Compensation data for bank chief executive officers are just starting to trickle out, but already there is evidence that the nation's top bankers got big cash raises in 1999, a weak year for bank stocks.
Boards of directors, facing fierce competition for executive talent from the Internet and other industries, have had to raise the compensation bar higher and higher to retain key personnel, said Lee Pomeroy, an executive recruiter at Egon Zehnder International in New York who specializes in the financial services industry.
Consultants say the lure of the dot-com world, with its potential for long-term gains from future stock issues to executives, has banks and other old-economy companies in a bind. Just last week, Heidi Miller, a well-regarded Citigroup executive, announced she would leave her job as chief financial officer to join Priceline.com.
"Boards at companies that feel their executives are poachable are reevaluating their compensation programs," said Rhoda Edelman, an executive compensation consultant at Pearl Meyer & Partners in New York. "It definitely has to be on people's minds."
L. Phillip Humann, chairman and chief executive officer of SunTrust Inc. in Atlanta, got $700,000 in base salary, a 19% gain from 1998, according to the company proxy statement filed with the Securities and Exchange Commission this week. Together with a $525,510 bonus and other annual pay, Mr. Humann's total 1999 cash and bonus compensation of $1.24 million was 31% higher than the year before.
At Firstar Corp. in Milwaukee, CEO Jerry A. Grundhofer got $850,000 in base salary, a 6% raise, and a bonus of $1.7 million, according to the company's proxy. His total compensation of $2.55 million, excluding stock and other incentives, was up 42%.
Frank Wobst, chairman and CEO of Huntington Bancshares in Columbus, Ohio, got a base salary of $977,308, a 2% raise, but his annual bonus more than quadrupled, to $1.1 million, according to the company's proxy. That made his total compensation, excluding stock and other long-term incentives, $2.2 million - a 77% raise.
Larger banking companies, including Citigroup Inc., Chase Manhattan Corp., and J.P. Morgan & Co. have yet to report, but compensation consultants said the raises should be the same if not more pronounced.
Cash and bonus awards for bank CEOs are rising even as those companies' stock is falling. SunTrust shares were down 10% on Dec. 31, 1999 compared with their close on Jan. 4 of that year. Firstar shares fell 30% in the same period, and Huntington's were down 12.6%.
But stock performance is just one factor compensation committees weigh. That was especially true in 1999, when the entire industry fell into disfavor on Wall Street. The Standard & Poor's index of bank stocks fell 15% between Jan. 4 and Dec. 31.
SunTrust, Firstar, and Huntington were among banking companies that posted double-digit earnings gains for the full year. SunTrust earnings rose 36.5% during 1999, to $1.3 billion, and its return on equity was 20.83%. The company's proxy cited the performance as supporting Mr. Humann's compensation.
Firstar earnings rose 19%, to $1.25 billion, and its return on equity was 18.76%. Huntington's yearend profits were 40% higher, to $422 million, and its return on equity was 19.66%.
Lagging share prices might force bank boards to turn back to cash awards for the near term. "Cash is the fastest way to get someone's attention," Mr. Pomeroy said. "Paying an executive stock in an industry that isn't hot with investors is not going to keep that person's feet warm at night."
|Bank CEOs' Executive Compensation (YE 1999)|
|Name and Principal Positions||Company||Year||Salary||Bonus||Other Compensation|
|Jerry A. Grundhofer - president and chief executive||Firstar Corp., Milwaukee||1999||$850,000||$1,700,000||-|
|Frank Wobst - chairman and chief executive||Huntington Bancshares Inc., Columbus, Ohio||1999||$977,308||$1,143,450||$109,093*|
|L. Phillip Humann - chairman, president, and chief executive||SunTrust Banks Inc., Atlanta||1999||$700,000||$525,510||$14,240|
|Source: SEC filings. |
* During 1999, 1998, and 1997 Mr. Wobst received other annual compensation in the amounts indicated, including executive life insurance premiums in the amounts of $79,599, $67,498, and $56,772, respectively.