This blog was first posted at The Huffington Post on January 24, 2014
Wall Street's trumpets blasted in full force from the top of America's largest bank today to declare: all we care about is making money, even if that means breaking the law at times.
The head of the largest bank in the United States, Jamie Dimon, Chairman and Chief Executive Officer of J.P. Morgan Chase, just got a 74 percent pay rise to around $20 million for his leadership in 2013. This decision by the Board of Directors came despite the fact that the bank paid $20 billion in fines last year.
No bank in history has paid fines that come even close to this level.
The pay rise is not altogether unexpected. The Board has been absolutely craven when it comes to flattering Mr. Dimon.
This has been exemplified by the Board's rejection of rising shareholder pressures over the last two years for Mr. Dimon to give up both chairing the Board and running the management. Large numbers of shareholders, including large institutional investors, have been calling on the bank to split Dimon's responsibilities so that he can concentrate entirely on his executive management responsibilities, while the Board's independence is strengthened by having a non-executive Chairman.
As "The Wolf of Wall Street" plays in movie houses and looks to Oscar glory, so this tale of total greed is now being reflected by the Board of Directors of J.P. Morgan Chase. The pay decision suggests, in effect, that the Board is telling the world:
- Thanks Jamie, like you, we do not care what the public thinks -- hey, we're all making money! - Thanks Jamie for negotiating with the authorities to ensure the fines were not bigger; - Thanks Jamie for boosting our bank share price 22 percent last year; - Thanks Jamie for your laser-like focus on maximizing profits and we accept that this will mean getting in trouble with the law at times and appearing unethical, but we accept this is just part of doing business.
The fines covered a range of civil actions brought against the bank by the U.S. Department of Justice and other U.S. regulatory agencies, from misleading investors over huge trading losses, to malpractice related to vast sub-prime mortgage deals.
The U.S. Department of Justice may now, finally, start to consider whether its willingness to only bring civil charges, rather than criminal ones, against top banks and bankers is effective. Are these big fines really serving as punishments that change behavior?
Today's action suggests the answer is a resounding NO.
If Wall Street is deaf to the big fines, then do not expect it to listen to the criticisms and the protests that inevitably will be all over the liberal political media in coming days, replete with tough talk from prominent politicians.
And, as a footnote, perhaps this event will have a modest impact across the Atlantic in suggesting to regulatory authorities there that fines alone are meaningless gestures. In the U.K., the authorities are starting very, very slowly to prosecute major banks. It is doing so with enormous trepidation -- the latest action involved the British subsidiary of South Africa's largest bank, Standard Bank, which has been fined just about $12 million (yes, less even than just Dimon's pay) by the Financial Conduct Authority for lax anti-money laundering controls.
If U.S. actions by banks are any indicator, then Standard Bank's board of directors will not even notice the tiny fine. Indeed, they probably will give the CEO a pay rise as well!