There are a host of reasons why big banks have dismissed calls to break themselves up. But here's an argument that has sparked some chatter: Executive pay encourages banks to stay bulky.

Pay plans reward chief executives for the size of the companies they run, rather than the returns they generate for shareholders, Keefe, Bruyette & Woods said in a recent research note. While CEO pay at big banks has increased since the crisis, their returns have mostly lagged those of regional banks, whose top leaders generally get paid less.

Why should top executives engage in serious divestitures or spinoffs for the benefit of shareholders when it would cost them pay, the argument goes.

Several bankers and trade groups contacted for this story chose not to take the bait, but the notionattracted sharp criticism from compensation experts, who describe it as a simplified take on a complex issue.

Either way, the conversation illustrates how incentive-based pay has become a flashpoint for investors — and how investors are staking a claim in the broader industry discussion about the future of megabanks. And it echoes a broader debate among policymakers over whether megabanks should be smaller and less complex.

Since the end of 2009, total shareholder returns at megabanks — measured as stock-price performance — have fallen behind their smaller peers, according to KBW.

Returns have grown by triple digits at several regional banks, including Huntington Bancshares, but they have declined by 6% at Bank of America, and grew only 33% at Citigroup.

At the same time, big banks have predictably dwarfed their smaller peers when it comes to compensation. For instance, JPMorgan Chief Executive Jamie Dimon was paid a combined $120 million from 2009 to 2015,or about three times more than several regional bank CEOs.

"The two determinants [of executive pay] are the size and complexity of the organization that's being run," said Fred Cannon, director of research at KBW. "Shareholder returns and other factors seem to fall by the wayside."

Bank size has simply been a drag on bank stocks — but executives have little incentive to "address the problems that size and complexity raise," Cannon said. Big bank CEOs have little interest in considering "sum-of-the-parts" strategies.

Neat comparison … but not so fast, counter critics of the argument.

Paying CEOs for performance requires a broader set of metrics than stock performance, such as return on assets and measures of efficiency, said Frank Glassner, the CEO of Veritas Executive Compensation Consultants.

There is also the issue that, following the crisis, banks have been under pressure to defer portions of their incentive-based pay over longer time frames. This was also a key element in the executive-pay rules proposed by federal regulators last month.

Deferring could skew the correlation between stock performance and executive pay, according to Mark Jones, an attorney at Pillsbury Winthrop Shaw Pittman. In other words, a bank could hand out a raise after its hot performance has cooled.

Yet "most see that as being a good thing" to eliminate incentivesfor short-term risk-taking, Jones said.

This is not the first time KBW has laid out a business case for breaking up big banks. Earlier this year, the firm called on Citigroup to split itself into two separate entities, as a way to return capital to shareholders.

Citi would be about 50% more valuable as two smaller units, KBW said. According to the breakup plan, the bank would boost market value to about $198 billion.

Its latest report builds on that argument. Making pay more responsive to shareholder returns could encourage CEOs to engage in a discussion about the potential — if debatable — benefits of a breakup, KBW said.

The report comes as big banks have been under fire from investors to overhaul their pay practices.

Deutsche Bank shareholders Thursday rejected the company's compensation plan, in a nonbinding vote. At Citigroup last month, about one-third of investors opposed the way the company pays its top brass; the same thing happened at Goldman Sachs' annual meeting on Friday.

JPMorgan this year changed the way it calculates incentive-based pay, linking it more closely to return on equity. The change was made in response to shareholder concerns, the company said at its annual meeting on Tuesday.

"Last year, we heard shareholders ask, 'Why don't we tie the vesting of a portion of incentive awards to a predetermined performance metric, as opposed to simply time?'" said Lee Raymond, JPMorgan's lead independent director.

Still, in the report, KBW acknowledges that there are many factors that figure into compensation plans, and that it does not "begrudge" high-performing CEOs for their top-end compensation.

The firm also notes that not all banks are lagging behind when it comes to generating investor returns. Wells Fargo, for instance, rivals several of its smaller peers, having produced an 82% increase in returns over the past six years.

And, performance measures aside, there is also the issue that big-bank CEOs simply get paid more because they have more people, processes and risk to manage. So in many eyes it makes sense that compensation would closely track bank size.

"We would be surprised if it were any other way," Jones said.

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