Magazine article American Banker

Morgan Chase Officers Pay for Errors with Steep Pay Cuts

Magazine article American Banker

Morgan Chase Officers Pay for Errors with Steep Pay Cuts

Article excerpt

Compensation of J.P. Morgan Chase & Co.'s senior management was slashed 50% last year as executives had to answer for mistakes that led to a slump in its earnings and share price, chairman and chief executive William B. Harrison Jr. told investors Thursday.

"That's the way it should be," Mr. Harrison said in response to a question at a conference in New York sponsored by Citigroup Inc.'s Salomon Smith Barney unit. "I'm accountable, and all the senior members of the team are accountable, and we take it out in compensation."

Bonuses were handed out this month. Meanwhile, Morgan Chase has tried to offset revenue weakness in investment banking, investment management, and private banking by cutting jobs.

The company paid Mr. Harrison a salary of $1 million for 2001 and a cash bonus of $5 million, according to a proxy filed last March with the Securities and Exchange Commission.

In January 2002 Mr. Harrison got the first of two installments of a $10 million merger-related bonus, and the second $5 million installment was to be paid this month. Morgan Chase will disclose compensation of its highest-paid executives, including Mr. Harrison, with its 2002 proxy, typically filed by the end of the first quarter.

Though weak in terms of the markets, 2001 was not nearly as bad as 2002 -- which brought several large corporate bankruptcies, further erosion of the markets, and regulatory and congressional investigations. Morgan Chase, as financier to Enron Corp., was dragged through the mud by a Senate investigative panel. It also acknowledged mistakes in some of its business decisions, scrambling to reduce its credit exposure and its private equity investments in telecommunications and other struggling sectors.

Mr. Harrison has apologized repeatedly to investors for his company's lackluster financial performance and its depressed stock price. …

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