Trading loss costs JPMorgan's Jamie Dimon a big pay cut

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NEW YORK -- America's best-known banker is getting a big pay cut. JPMorgan Chase said Wednesday that it will dock the pay of CEO Jamie Dimon by more than half, to $11.5 million from $23 million.

It's the latest fallout from an embarrassing trading loss at the bank last year, one that eventually ballooned to $6 billion. Its ripple effects have already been numerous, forcing Mr. Dimon to appear contritely before Congress and putting the bank squarely in the cross hairs of regulators and lawmakers.

The pay cut didn't come as a surprise on Wall Street. What set it apart was that it amounted to a reprimand from the bank against a CEO who remains popular and well regarded, despite the stain of a trading loss that Mr. Dimon once dismissed as a "tempest in a teapot."

And even as it cut his pay, the board of directors praised Mr. Dimon for responding "forcefully" to the trading loss, presiding over an overhaul of the bank's risk management and booting out responsible executives. A bank task force report placed most of the blame on other executives and traders who have since left.

Compensation consultant James F. Reda was underwhelmed. He called Mr. Dimon's pay cut "ceremonial," a way for the bank to show that it is paying penance. "He doesn't need the money," Mr. Reda said. "He was probably very proactive in accepting this, to keep people off his back. To get punished, if you will, so he can then point to that and say, 'Look, I was punished. Isn't that enough? Leave me alone. Let me run my business.' "

Mr. Dimon's job was never seriously in danger, even with the trading loss, and the pay cut hasn't changed that perception. Wall Street saw it less as an indictment of Mr. Dimon and more as a sign of the board's commitment to taking the trading loss seriously. "It's bitter medicine, but he swallowed it and is moving on," said Boston University School of Management professor James Post, an expert on corporate governance. "I think that still leaves him in a very strong leadership position, in both the bank and the industry."

JPMorgan, and Mr. Dimon, are essential players in U.S. banking. JPMorgan emerged from the financial crisis as one of the strongest banks in the nation, a winner in a meltdown that forced other banks to their knees. Its blockbuster fourth-quarter earnings, released Wednesday, will almost certainly cement it as the most profitable U.S. bank of 2012. Such accomplishments have made Mr. Dimon one of the best known, and most outspoken, bank leaders of his generation, even in a time of heightened scrutiny and public anger against the industry.

While some of his peers have tried to stay under the radar, he has spoken out against many new regulations -- including some, the bank's critics say, that could have prevented the trading loss.

Mr. Dimon has publicly chafed at criticism of banking's big pay packages, including President Barack Obama's famous "fat-cat bankers" comment. "Acting like everyone who's been successful is bad and because you are rich, you are bad -- I don't understand it, I don't get it," he told an investment conference.

On calls with reporters and analysts Wednesday, he was his usual swashbuckling self, intensely proud of the bank he runs and sometimes impatient with critical questions. He said the portfolio where the troubled bets were made is "very close to being a non-issue," as far as trading losses are concerned. Asked for thoughts on his pay cut, Mr. Dimon said he respected the board's decision. Pressed for his "gut feeling," he replied, "Nope, you're not gonna get it."

When analyst Guy Moszkowski asked about the "exotic investment strategies" of the Chief Investment Office, where the loss occurred, he shot back, "It has got not a damned thing to do with exotic investment strategies -- zero, nada, nothing. OK?"

For 2012, Mr. Dimon will get $1.5 million in salary and $10 million in restricted stock awards. It likely means that he'll no longer be the highest-paid CEO among the nation's six mega-banks. Even with the pay cut, and even by the lofty standards of big-time CEOs, the 56-year-old Mr. Dimon will still be well paid. The median pay for CEOs of S&P 500 companies for 2011 was $9.6 million, according to the latest data from executive compensation firm Equilar.

Although Mr. Dimon made clear that he is eager to put the so-called London whale loss behind him, there could be more reminders in store. The bank has said it received requests for information related to government inquiries and investigations by Congress, the Department of Justice, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the U.K. Financial Services Authority, the state of Massachusetts and others.

On Monday, the Federal Reserve and the Office of the Comptroller of the Currency, both bank regulators, slapped sanctions on JPMorgan for the trading loss and ordered it to tighten up its risk management procedures. The bank neither admitted nor denied wrongdoing, but said it was working to correct any issues identified by the regulators.

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