NEW YORK (
) -- Even as regulators move to reform Wall Street pay, it remains difficult for inexpert investors to figure out just how much bank executives earn in any given year.
Ever since the Securities and Exchange Commission adopted stricter disclosure rules in 2006, companies have had to disclose much more information about how much and in what fashion executives get paid. But just because banks aren't "hiding" information doesn't make the trove of pay data any simpler to digest.
To sort through a proxy filing can be tedious and confusing, and requires the knowledge of terms like "above-market preferential earnings on deferred compensation." (Meaning, for instance, that an executive made excellent returns on a pension plan, with an interest rate more than 120% above a long-term federal rate.) Often times there are several ways to analyze an executive's pay and come up with wildly different amounts, depending on what items are deemed worth of inclusion.
CEO John Stumpf earned a base salary of $878,920 last year. For 2009, the company bumped his pay 2% to $900,000. Unless of course one factors in the stock portion, which would bring the tally to $5.6 million -- more than six times what he earned in 2008. (Stumpf didn't receive stock rewards last year.)
What's even more telling is the nuances in pension calculations that can make an annual increase seem paltry, but end up sending an executive out the door with a golden parachute. Stumpf's pension appears to have fallen 3% in 2008, when in actuality the overall payout he'd receive had risen by 58%. That's because the $17.7 million "lump sum" pension payout was "calculated using a different valuation date and assumptions."
Discovering what an executive will receive in totality when he or she leaves is even more difficult.
Bank of America's
departing CEO Ken Lewis had a retirement package worth nearly $70 million at the end of last year, including a $53 million pension, millions of common shares and thousands of preferred shares accumulated over his four decades at the bank.
But given the various considerations -- vesting dates, accounting gains and losses, underlying change in stock value, and other restrictions and benefits -- it's difficult to ascertain what Lewis will actually receive. Given pay czar Kenneth Feinberg's crackdown on CEO pay at seven firms, including BofA,
American International Group
, and others, whatever the agreement at the end of 2008 may end up being a moot point.
Other, less troubled firms, are being told by regulators to improve their pay practices and align compensation with the company's long-term performance. Wells Fargo,
have already made changes to weigh more compensation in stock that vests after an extended period of time, or can be clawed back. Others are sure to follow.
But now that companies are disclosing so much about pay, it might help to say in plain English what executives will bring home each year, and what they will receive when they retire, if performance goals are met.
Written by Lauren Tara LaCapra in New York