Jamie Dimon made $28 million last year as CEO of J.P. Morgan. But he could have taken home more than double that amount if he’d accepted a Cabinet job in Donald Trump’s administration instead.
In the days following the November election, then-President-elect Trump’s team tried to recruit the bank chief to be the next Treasury Secretary. Dimon turned down the offer, Fortune reported at the time. In doing so, however, Dimon also gave up an immediate payday of nearly $70 million, new securities filings show.
A day after releasing Dimon’s annual letter to shareholders, J.P. Morgan Chase (JPM) Wednesday revealed details of its special provisions for compensating employees who leave the bank for government service. The so-called government office provisions allow employees, including Dimon, in certain circumstances to walk away with the full amount of the stock-based pay and bonuses that they would otherwise lose when they resigned from the firm.
When an employee takes a government job that requires divesting of assets in order to prevent conflicts of interest—as the role of Treasury Secretary certainly would, and did for the current holder of that office, Steven Mnuchin—J.P. Morgan’s policy fast-tracks the vesting of the employee’s stock awards. That means the person would receive the full value of his or her earned compensation—which is normally contingent upon continued service at the firm, and vests over time—right away.
In Dimon’s case, had he taken the Treasury job, he would have been entitled to a lump sum payout of $67.8 million, according to J.P. Morgan’s filing. That’s the value of the unvested stock compensation that he would have been forced to divest when he joined the Trump administration.
J.P. Morgan’s provision for compensating employees who leave to serve in government—a practice so common on Wall Street that it has become known as the proverbial “revolving door”—has become a point of contention in recent years, not only at the bank but for the industry as a whole.
For the third year in a row, the AFL-CIO, which represents labor unions and invests on their behalf, has submitted a shareholder proposal on J.P. Morgan’s proxy ballot calling for the bank to end what the group calls a “Government Service Golden Parachute.” In its proposal, the AFL-CIO argues, “In our view, the vesting of equity awards that would otherwise be forfeited after a voluntary termination is a windfall payment, not a form of deferred compensation for previous service.”
The controversy arose after former Treasury Secretary Jack Lew, who preceded Mnuchin, received a bonus from Citigroup (C) when he left the bank to work for the Obama administration in 2013. The AFL-CIO has since targeted seven big banks, including Goldman Sachs (GS) and Bank of America (BAC) along with Citi and J.P. Morgan, with similar demands.
J.P. Morgan, however, is recommending that shareholders vote against the AFL-CIO’s proposal for a third time this year. “Our Government Office distribution provisions do not create a windfall,” the company’s board writes in a rebuttal to the proxy proposal, pointing out that the payments represent compensation that was already earned, not additional bonuses. “Our compensation program shows respect for those choosing to enter public service and is intended to enable us to hire the best and brightest employees,” the board’s statement continues. “While we do not want to lose these employees, we also believe that they should not be impeded from pursuing public service.”
To be sure, J.P. Morgan would pay Dimon the same amount in stock compensation whether the CEO went into government or simply resigned, or even (under most circumstances) if he was fired. The difference with the government office provision, though, is that the bank would pay it out all at once, whereas Dimon would otherwise have to wait for the stock to vest on its normal timetable. For at least some of his stock awards, that won’t be for another two years.
Dimon, whose current net worth is $1.3 billion, according to Bloomberg data, doesn’t appear to regret his choice of delayed gratification, nor opting out of the White House. (He admitted this week that he doesn’t always agree with Trump, but is still rooting for the President’s success.)
Goldman Sachs, on the other hand, had to confront the revolving door compensation issue this year when its president and chief operating officer Gary Cohn resigned to accept a position as an economic advisor in the White House. Cohn’s parting gift: A check for $85 million, including $65 million for Goldman stock that Cohn cashed out of in order to avoid conflicts of interest.
But there’s one reason that Goldman’s payout to Cohn may have been less controversial than Dimon’s potentially would have been. All of Cohn’s stock awards had already vested, the bank made clear in its own proxy filing. So while Goldman paid Cohn sooner and in a different form than it had initially planned, there was little doubt that it owed its former COO the money no matter what.