A virus ravaged the U.S. economy in 2020, yet Wall Street bosses’ pay was virtually untouched. Morgan Stanley’s James Gorman even got a $6 million raise. Financial firms benefited massively from government measures to support the economy and lending as Covid-19 struck. That makes it hard to justify the amounts.
Gorman’s $33 million in cash and deferred stock makes him the best paid of the big six bank chief executives for 2020. Morgan Stanley had a good year, with pre-tax profit up 28%. But even at banks whose earnings collapsed, pay didn’t fall much. Wells Fargo’s pre-tax profit dropped 98% in 2020, but Charlie Scharf’s pay only slipped 12% on an annualized basis, to $20.3 million. JPMorgan’s Jamie Dimon got $31.5 million, the same as the year before.
Where there were big cuts in CEO pay, it wasn’t because of Covid-19. David Solomon at Goldman Sachs and the now-retired Mike Corbat at Citigroup respectively lost $10 million and $5 million compared to 2019. But that was because their banks paid large fines for bad behavior, not because their boards thought keeping pay at 2019’s level would be inappropriate in an economic crisis.
Banks argue that they are merely keeping up with rivals. Their awards pale next to private equity firms like Blackstone. But even in a regular year, the amounts at stake make little sense. Gorman’s pay in 2019 was 248 times that of the median Morgan Stanley employee. Jamie Dimon’s private-jet perks and reimbursement for accounting assistance together amounted to seven years’ pay for his average employee.
And in 2020 it was the government that did the heavy lifting. The Treasury paid employers to keep staff on the payroll and disbursed cash to households, which spared lenders a surge in bad debts. Meanwhile, the Federal Reserve propped up markets, boosting trading desks. And there was little net new lending except under the Washington-backed Paycheck Protection Program.
With Democrats in control of Congress, taking a Covid-19 windfall and paying the boss $30-odd million is a brave choice. As for shareholders, they typically tolerate high pay – not since 2012 at Citi has a big bank’s compensation plan failed to pass the annual advisory vote. But shareholders are also customers, taxpayers and locked-down citizens. Proxy season could be more bruising than usual for the banks.