Newspaper article International Herald Tribune

Big Raises for Part-Time Bankers ; as Other Salaries Are Cut, Many Firms Pay Premium to Lure Qualified Directors

Newspaper article International Herald Tribune

Big Raises for Part-Time Bankers ; as Other Salaries Are Cut, Many Firms Pay Premium to Lure Qualified Directors

Article excerpt

At one bank, Goldman Sachs, the average annual compensation for a director was $488,709 in 2011, the last year for which data are available, up more than 50 percent from 2008.

Wall Street pay, while lucrative, is not what it used to be -- unless you are a board member.

Since the financial crisis, compensation for the directors of the biggest American banks has continued to rise, even as the banks themselves, facing difficult markets and regulatory pressures, are reining in bonuses and pay.

Take Goldman Sachs, where the average annual compensation for a director -- essentially a part-time job -- was $488,709 in 2011, the last year for which data are available, up more than 50 percent from 2008, according to Equilar, a compensation data firm. Some of the firm's 13 directors make more than $500,000 because they have extra responsibilities.

And those numbers are likely to skyrocket for 2012, because the firm's shares rose about 35 percent last year and its directors are paid in stock. Goldman Sachs is expected to release fresh pay data in the coming weeks.

Goldman's board is the best-compensated of any big American bank and the fifth-highest paid of any company in the United States, according to Equilar. But some of its rivals are not far behind. The biggest American banks paid their directors about $95,000 a year more, on average, in 2011 than what other large corporations paid.

Goldman defends the board's pay, saying that the bulk of the compensation is in stock that directors cannot touch until after they have left the board.

That arrangement, the firm says, aligns directors' interests with those of shareholders.

"The board's pay is set at a level that reflects the firm's long- term performance, as well as directors' substantial time commitment and the increased demands placed on them in recent years by new laws and regulations," said David Wells, a Goldman spokesman.

More broadly, banks and compensation experts say, financial firms must now pay a premium to entice and keep qualified directors.

After the financial crisis, some financial firms' boards were criticized for being asleep at the wheel and not understanding the risks being taken. Recruiters say banks are redoubling efforts to recruit directors with more financial expertise who can exercise better oversight.

Yet the readjustment is also a balancing act, because too much pay may end up giving boards an incentive to not rock the boat.

Some Wall Street insiders also question the need to pay bank directors more than their counterparts at other big corporations, arguing that the increased regulation has actually limited the ability of bank boards to perform important tasks, like raising capital and issuing dividends. Even when it comes to paying senior executives, boards have less leeway because regulators have put pressure on boards to reduce executive pay.

"About the only thing bank directors have more of these days is meetings," joked one senior Wall Street executive who has frequent interaction with his board but spoke on the condition he not be named because he was not authorized to speak on the record.

"Regulators have all but stripped boards of the main powers they had before the crisis."

Morgan Stanley's director pay is the second highest on Wall Street, after that of Goldman, with an average of $351,080, about the same as it was in 2008 but much higher than the pay at bigger and more complicated rivals like JPMorgan Chase and Citigroup.

Board pay at Morgan Stanley has drawn criticism from Daniel S. Loeb's hedge fund, Third Point, which recently bought 7.8 million shares, or a 0.4 percent stake, in the firm. While praising Morgan Stanley and its management, Mr. Loeb said in a letter to investors that he had been surprised by the compensation its directors received.

"We hope Morgan Stanley will show that its reinvention begins at the top and set an example for the company by quickly revising its board practices," he wrote. …

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