JP Morgan Chase (NYSE: JPM) gave in to public pressure to rein in compensation packages on Friday, cutting the revenue earmarked for compensation in an attempt to defuse some of the political outrage against large cap banks that are providing their employees large bonuses thanks in part to tax payer assistance.
JP Morgan will be giving its executives a total of $9.3 billion worth of compensation, averaging about $378,000 per executive including salary, benefits, and bonuses in the form of stock.
After President Obama criticized banks for “obscene” bonuses, JP Morgan Chase said that it had set aside 1/3rd of its investment banking revenue for compensation, which is about half of its 2008 figure and about 44% below its historical average.
The lower compensation plan also helped the company produced better-than-expected fourth-quarter profits, despite some losses from its retail bank and disappointing revenues from fixed-income assets.
JP Morgan’s move will likely increase the scrutiny of other banks whose profits have also rebounded after significant interventions from both American and European governments. Citigroup, which is owned partially by the United States Federal Government, has capped the cash portion of its bonuses to less than $100,000, while other banks have also said that they will pay more in stock this year.
