the bank’s highest-paid executive in 2011.
Two of the three other chief executives at the broker-dealers saw their pay increase, while the third, James Cracchiolo of Ameriprise Financial Inc., made 5% less last year than in 2011.
Mr. Cracchiolo, nevertheless, continues to be one of the highest-paid executives in the industry, with total compensation of $17.83 million last year.
“He’s an outlier, but you can make the argument that he’s done a great job for a long time,” Mr. Johnson said.
Laurence Fink, chief executive of BlackRock Inc., was the second-highest-paid executive of the 15 companies examined, earning total compensation of $20.23 million, down 7.6% from 2011.
Three of the other six asset management companies examined paid their top two executives less than in the previous year.
At Janus Capital Group Inc., which has struggled over the past three years, executive pay fell sharply.
Chief executive Richard Weil saw his total compensation drop 19% to $4.98 million last year, and his pay was less than a quarter of the more than $20 million he was paid in 2010.
PERFORMANCE MATTERS
At Franklin Resources, CEO Gregory Johnson’s total compensation climbed 25% to $12.32 million, largely due to a whopping stock award valued at $8.85 million.
The pay of T. Rowe Price chief executive James Kennedy increased 6.9% to $8.44 million. Brian Rogers, chairman and chief investment officer of the company, saw his pay increase 8% to $8.33 million.
Two trends that continue to play out in the industry are the increased use of performance targets for executives and a more substantial part of total compensation being paid in equity incentives, very often deferred for more than a year, Mr. Sorrentino said.
LPL chief executive Mark Casady, for example, saw his cash bonus drop by more than 50% to $1 million, but he also received $2.8 million worth of incentive options.
While financial services executives still aren’t pulling in what they did in the heady days leading up to the financial crisis, they aren’t exactly earning chump change.
“There’s still more opportunity to make a lot of money in financial services than in other industries, but less so,” Mr. Sorrentino said.
