The controversy over executive pay is not about to be quelled by events in the banking industry.

Cash compensation for the 10 highest-paid bank executives in 1991 rose an average of 46% from their pay in 1990, according to a new survey from SNL Securities. Earnings at their banks during the same period rose less than 7%.

In addition, three of the highest-paid executives broke the $2 million mark in pure cash awards. Never before had more than one senior executive from a public bank company broken into that rarefied realm.

A Critic's View

"If there were a relationship between pay and performance, then we wouldn't be seeing salaries like this during a recession," said Graef Crystal, an executive-pay gadfly who teaches at the University of California at Berkeley.

The nation's highest-paid banker last year was Dennis Weatherstone, chairman of J.P. Morgan & Co., who earned $2.06 million in 1991, a 30.1% jump from his year-earlier pay. Morgan's net income jumped 14% in 1991.

The figures for Mr. Weatherstone and others in the survey include salary, bonus, deferred compensation, and other forms of cash-equivalent compensation such as installments of annual bonus payments. Excluded are severance pay and signing bonuses, where identifiable in proxy statements.

Though all senior Morgan executives did well - four were among the top 15 highest-paid bankers last year - it also paid to preside over a megamerger.

John F. McGillicuddy, now chairman of Chemical Banking Corp., made $2.05 million in 1991, earning runner-up honors in the bank compensation derby. His 89.1% pay hike came as earnings at his old shop, Manufacturers Hanover Corp., rose 45% on an annualized basis.

Hugh McColl, president of what is now NationsBank Corp., earned $2 million. That was nearly three times the $700,000 he took home in 1990 as head of NCNB Corp, which adopted the new name after merging with C&S/Sovran Corp.

A NationsBank spokesman said Mr. McColl's 1991 salary of $700,000 matched his 1990 pay. The difference was a $1.3 million bonus received last year versus no bonus in 1990.

Though Mr. McGillicuddy and Mr. McColl clearly were compensated for jockeying their banks through merger negotiations, full cost savings from the yearend combinations are not expected to be achieved for several years.

Pay Up, Bank Earnings Down

According to the SNL survey, the median percentage increase in cash compensation for chief executives' at 49 banks with more than $10 billion in assets was 8.7%.

The banks that they ran reported aggregate earnings $1 billion below the previous year's, and more than 20% of them lost money in 1991.

However, the correlation between strong bank performance and high pay also exists. J.P. Morgan and Bankers Trust New York Corp., both of which reported record earnings in 1991, were home to seven of the fifteen highest-paid executives at commercial banks.

Nevertheless, executive compensation in banking will continue to be tied more to precedent than bank returns, said Emanuel Monogenis, head of the financial institutions practice at Heidrick & Struggles Inc., the executive search firm.

Bankers certainly won't argue with him. A survey conducted by Heidrick & Struggles found only half the chief executives at large banks agreeing with the proposition that directors - including bank officers - should be paid according to performance.

Many experts agree with them.

"The bottom-line measure of executive performance is whether they have increased shareholders' wealth over time," said Edward Furash, president of the bank consulting firm Furash & Co. "Executive compensation should not be made up solely of short-term performance."

The awards to Mr. McGillicuddy and Mr. McColl also illustrate a school of thought that says strategic smarts are as important as immediate performance. In banking, "there's more emphasis on strategic focus," said Gary Goldstein, president of the Whitney Group, an executive search firm.

He pointed out that top bankers today spend much of their time repairing old problems, activities that do not generate earnings.

In fact, building up loan loss reserves directly cuts into earnings, though the process is aimed at a longer-term strengthening of the balance sheet, he said.

Perhaps less surprising than the bankers' high salaries were compensation patterns at the big thrift companies. The shakeout in the savings-and-loan industry means that many of the survivors are relatively strong, with their overseers justly compensated.

Among thrift executives, the two top officers of Great Western Financial Corp. ranked first and third in cash compensation in 1991 as return on assets at the company soared.

James F. Montgomery, chairman of the California company, made $1.72 million last year, a 27.3% increase over his 1990 pay. John F. Maher, president of the nation's second-largest thrift company, took home $1.1 million.

Richard H. Deihl of H.F. Ahmanson & Co., the biggest thrift, ranked second among thrift executives with cash compensation of $1.21 million. Unlike many of his peers, however, his compensation actually declined, though by less than 1%, despite a rise in his company's performance.

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