Everyone knows that China is different than the US, but one area in which little is known about just how vast the difference is, is banker pay. Which is why the following comparison may come as a surprise. According to Bloomberg, the difference between pay for Jamie Dimon, head of the US' largest bank JPM, and Jiang Jianqing, head of ICBC - the world's most profitable bank, is simply stunning. Last year, Jamie - the head of the bank ensnared in everything from Liborgate, to the London whale fiasco, to MF Global client fund "confiscation", got paid $23 million. His Chinese counterpart? A tiny $308,000. This translated into $1.21 million for every $1 billion in profit for the JP Morganite, and $9,400 for the same profit for the ICBC head: a nearly 130x differential! Perhaps it is time shareholders of US financial companies demanded the same kinds of pay-for-performance metrics as those already in place in China.
Some other considerations via Bloomberg:
That pay-to-performance gap is set to widen this year. The state-controlled Chinese lender, led by Chairman Jiang Jianqing, may post second-quarter net income of $9.63 billion on Aug. 30, while Bank of China Ltd. will probably report $5.44 billion tomorrow, according to analysts’ estimates. New York-based JPMorgan last month reported a 9 percent decline to $4.96 billion following its trading loss in London.
Pay hasn’t kept pace with earnings in China, where government-appointed bankers have escaped the ire directed at overseas rivals for losing money on complex derivatives, money laundering or rigging rates. Still, the banks’ shares remain weighed down by concern that slowing economic growth will trigger defaults by developers and local governments.
“Chinese banks are risk averse due to culture, a different executive compensation structure” and the profitability of their lending operations, said Himanshu Shah, chief investment officer of Shah Capital Management in Raleigh, North Carolina. However, the banks are changing and will “resemble their Western counterparts to a great extent over the next five years.”
Great: all the world needs is a bank so big it can hold not just America, but the entire world hostage.
Ironically, Chinese banks, just like America's are no strangers to bailouts:
China’s top bankers have escaped the tarnish of such scandals in recent years. The state-run lenders were transformed from almost insolvent institutions with spiraling defaults a decade ago with the help of more than $650 billion in bailouts. The four largest banks, all based in Beijing, went on to raise a combined $64.5 billion through first-time share sales starting in 2005 and now rank among the seven biggest by market value in the world.
In other words, Chinese banks did precisely what US banks should have done - be run as utilities, with modest executive pay, while taking advantage of a soaring market to recapitalize and become self-sustaining. Sadly, western banks did just the opposite.
How do some other banks compare?
Dimon, who is both chairman and chief executive officer of JPMorgan, was awarded total 2011 compensation of $23 million, including a salary, bonus and stock options. The 56-year-old was the highest-paid banker among 50 CEOs at the largest U.S.-based financial companies, according to the Finance 50 annual ranking by Bloomberg Markets.
In the U.K., HSBC Holdings Plc said it would pay CEO Stuart Gulliver, 53, as much as 13.3 million pounds ($21 million) including long-term bonuses for last year, making him Britain’s best-paid banking chief. Local rival Barclays Plc awarded Bob Diamond, 61, as much as 12.5 million pounds.
Oddly enough, massive comp does not appear to be a primary need for the Chinese bank CEO:
Jiang’s annual compensation has stagnated in the last two years, the bank’s annual reports showed. China’s largest lender has frozen salaries for management this year, the 21st Century Business Herald newspaper reported May 29, citing people it didn’t identify. ICBC press official Wang Zhenning declined to comment.
Construction Bank, the world’s second-largest lender by profit, may post a 10 percent gain in net income on Aug. 26 to 50 billion yuan, according to the analysts’ estimates. Pay for its chairman has varied, dipping to 1.57 million yuan in 2008 before climbing to as much as 1.83 million yuan in 2010.
There is however a twist:
The executives aren’t motivated by their salaries because “they are more concerned about their career path as a government official,” said Oliver Rui, a professor of finance and accounting at the China Europe International Business School in Shanghai. “They are half professional, half politician.”
That sounds like a fair exchange - if US bankers demand to be paid the exorbitant compensation they have received in the past, can they please stay out of politics at least? And that includes bribes, and other forms of lobbying.
A complete list of who got paid what in China, is available here