Over the past year, JP Morgan has been involved with several high profile cases and probes relating to rigging and trading losses – and has paid payouts to regulators totalling around USD 20 billion; leading to a 16% decrease in the bank’s profits.
Yet in a move that is sure to fan the flames of those who perceive senior banking officials’ salaries as unjust, for the year 2013 Dimon received a basic salary of USD 1.5 million, and additional shares totaling USD 18.5 million.
In 2011, Dimon was paid USD 23 million, which was halved to USD 11.5 million in 2012 following huge trading losses.
A series of unfortunate events
Dimon’s pay was first cut after JP Morgan’s “London Whale” trading loss, in which one trader racked up losses of around USD 6 billion – a move which led the Chief Investment Officer Ina Drew, who had run the office, to step down.
During the debacle, Dimon addressed the Senate Banking Committee to confirm his belief the bank would recover, apologised for errors, and then ultimately defended the bank.
JP Morgan was then one of the international financial firms caught up in the Libor scandal – where several high profile banks stand accused of manipulating of the London inter-bank offered rate (a key interest rate).
USD 2.6 billion was also paid to settle claims the bank has failed to alert authorities over the suspicious behavior and Ponzi schemes of Bernie Madoff; a convicted fraudster.
This led to a net income fall of 7.3% in Q4 of 2013 to USD 5.3 billion, down from the USD 5.7 billion in the same quarter in 2012.
Astute or aggressive?
Yet Dimon’s pay raise – which is 74% more than his pay in 2012 – shows that the board is nevertheless firmly behind Dimon’s performance.
They stated their belief Dimon had progressed the bank in many ways, a sentiment echoed by investment superstar Warren Buffett of Berkshire Hathaway, who noted: “Overall, I think the shareholders of JPMorgan and the American people should be happy that Jamie Dimon has been running the bank over this period.”
Part of this is related to Dimon’s performance in the wake of the financial crisis. JP Morgan emerged from the crisis in a stronger position than most of its peers – marking Dimon as a shrewd manager of risks.
Yet his sometimes aggressive managerial style has led to conflicts and questions – namely after the London Whale fiasco – where many other senior officials would have promoted a more peaceful and remorseful approach.