Jamie Dimon, US Bank and BMO show that value is a buyer-led construction

JPMorgan Chase reported tuesday that he transferred 398,708 shares of the company to CEO Jamie Dimon last week. The shares – part of Dimon’s 2018 compensation package – are worth nearly $56 million, Bloomberg reported. It’s more than double the $24.5 million Dimon was pledged that year in performance share units.

To be clear, JPMorgan Chase said at the time that it could increase the number of shares – originally 243,697 – by up to 50% if the bank met a predetermined return on equity target, among other things. factors.

Additionally, JPMorgan’s share price is up about 38% since the 2018 compensation deal was struck.

Just like that, a package once supposed to encompass $31.5 million has moved north of sixty, when Dimon’s $1.5 million salary and $5 million cash bonus are included.

Tuesday’s filing is not an outlier. Dimon’s incentive bonus for 2017 was paid last March for a value of $51 million, according to Bloomberg. That’s up from an initial estimate of $23 million.

This emphasizes the “variability” of variable compensation – and reinforces the idea that value is a construct, and that the only opinion that matters in value is that of the buyer.

In Dimon’s case, the buyer is JPMorgan’s board – which made it clear last July, when it presented the CEO with a ‘special award’, that it was aiming to buy his services for at least five years.

The spectrum of M&A stocks

Indeed, the concept of value can have few constants. To illustrate, let’s look at mergers and acquisitions — specifically, comparing two proposed deals about three months apart by two banks, each taking on the US retail footprint of a foreign entity seeking to exit consumer banking in the States. -United.

Bank of the West, the US branch of the San Francisco-based French juggernaut BNP Paribas, had $105 billion in assets when the Bank of Montreal (BMO) offered $16.3 billion in December. To be fair, total assets are not the only factor that goes into determining value. But consider, US Bank in September offered to acquire MUFG Union Bank – and its $133 billion in assets – for $8 billion, less than half the price of Bank of the West.

Two other recent proposed acquisitions of banks with similar total assets show that transactions between BMO and US Bank may simply represent the high and low ends of a value spectrum. PNC paid $11.6 billion at the end of 2020 to buy BBVA’s $101 billion in US assets. More recently, TD announced that it would buy $89.1 billion in assets Premier Horizon for $13.4 billion.

The moral can be: it is not what a bank or a banker is worth; that is what this bank or banker is worth to the buyer.

Asterisks

And the pay numbers, like sports records, may well include asterisks. The value may also depreciate. Some Syracuse University basketball fans may say that men’s head coach Jim Boeheim has won 1,099 games in his career. But the NCAA showed it saw no value in 101 of those wins when it determined the program violated regulations in the mid-2000s and early 2010s.

Likewise, Barry Bonds may have hit more home runs than any baseball player. And if the spectrum of performance-enhancing drugs wasn’t an issue, he would have been a first-round lock. But baseball buyers — in this case, the sportswriters who vote every year — felt that home run totals weren’t valuable enough on their own to warrant entry into the Hall of Fame.

Banks can also value certain qualities or people over time. Barclays last month froze the unearned portion of former CEO Jes Staley’s deferred salary “pending further developments” stemming from UK regulators’ investigation into his links to convicted sex offender Jeffrey Epstein. This means Staley could lose $32 million worth of Barclays stock.

The bank clearly thought that at some point Staley was worth it. And that may still be the case, depending on the outcome of the case and the associated optics.

Goldman Sachs, in another example, has shown that it embraces the idea that value is tied to loyalty. The bank is said to have locked in unearned compensation it once promised to Gregg Lemkau and Eric Lane, two executives who left Goldman in 2020 and 2021 for companies that traditionally wouldn’t be seen as direct competitors.

Executives have signed contracts that say the bank has the right to withhold unearned funds, but historically Goldman had let departures slip to non-competitors. Perhaps feeling betrayed by these particular instances of executive flight, Goldman adhered to a stricter interpretation of the contracts.

Lemkau and Lane would not be alone. Goldman also reportedly blocked former Marcus executives Omer Ismail and David Stark from cashing out stock bonuses that had been vested and taxed up to five years earlier and banned them from alumni events. Ismail and Stark left Goldman in early 2021 for fintech startup Walmart.

It turns out Dimon could end up pocketing a figure closer to what was agreed for 2018. More than half of the stock reported Tuesday was withheld for tax purposes, Bloomberg reported.

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