CEOs Paid the Price for Banks' Poor Performance
The growing linkage of performance and compensation proved painful for managers of many of the nation's largest banks in 1990.
While chief executive officers of all 361 publicly owned banks had a median increase of 5% in total compensation last year, compensation for managers of the largest banks - those with assets of $10 billion and more - plunged 12%, representing an inflation-adjusted decline of 17.4%. The drop in pay for these bankers reverses the 12% raise they received in 1989, leaving the typical big-bank CEO with slightly less compensation in 1990 than in 1988.
Lower-ranking managers of big banks, chief operating officers and chief financial officers, presumably shouldered less responsibility for the decline in their companies' fortunes and received smaller pay cuts - 4% and 7%, respectively.
Cash compensation for some chief executives, like Hugh McColl of NCNB Corp. and Barry Sullivan of First Chicago Corp., fell as much as a 50%. Others were even less fortunate. Alan Fellheimer of Equimark Corp., Robert Van Buren of Midlantic Corp., and Jerry Jarrett of Ameritrust Co. suffered the ignominy of receiving both a pay cut and a pink slip.
The declining fortunes of many of the country's biggest banks took a toll on the Millionaire's Club, that tony group of bankers earning more than $1 million. Membership declined from 45 in 1989 to 31 this past year.
Further reflecting the topsyturvy world of banking, top billing this year went to Bram Goldsmith of $4.7 billion-asset City National Corp. of Beverly Hills, who received $2.5 million. Last year's winner, Robert Mendoza, the stylish merchant banker from J.P. Morgan, slipped to 15th position after a 37% pay cut.
Ten of this year's exclusive group of millionaires came from two banks - J.P. Morgan & Co. and Bankers Trust New York Corp. All five from the latter, including chairman Charles Sanford, received the same pay in 1990 as they did in 1989.
Staying Ahead of Inflation
Many of the senior managers of banks with less than $10 billion in assets managed to secure median pay raises in excess of the 5.4% inflation rate for 1990. Those raises ranged from 5% to 9%, depending on the size of the bank and the position. In 1989, the range of compensation increases was 6% to 14%, compared with a 4.8% inflation rate that year.
Compensation trends largely reflect performance trends. Last year was a lousy one for bank profitability. Not surprisingly, the list of the 15 CEOs suffering the largest percentage declines in compensation reads like a Who's Who of banking disappointments and disasters in 1990.
On the flip side, the 15 largest increases reflect a cross section of CEOs from the nation's regional and community banks. Seven of the top 15 come from California, one of the last regions of the country to be hit by the wave of
credit quality problems that began in the Northeast and spread south and west.
The only head of a big bank on the list was Walter Weiner, chairman of $29 billion-asset Republic New York Corp., one of the two most successful big banks in the Northeast. His compensation rose 55% last year, to $950,977.
Among large companies, James B. Williams of Sun Trust Banks Inc. is in line for a big raise during 1991. Mr. Williams was promoted in early 1990 from vice chairman to president and chief operating officer, and ultimately replaced the chairman, who died this past February. He manages a company that has performed well above average.
Among the most successful smaller companies, Miners National Bank of Pottsville, Pa., with $196 million in assets, gave its CEO, Allen E. Kiefer a 6% raise. That brought his total compensation for 1990 to a relatively modest $125,603.
Beyond pay, SNL monitors benefit plans offered to bankers on both the executive and corporate levels. From 1989 to 1990, the median number of plans offered to executives rose from three to four (the average went from 3.3 to 3.6), while the median number of corporate plans remained at about two (the average rose from 1.8 to 1.9).
The percentage of companies offering golden parachutes and annual cash incentive plans was virtually unchanged for the year. On the corporate level, 401(k), employee stock ownership plans, and profit sharing plans rose, while the number of companies offering qualified pension plans declined.
Mr. Nagle is president of SNL Securities, a research and publishing firm based in Charlottesville, Va.