Chief executives at commercial banks have benefited from improved profits and industry consolidation to reward themselves handsomely over the last few years.
A preliminary survey from the New York-based Conference Board - a research organization supported by leading businesses - said commercial- bank chief executives last year ranked as the best-paid in the country in terms of cash compensation.
But the good times may be ending. Compensation experts said heightened scrutiny by investors and boards of directors could make it a lot harder for CEOs to collect big cash pay increases. Instead, they said, more and more compensation for bank executives will be conditioned on company earnings and stock market performance.
"Compensation is coming under a lot more scrutiny," said Marc-Andreas Klein, a research associate at the Conference Board, "and flexibility of the last decade is going to change."
Ira Kay, practice director in New York for Watson Wyatt Worldwide, a Washington-based compensation and benefits consulting firm, commented: "Boards of directors have become much bolder in terms of evaluating the effectiveness of these compensation programs.
"They are putting much more pay at risk, and much more in the form of stock-based programs."
The preliminary survey by the Conference Board found that median total compensation for chief executives in commercial banking was $953,000.
That compared with $940,000 for chief executives in the insurance sector, $791,000 in manufacturing, $590,000 in utilities, and $536,000 in diversified services.
A sampling of 20 banks of varying sizes showed bank chief executives were paid the highest median cash compensation, $596,000 compared with $578,000 in the insurance industry and $500,000 in manufacturing.
Analysts did not dispute the Conference Board data on cash earnings. "Several years ago bank executives seemed to be paid conservatively, but banks are catching up in terms of opportunities offered to top executives," said John Gayley, an executive compensation consultant at Hewitt Associates in Lincolnshire, Ill.
"Both the Conference Board and our data confirm that the gap with other sectors is decreasing," he said.
David Simmons, a principal at Towers Perrin in Atlanta, pointed out: "Banking has been catching up with other sectors for years, and in many instances compensation surpasses that of general industry."
But he also warned that comparisons can be difficult, since figuring out how a bank's size compares to that of an industrial company is almost impossible.
Analysts added that total compensation, including stock options and other stock-related earnings, is probably greater in other sectors.
