NEW YORK - Leading shareholder advisory groups Wednesday opposed JPMorgan Chase chief executive Jamie Dimon's annual pay packet, branding it poorly aligned with the bank's performance.
JPMorgan, the largest US bank by assets, kept Dimon's overall compensation for 2014 at the same level of USD$20 million (S$26.5 million) as in 2013, but included a USD$7 million cash incentive bonus after granting comparable pay in stock the last two years.
The change "reflects the board's desire to return Mr. Dimon's pay mix to market-competitive levels," JPMorgan said in a securities filing.
But Institutional Shareholders Services, which advises money managers on proxy decisions, said the board's justification for the shift was weak and urged investors to oppose the plan at the May 19 annual meeting.
Substituting cash for stock eliminates an executive retention incentive and the size of the award "appears arbitrary," ISS said.
"While provision of cash incentives to top executives is standard compensation practice, the lack of strong rationale for reverting to substantial cash awards that have no connection to attainment of preset goals raises significant concern," ISS added.
Glass, Lewis, another leading proxy advisory firm, also recommended a "no" vote on the compensation plan, saying the board's payment system "has been deficient in linking executive pay with corporate performance."
Both ISS and Glass, Lewis also backed a proposal offered by an individual shareholder and opposed by JPMorgan's board to split up the chief executive and chairman roles, both of which are occupied by Dimon.
ISS said the presence of a chairman independent of the CEO would guard against conflicts of interest and ensure "the strongest possible risk oversight" of the bank.
The recommendations came as International Monetary Fund Managing Director Christine Lagarde called for more reform to bankers' compensation at a Washington conference on the lessons of the 2008 financial crisis.
Lagarde said compensation should be structured to no longer reward "excessive risk taking" and should be designed to "favour the long-term performance and soundness of the firm."
Lagarde singled out the 2013 "London Whale" debacle as an example of a case of poor risk management that could have benefited from a different governance structure.
JPMorgan lost USD$6.2 billion.
"Failure happened at both the management and board levels," Lagarde said. "One way to address this failure is to establish clearer separation of the management and the board. We have seen that banks with more independent board members take fewer risks."