摩根大通交易巨亏折射出的高管薪酬问题
Eleanor Bloxham | 2012-06-18 11:52
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In The Devil Wears Prada, Meryl Streep's character Miranda Priestly says she lives on hope. I know what she means. But sometimes, I wonder how long we can live that way. We keep paying for the bank's messes. We pay for the government hearings and investigations, the losses in our retirement accounts, the negative impact on the economy, and in many other ways.
J.P. Morgan (JPM) CEO Jamie Dimon testified before the Senate Banking Committee this morning. But in all the hullabaloo and consternation about the bank's oversized bets, only a minute or two was spent on incentives. Sure, J.P. Morgan's proxy has something to say about pay and risk. The company is required to address such things now. And what it says is that "regardless of the motivation," the bank's "risk discipline" and "frequent risk reporting" has "excessive risk-taking" under control. Well, that didn't work so well at Fortune's most admired megabank and No. 22 most admired company in the world.
Despite what Dimon said this morning, it's important to remember this is not an isolated mistake. Bloomberg reported last week that a court appointed monitor is seeking consumer inputrelated to ongoing foreclosure abuses. And the senators at the hearing asked for help for constituents that are being told their paperwork is missing. To his credit, Dimon said the bank would look into the paperwork issues.
But poor oversight is a management and governance deficiency. The billions of dollars in trading losses is merely the most recent example of poor risk oversight at the largest banks
On May 10, J.P. Morgan disclosed its immense trading losses. But on April 6, a hedge fund manager told the Financial Times: "The thing I'd be questioning, though, is why JPMorgan has such a big directional position when banks aren't supposed to be prop trading any more." And Bloomberg reported on April 9 that "four hedge-fund managers and dealers say the trades are big enough to move indexes and resemble proprietary bets, or wagers made with the bank's own money." If outsiders understood the size of the gambles back then, where were the bank's senior managers and its board? Why on April 13 did they not understand the magnitude, as Dimon testified this morning was the case?
When I speak with board directors, risk managers, and consultants who work with some of the largest banks, they agree that there is still a lot of work to do when it comes to risk oversight. And if Congress wanted to get the real picture, that's who they'd be talking to -- along with other observers who know the score. Not that everyone would be forthcoming, but if Congress asked the right questions, they would get the facts about the bailed out banks soon enough.
Exec pay days, for all the wrong reasons
But let's focus instead on motive and the all too obvious fact: incentives matter. If you pay for the wrong reasons in the wrong form, you'll get the risky behaviors you encourage. We shouldn't be surprised.
Jamie Dimon became CEO of J.P. Morgan on January 1, 2006. The latest J.P. Morgan proxy shows that Jamie Dimon holds shares (and equivalents) worth over $200 million based on the company's closing price June 8. If the stock price rose to where it was just five years ago, his net worth would jump by $75 million.
A similar pop would net Ina Drew, former chief investment officer at the bank, over $23 million, if you include her deferred compensation and unvested shares. Drew oversaw the unit responsible for the large losses and reported directly to Dimon according to the testimony this morning. As in years past, the board gave Dimon and Drew's pay primarily in stock and options-based awards. Those items alone totaled $17 million and $8.5 million in 2011, respectively.
So what really drives their behavior? And what message is the board sending when they pay their executives this way?
This kind of high pay is exactly what a December New York Fed staff report warned could encourage risky CEO behavior and create economic distress. (Ironically, Dimon sits on the NY Fed's board, although a petition for his removal has garnered over 36,000 signatures.)
In contrast, sound compensation guidance from the regulators recommends risk-based measures, which put a company's and its employees' performance in the context of the quantity and quality of the risk that's taken on. Though banks claim to use risk-based measures, stock price is still the biggest determining factor in top bank executives' actual rewards. But goosing a company's stock price and taking rational risks are not exactly close companions. Former CEO Dick Fuld at Lehman Brothers was the poster child for this issue.
Even the measures cited in the proxy for rewarding Dimon and Drew are not risk-based. While a spokesperson for Citi (C) (which received a no vote on pay this year) wrote in an email that "Citi has continued to enhance the ability of the firm to reduce risks through its compensation programs," J. P. Morgan, Goldman (GS), Bank of America (BAC), and Morgan Stanley (MS) declined to discuss their pay practices for this article. No wonder. An October 2011 report by the Federal Reserve confirms that the use of risk-based measures at the large banks is "uneven" and every bank has more work to do. "Substantial work remains to be done to achieve consistency and effectiveness … in providing balanced risk-taking incentives," the report states. Put simply, bank boards need a kick in the pants.
Who will step up?
The FDIC put out an advanced notice over two years ago asking for comments on proposing a rule that would charge banks more for depository insurance if their pay programs were risky. Such a measure could have been a real impetus to fix pay. But, "to date, there has been no follow-up to the advance notice of proposed rulemaking," an FDIC spokesperson recently emailed me. And Martin Gruenberg, acting chair of the FDIC, did not address pay or such a proposed rule in his prepared testimony before the Senate last week.
The Office of the Comptroller of the Currency (OCC) is getting beat up these days. They had staff in London where the J.P. Morgan traders were located. An OCC spokesperson explained to me by email that while their staffers review trading data daily or weekly, "even a strong risk management culture could have surprises or breaks, but they should not be of significant magnitude relative to the banks business." Regarding pay, "the [sound compensation] guidance stands as what the examiners are using to supervise banks."
Last week, in his remarks before the banking committee, OCC head Thomas Curry mentioned"the need to ensure that incentive compensation structures balance risk and financial rewards and are compatible with effective controls and risk management."
Daniel Tarullo testified on behalf of the Board of Governors of the Federal Reserve. But his prepared remarks did not mention compensation. This, despite the fact that the Fed has oversight responsibility for top executives' pay. The Fed's October 2011 report outlines that bank pay "should achieve substantial conformance with the interagency guidance by the end of 2011 (affecting the award of incentive compensation awards for the 2011 performance year), and should fully conform thereafter." Neither the OCC nor Federal Reserve would comment, however, on their examinations and assessments.
The silence, especially from the Fed, is deafening, particularly since the banks' compensation fixes seem to have been done for only some managers rather than the top executives.
But pay programs for top executives matter most because their motives will influence their instructions and other managers' actions. (While the reverse is not necessarily true.)
The October 2011 report by the Federal Reserve states that incentives "were a contributing factor to the financial crisis that began in 2007." The M.O. among do-nothings is that losing billions isn't necessarily concerning for a bank the size of J.P. Morgan. I don't agree. Just because this isn't the 100-year flood doesn't mean we shouldn't repair the levy. How many breaks will we tolerate until we fix it?
Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (http://thevaluealliance.com), a board advisory firm.
在影片《穿普拉达的女魔头》(The Devil Wears Prada)中,由梅丽尔•斯特里普(Meryl Streep)饰演的米兰达•普瑞斯特里说,她依赖希望而生。我知道她的意思,但有时我怀疑这样有希望的日子还会有多久。我们在不断地为银行业危机买单,为政府听证会和调查买单,为我们退休账户的损失买单,为经济受到的负面影响买单,等等。 摩根大通(J.P. Morgan)首席执行官杰米•戴蒙日前在美国参议院银行委员会(Senate Banking Committee)作证。但在该行豪赌巨亏引发的一片哗然和错愕中,关于高管薪酬戴蒙只谈了一两分钟。当然,摩根大通的委托投票书对薪酬和风险都有提及。但如今,摩根大通需要回答此类问题,它却只是说“不管动机怎样”,摩根大通的“风险自律”和“频繁的风险报告”约束了“过度冒险”行为。哦,事实是对于摩根大通这家入选《财富》杂志“最受赞赏大银行”和“全球最受赞赏公司第22名”的公司来说,这些并不管用。 不管戴蒙在听证会上说了什么,重要的是别忘了这并非一个孤立的错误。彭博社(Bloomberg)日前报道,由法庭指定的一位监督员正在就持续的滥用止赎权现象征求消费者意见。而且,在听证会上,参议员们也在为一些文件莫名丢失的选民打抱不平。对此,戴蒙称,摩根大通将调查文件问题。 但监督不力源于管理和治理欠缺。几十亿美元的交易损失只是这些大银行对风险监督不力的最新例证。 5月10日,摩根大通披露了巨额交易损失。但4月6日,一位对冲基金经理告诉英国《金融时报》(Financial Times):“我要质疑的是为何在银行不该再进行自营交易之时,摩根大通仍有这么大的方向性头寸。”4月9日,彭博社报道,“四位对冲基金经理和交易商表示,这些交易规模之大,足以影响指数,类似于自营交易或自有资金押注。”如果连外人都知道当时的押注规模,那么当时银行的高管和董事会在哪里?为何戴蒙在参议院作证时说,4月13日他们还不知道这些交易的规模大小? 当我和董事会成员、风险经理以及曾与一些大银行合作的顾问们对话时,他们都认为要加强风险监督,仍有很多工作要做。如果美国国会真想了解实际情况,就该和这些人——以及知道真相的观察人士谈谈。不是所有人都会直言不讳,但如果美国国会问对问题,他们很快就会得到事情真相。 高管天价薪酬缺乏依据 还是让我们来看看动机和显而易见的事实——激励机制。如果天价薪酬缺乏依据、形式有误,等于是在鼓励冒险。我们不应感到意外。 | In The Devil Wears Prada, Meryl Streep's character Miranda Priestly says she lives on hope. I know what she means. But sometimes, I wonder how long we can live that way. We keep paying for the bank's messes. We pay for the government hearings and investigations, the losses in our retirement accounts, the negative impact on the economy, and in many other ways. J.P. Morgan (JPM) CEO Jamie Dimon testified before the Senate Banking Committee this morning. But in all the hullabaloo and consternation about the bank's oversized bets, only a minute or two was spent on incentives. Sure, J.P. Morgan's proxy has something to say about pay and risk. The company is required to address such things now. And what it says is that "regardless of the motivation," the bank's "risk discipline" and "frequent risk reporting" has "excessive risk-taking" under control. Well, that didn't work so well at Fortune's most admired megabank and No. 22 most admired company in the world. Despite what Dimon said this morning, it's important to remember this is not an isolated mistake. Bloomberg reported last week that a court appointed monitor is seeking consumer inputrelated to ongoing foreclosure abuses. And the senators at the hearing asked for help for constituents that are being told their paperwork is missing. To his credit, Dimon said the bank would look into the paperwork issues. But poor oversight is a management and governance deficiency. The billions of dollars in trading losses is merely the most recent example of poor risk oversight at the largest banks On May 10, J.P. Morgan disclosed its immense trading losses. But on April 6, a hedge fund manager told the Financial Times: "The thing I'd be questioning, though, is why JPMorgan has such a big directional position when banks aren't supposed to be prop trading any more." And Bloomberg reported on April 9 that "four hedge-fund managers and dealers say the trades are big enough to move indexes and resemble proprietary bets, or wagers made with the bank's own money." If outsiders understood the size of the gambles back then, where were the bank's senior managers and its board? Why on April 13 did they not understand the magnitude, as Dimon testified this morning was the case? When I speak with board directors, risk managers, and consultants who work with some of the largest banks, they agree that there is still a lot of work to do when it comes to risk oversight. And if Congress wanted to get the real picture, that's who they'd be talking to -- along with other observers who know the score. Not that everyone would be forthcoming, but if Congress asked the right questions, they would get the facts about the bailed out banks soon enough. Exec pay days, for all the wrong reasons But let's focus instead on motive and the all too obvious fact: incentives matter. If you pay for the wrong reasons in the wrong form, you'll get the risky behaviors you encourage. We shouldn't be surprised. |
杰米•戴蒙于2006年1月1日出任摩根大通首席执行官。根据最近的摩根大通投票委托书,杰米•戴蒙所持股票(和等价物)若按摩根大通6月8日收盘价,价值逾2亿美元。如果股价涨至5年前水平,戴蒙所持股票净值将再增加7500万美元。 同样的股价上涨将令前摩根大通首席投资官伊娜•德鲁所持股票净值增值超过2300万美元,包括她的延付薪酬和未行权股票。根据戴蒙的证词,德鲁负责的正是造成此次交易巨亏的部门,她直接向戴蒙报告。和近年来一样,董事会给戴蒙和德鲁的的薪酬主要是股票和期权。仅这两项2011年就分别合计1700万美元和850万美元。 那么,他们的行为驱动力是什么?当董事会以这种方式支付高管薪酬时,传递出的时什么信息? 纽约联储银行去年12月份的一份工作人员报告警告称,这类高薪可能鼓励首席执行官的冒险行为,造成公司财务压力(讽刺的是,戴蒙是纽约联储银行的董事会成员,但要求其离任的一份请愿书获得超过3.6万个签名)。 与之形成对比的是,监管部门制定的《稳健薪酬指南》建议采用基于风险的指标,即将一家公司和员工的绩效与所承担风险的数量和质量相挂钩。虽然银行业宣称采用基于风险的指标,但股价仍是决定银行高管实际薪酬的最大决定因素。但推高一家公司的股价和理性承担风险,往往背道而驰。前雷曼兄弟(Lehman Brothers)首席执行官迪克•富尔德就是一个例子。 不过,即便是投票委托书列出的考量戴蒙、德鲁薪酬的指标,也不是基于风险。今年高管薪酬方案被股东否决的花旗银行(Citi)通过发言人回复电子邮件,声称“花旗通过薪酬计划,持续强化公司降低风险的能力”,摩根大通、高盛(Goldman)、美国银行(Bank of America)和摩根士丹利(Morgan Stanley)拒绝在本文中讨论他们的薪酬做法。毫不奇怪。美联储(Federal Reserve)2011年10月的一份报告证实大银行应用基于风险的指标存在“不均衡”现象,每家银行都有更多工作要做。报告称“要推广基于风险的指标,实现一致性和有效性,还有大量的工作要做。”简言之,银行董事会需要踹上一脚。 谁会加大监督力度? 两年前,美国联邦存款保险公司(FDIC)发出了一则征求意见的预先通知,计划如果银行的薪酬方案风险高,它将向银行收取更高的存款保险费。这样一项举措本应起到敦促银行尽快调整高管薪酬的作用。但“迄今为止,这一拟议条例尚无进展,”FDIC的一位发言人最近在电子邮件中表示。近日,FDIC的代理主席马丁•格鲁伯格在参议院发表预先准备好的讲话时,也没有谈到薪酬或这样一项拟议条例。 | Jamie Dimon became CEO of J.P. Morgan on January 1, 2006. The latest J.P. Morgan proxy shows that Jamie Dimon holds shares (and equivalents) worth over $200 million based on the company's closing price June 8. If the stock price rose to where it was just five years ago, his net worth would jump by $75 million. A similar pop would net Ina Drew, former chief investment officer at the bank, over $23 million, if you include her deferred compensation and unvested shares. Drew oversaw the unit responsible for the large losses and reported directly to Dimon according to the testimony this morning. As in years past, the board gave Dimon and Drew's pay primarily in stock and options-based awards. Those items alone totaled $17 million and $8.5 million in 2011, respectively. So what really drives their behavior? And what message is the board sending when they pay their executives this way? This kind of high pay is exactly what a December New York Fed staff report warned could encourage risky CEO behavior and create economic distress. (Ironically, Dimon sits on the NY Fed's board, although a petition for his removal has garnered over 36,000 signatures.) In contrast, sound compensation guidance from the regulators recommends risk-based measures, which put a company's and its employees' performance in the context of the quantity and quality of the risk that's taken on. Though banks claim to use risk-based measures, stock price is still the biggest determining factor in top bank executives' actual rewards. But goosing a company's stock price and taking rational risks are not exactly close companions. Former CEO Dick Fuld at Lehman Brothers was the poster child for this issue. Even the measures cited in the proxy for rewarding Dimon and Drew are not risk-based. While a spokesperson for Citi (C) (which received a no vote on pay this year) wrote in an email that "Citi has continued to enhance the ability of the firm to reduce risks through its compensation programs," J. P. Morgan, Goldman (GS), Bank of America (BAC), and Morgan Stanley (MS) declined to discuss their pay practices for this article. No wonder. An October 2011 report by the Federal Reserve confirms that the use of risk-based measures at the large banks is "uneven" and every bank has more work to do. "Substantial work remains to be done to achieve consistency and effectiveness … in providing balanced risk-taking incentives," the report states. Put simply, bank boards need a kick in the pants. Who will step up? The FDIC put out an advanced notice over two years ago asking for comments on proposing a rule that would charge banks more for depository insurance if their pay programs were risky. Such a measure could have been a real impetus to fix pay. But, "to date, there has been no follow-up to the advance notice of proposed rulemaking," an FDIC spokesperson recently emailed me. And Martin Gruenberg, acting chair of the FDIC, did not address pay or such a proposed rule in his prepared testimony before the Senate last week. |
美国货币监理署(The Office of the Comptroller of the Currency,OCC)这些天来频频发声。他们在伦敦有员工,而造成摩根大通巨亏的交易员正是常住伦敦。OCC的一位发言人通过电子邮件向我解释,他们的职员会对交易数据进行每日或每周的例行检查,但“即便是强大的风险管理文化,也可能出现意外或失误,但相比银行业务,影响不应很大。”至于薪酬,“检查人员采用[稳健薪酬]指南对银行进行监管。” OCC负责人托马斯•柯瑞日前在美国参议院银行委员会讲话时,提到了“需要确保薪酬结构能平衡风险回报,并与有效的控制和风险管理相适应。” 丹尼尔•塔鲁洛代表美国联储银行行长理事会(Board of Governors of the Federal Reserve)作证。但他事先准备好的演讲稿没有提到薪酬,虽然美联储对高管薪酬有监督职责。美联储2011年10月的报告列出了,银行薪酬“到2011年底,应该基本遵守银行间指南(影响2011绩效年激励薪酬的授予),此后完全执行。”但无论是OCC,还是美联储都不愿就检查评估情况发表评论。 这种沉默,特别是美联储的沉默,令人心惊。尤其是在这些银行的薪酬调整迄今似乎只涉及一些中层管理人员,而非高管。 但高管薪酬方案非常重要,因为高管的动机会影响到他们的指示和其他经理的行为(反之则不一定成立。) 美联储2011年10月的报告指出,激励机制“是造成这场金融危机(始于2007年)的原因之一。”不作为的理由之一是,损失几十亿美元对于像摩根大通这样规模的银行可能只是毛毛雨。我不同意这样的观点。不能因为这不是百年一遇的洪水,就不用查漏堵缺。要铸下多少次大错,我们才会着手纠正? 本文作者埃莉诺•布洛克斯汉姆是董事会咨询机构价值联盟和企业管理管理联盟(The Value Alliance and Corporate Governance Alliance)的CEO。 译者:早稻米 | The Office of the Comptroller of the Currency (OCC) is getting beat up these days. They had staff in London where the J.P. Morgan traders were located. An OCC spokesperson explained to me by email that while their staffers review trading data daily or weekly, "even a strong risk management culture could have surprises or breaks, but they should not be of significant magnitude relative to the banks business." Regarding pay, "the [sound compensation] guidance stands as what the examiners are using to supervise banks." Last week, in his remarks before the banking committee, OCC head Thomas Curry mentioned"the need to ensure that incentive compensation structures balance risk and financial rewards and are compatible with effective controls and risk management." Daniel Tarullo testified on behalf of the Board of Governors of the Federal Reserve. But his prepared remarks did not mention compensation. This, despite the fact that the Fed has oversight responsibility for top executives' pay. The Fed's October 2011 report outlines that bank pay "should achieve substantial conformance with the interagency guidance by the end of 2011 (affecting the award of incentive compensation awards for the 2011 performance year), and should fully conform thereafter." Neither the OCC nor Federal Reserve would comment, however, on their examinations and assessments. The silence, especially from the Fed, is deafening, particularly since the banks' compensation fixes seem to have been done for only some managers rather than the top executives. But pay programs for top executives matter most because their motives will influence their instructions and other managers' actions. (While the reverse is not necessarily true.) The October 2011 report by the Federal Reserve states that incentives "were a contributing factor to the financial crisis that began in 2007." The M.O. among do-nothings is that losing billions isn't necessarily concerning for a bank the size of J.P. Morgan. I don't agree. Just because this isn't the 100-year flood doesn't mean we shouldn't repair the levy. How many breaks will we tolerate until we fix it? Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (http://thevaluealliance.com), a board advisory firm. |
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