If you ever needed proof that it pays to go into finance, here it is. Of the 80 financial-services companies in the S&P 500, 31 of them handed their chief executives eight-figure checks. The nice thing about being a financial-services CEO is, you don't always have to earn it: As today's ROE v. Paid: Financial Services chart shows, only 41 -- just over half -- of the financial-services outfits in the S&P 500 managed to post return on equity of 15% a year on average over the past five years. And so it goes: Pay doesn't always correlate with performance. As part of TheStreet.com's coverage of executive pay, the ROE v. Paid charts compare a company's average return on equity -- or ROE, a handy measure of how effectively a CEO puts shareholder money to use -- over the past five years with the chief executive's compensation. For compensation, we used the most recent figures provided by Aon Consulting's eComp Database -- the numbers include salary, bonus and options. Lots of media outlets have been measuring executive pay against the company's stock market returns over the past year. Since the S&P 500 cratered 23.4% in 2002, and took down lots of individual companies with it, we felt ROE would be a fairer -- if still imperfect -- measure of executive performance. (For more on our series, please read
this column .) According to the chart, some high-profile finance chieftains haven't exactly been knocking the cover off the ball on ROE. While the verdict is still out on whether Jamie Dimon's three-year effort to turn around Bank One ( ONE) will bear fruit, his $10.7 million compensation last year -- compared with a five-year average ROE of 11.9% -- shows he gets paid as if it were a done deal. (Dimon also has $21.2 million in unexercised stock options from previous years, according to eComp.)
To be fair, Dimon's payday is modest compared to peers. Consider J.P. Morgan Chase ( JPM), where William Harrison took home $21.9 million in pay, bonus and options in 2002, while the firm's five-year ROE is a less-than-stellar 11.9%. The stock, for what it's worth, skidded 34% last year. For the stock-watchers out there, the ROE v. Paid chart also shows market returns for 2002: Only 22 of the 80 financial-services outfits ended in the black. As the chart indicates, that hasn't put CEOs out too much. And before you start taking up a collection for executives such as Capital One's ( COF) Richard Fairbank, whose compensation totaled a mere $97,274 last year, consider: Fairbank has $103.9 million in unexercised options from previous years, according to eComp. Check today's chart to see how the rest of the financial-services CEOs stack up.
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|Who's Being Served? |
No financial-services firm had a five-year return on equity in the double digits, but that hasn't hurt the bottom line for CEOs in the sector. Fourteen of the 100 highest paid executives turn up in the financial-services industries. When 2002 figures weren't available, previous-year figures were used, indicated by (2001) in the compensation column.
|Company (Ticker Symbol)||5-yr Average ROE||1-yr ROE||Chief Executive Compensation Rank in 500 Richest CEOs in 2002**||Stock Return in 2002|
|SLM (SLM)||54.3%||46.73%||Albert Lord |
|Providian (PVN)||29.1||10.78||Joseph Saunders |
|Freddie Mac (FRE)||28.5||35.91||Leland Brendsel |