CEO Pay Booms in a Year When Stocks Are a Bust

The fortunes of bank chief executives and stockholders moved in opposite directions in 2011, with CEO pay climbing a median 16% from a year earlier, even as shares slumped.

The pay increases extended to banks of all asset sizes, according to figures for 160 public banking companies from GMI Ratings, a corporate data gatherer and governance watchdog whose figures formed the basis for American Banker's 2012 compensation survey.

The median pay gain was the largest at the 127 institutions with less than $20 billion in assets, at 15.9%. That compared with 12.1% at 15 firms with more than $100 billion in assets. (CEOs who assumed posts in 2010 or 2011 were excluded from data for aggregate year-over-year changes since promotions and hirings can produce large pay swings.)

Small-bank gains did little to narrow the gap between their pay and typical packages for counterparts at bigger institutions. Median pay for the small banks was $1.1 million in fiscal 2011, versus $14.3 million at the biggest institutions.

Big banks had the widest gaps between CEO pay and that of the average worker; Kenneth Chenault's $23 million package was 230 times the average pay per employee of $100,000 at American Express (AXP). However, at small banks CEO pay generally represented a far larger share of total payroll expenses.

All told, CEO pay consumed 0.1% of total salaries and benefits at banks with more than $100 billion in assets, compared with 2.1% at banks with assets of less than $20 billion. That may be another reason for community banks to consider mergers.

Bucking the averages, certain CEOs' pay swung sharply up or down.

BOK Financial (BOKF) CEO Stanley Lybarger's compensation fell by more than half from the previous year to $2.9 million in 2011. The decline partly reflected the reduction from $1.2 million in 2010 to nothing last year in a cash payment that was determined by the growth of earnings per share relative to peers'. BOK has extended the performance period over which such awards are determined. It concluded that a "bounceback" in earnings at competitors that suffered large losses during the downturn create an unfair basis for comparison.

Citigroup (NYSE:C) CEO Vikram Pandit was the beneficiary of the largest increase in pay, with a package that jumped from $1 in 2010 — the amount he elected to accept until the company returned to sustained profitability — to $14.9 million in 2011.

In granting Pandit's outsize pay increase, the board considered Citi's "constant access to the capital markets in 2011," which is a bare necessity for survival. Citi's shareholders were less impressed by that achievement than was its board. A majority of shareholders rejected Citi's CEO pay plan in a nonbinding advisory vote in April, possibly presaging stronger pushback from investors over the size of bank CEO pay.