Mergers helped to fatten bankers' cash compensation again last year, and nowhere more than at Bank One Corp.
An American Banker compilation of high-level pay data from publicly traded companies showed that Bank One chairman Verne G. Istock and vice chairman David J. Vitale posted the largest percentage gains in 1998 annual compensation-702% and 437%, respectively. John S. Reed of Citigroup Inc. was a distant third, with a 135% pay increase. (Tables begin on page 8.)
Mr. Istock also topped the list of the 50 highest paid executives, earning $16.6 million. He vaulted from 59th place to first in annual compensation.
Mr. Vitale's 1998 pay hit $6.7 million, ranking him eighth among top earners. He did not make the top-50 list in 1997.
"It looks like they definitely moved to the higher pay scale of Bank One, as opposed to the lower one at First Chicago," said Lawrence W. Cohn, an analyst at Ryan, Beck & Co. What was then Banc One Corp. and First Chicago NBD Corp. merged Oct. 2 to form Bank One Corp.
In the overall top-50 rankings, Charles E. Rice, chairman of Bank of America Corp. and former Barnett Banks Inc. chairman, took second place behind Mr. Istock, with compensation of $10 million in 1998. Third was Mr. Reed, co-chairman and co-chief executive of Citigroup, who made $9.6 million last year.
The executives are ranked according to salary and bonus for the year, not including long-term stock grants and other awards. But the annual compensation of the two Bank One executives was supplemented by handsome stock awards related to the company's acquisition of First Chicago.
The income of Mr. Istock, the former chairman and CEO of First Chicago, was boosted by a $13.8 million stock award, and Mr. Vitale got a $5.1 million merger-related award.
"On absolute terms, these numbers are gargantuan," said Robert S. Rollo, the managing partner of Los Angeles-based executive search firm Rollo & Associates. "Never in their wildest dreams would these bankers have imagined the wealth that they have accumulated."
With Bank One's president and chief executive John B. McCoy earning $7.3 million, the Chicago-based company is the only bank with three executives in the top 10.
Despite the payouts that usually accompany big mergers, annual compensation for several executives at newly expanded companies declined last year. At Bank of America Corp., which was formed in September when BankAmerica Corp. merged with NationsBank Corp., several top executives' compensation declined in 1998.
Hugh L. McColl Jr., chief executive of the Charlotte, N.C., company, was paid 21% less last year than the year earlier; he earned $3.7 million. Chief financial officer James H. Hance Jr. and president Kenneth D. Lewis also earned 21% less than in 1997.
A rough year in the capital markets, trading losses, and a significant mortgage servicing asset writedown were reflected in the compensation of Bank of America executives, said Thomas F. Theurkauf, an analyst at Keefe, Bruyette & Woods Inc. in New York.
"Last year we did see a reduction in Bank of America's net income and return on equity," he said. "It's understandable you might see a reduction in compensation."
For the most part, however, mergers were very good to bank executives. Rodney L. Jacobs, vice chairman and chief financial officer of San Francisco's Wells Fargo & Co., got what amounted to a 78% raise in 1998, earning $2.6 million and jumping to 42nd place in the rankings, from 90th. Wells Fargo merged with Norwest Corp. of Minneapolis in November.
The compensation of Mr. Jacobs' boss, Wells Fargo chairman Paul M. Hazen, grew 38%, to nearly $4 million. He climbed to 22nd place, from 35th.