Slowly but surely, banking executives are increasing their stake in corporate America's stock-option bonanza.

Last year's mergers and a run-up in bank share prices have combined to make stock grants more valuable to banking's top tier of executives. All around the industry, stock options played an increasingly important part in rewarding senior executives and pushing them to keep shareholder interests at heart.

Among the big gainers: Edward E. Crutchfield of First Union Corp., Jerry Grundhofer of Firstar Corp., and Charles K. Gifford of BankBoston Corp. These chairmen saw a sharp rise in options as a share of total earnings- from zero in 1997 to 52% in 1998 for Mr. Crutchfield, from 61% to 85% for Mr. Grundhofer, and from 62% to 76% for Mr. Gifford.

Observers said bank boards, following in the footsteps of other industries, are updating compensation plans by tightly linking pay with performance.

"The old stereotype of the banker sitting with the green eye shade is a little unfair now," said Alan Johnson, partner at Johnson Associates, a New York consulting and recruiting firm. He said banks are "certainly in the mainstream" of U.S. companies linking pay to long-term performance.

Commercial banks still lag in other sectors in emphasis on stock options, however.

Measured as a percentage of total shares outstanding, stock option grants to bank executives and employees reached 3.09% in 1998, up from 2.67% the year earlier, according to Pearl Meyer & Partners, a New York- based compensation consulting firm.

At Wall Street brokerages and other financial companies the percentage of executive option grants was higher-5.13% of all shares, up from 4.93% in 1997.

And bank stock option rewards varied widely. Among the 10 highest-paid bankers last year, stock options ranged from zero, for Michael J. Murray, president of global corporate and investment banking at BankAmerica; to 78% of total pay for Sanford I. Weill, Citigroup co-chairman and chief executive officer.

Consultants said 1998 may have been somewhat of an aberration because of merger activity, which helped bolster compensation. Indeed, eight out of the 10 highest paid bankers worked at institutions involved in deals in 1998.

Mr. Weill, for instance, pulled down $52.1 million including options last year as he shepherded Travelers Group through a merger with Citicorp. His salary and bonus changed little from 1997.

His counterpart at Citigroup, John S. Reed, received a $26.5 million pay package. Mr. Reed's salary jumped 11%, and his bonus was tripled, to put it more in line with Mr. Weill's, but his noncash compensation got an even bigger boost. Options valued at $16.9 million accounted for almost 64% of his total pay.

At First Union, Mr. Crutchfield received a pay package last year totaling $14.6 million, including restricted stock worth $2 million and stock options valued at $7.6 million. He got no options in 1997 but received $15 million of restricted stock.

The noncash component of Mr. Crutchfield's pay has risen from 57% three years ago to 65% of total pay last year, proxy statements showed. In 1995 his total pay of $2.8 million included restricted stock of $834,811 and stock options valued at $773,560.

"The thought is, 'A shareholder will think like a shareholder,'" said Rhoda Edelman, a partner at Pearl Meyer.

Noncash awards take two forms: restricted stock, which can be sold only after a specified period of time, and stock options, which generally can be exercised only when the stock reaches a preset price target.

Options are becoming the preferred vehicle for boards, consultants said. That is because options are tied directly to a stock's rise, and option holders do not benefit if the stock doesn't perform. Restricted shares are available after a few years, no matter how well the bank's stock fared.

Still, an analysis of proxy statements filed by the nation's 25 largest banks showed that CEOs and other top executives almost universally received a combination of the two forms of stock grants.

At Chase Manhattan Corp., chairman and CEO Walter V. Shipley received compensation last year totaling $15.9 million, including restricted stock valued at $2.85 million and options valued at $5.1 million. Three years earlier, Mr. Shipley's noncash compensation included restricted stock of $946,250 and options valued at $9 million.

In many cases, bank boards are using increasingly large grants to attract and retain key personnel, including CEOs, consultants said.

"Companies are scared to death of losing them," said R. David Simmons, a compensation consultant for Towers Perrin in Atlanta. "The CEOs are already wealthy. The boards have to offer enough money to grab their attention."

Indeed, noncash compensation is beginning to reflect a change in the market, recruiters said. "It's an auction," said Andrea D'Chalnoky, a recruiter at Spencer Stuart & Associates who helps negotiate pay packages for executives. "Companies are trying to focus on what the consequences would be of not having a person or a group on their team."

But even executives who are not likely to spend many years with a newly merged company benefited from the combination.

Wells Fargo & Co.'s chairman, Paul Hazen, received $34.2 million in a package that included restricted stock worth $10.8 million and stock options valued at least at $19.4 million. Mr. Hazen sold his bank to Minneapolis-based Norwest Corp. in November.

David A. Coulter, former chairman of San Francisco-based BankAmerica Corp., who sold to Charlotte-based NationsBank Corp. in September and left the bank shortly thereafter, received a windfall of about $100 million, including 300,000 new stock options valued at $30 million.

Still, some consultants said, shareholders may not be comfortable with these rich rewards.

"There have been a lot of winners in the stock market even though their companies might have been only mediocre performers," said Rose Marie Orens, a consultant at William M. Mercer, a New York-based executive compensation consulting firm. "There's a backlash brewing."

Certainly, not all bank CEOs cashed in big last year. Norwest's chairman Richard M. Kovacevich, who is now president and CEO of Wells, received $5.7 million last year, including $1.5 million in restricted stock, but no stock options.

Hugh L. McColl Jr., the former NationsBank CEO who now heads up BankAmerica Corp., took a 50% pay cut last year, to $3.68 million in cash and stock, partly because of a downturn in the company's shares. NationsBank merged with BankAmerica in September.

Typically, big payouts are triggered for the takeover candidate, not the acquirer, because of change-of-control provisions, consultants said. The larger paychecks for Mr. Hazen and Mr. Coulter illustrate that phenomenon.

Less-than-stellar performance can also affect the level of noncash awards, proxy statements show.

At J.P. Morgan & Co., a company with a pay structure more typical of Wall Street investment banks-namely, one that has historically offered a higher proportion of stock than cash compensation-such noncash awards declined as performance lagged.

Douglas A. Warner 3d, Morgan's chairman and CEO, received total pay last year of $7.4 million, including restricted stock of $1.1 million and options valued at $4.3 million. Three years earlier, Mr. Warner received restricted stock worth $1.8 million and options valued at $9 million.

Morgan's net income has declined 25% since 1995.

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