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Why is Jamie Dimon so stingy?

While Goldman executives and shareholders appear more than willing to share profits equally with the firm’s bankers, the same doesn’t appear to hold for JPMorgan.

Compensation ratios in JPMorgan’s investment bank fell to just 37% of revenues in the past quarter, down from 63% for 2008 as a whole, and well below the 50% typical of most US competitors.

With $233k in accrued compensation during the first half of the year, the average JPMorgan investment banker isn’t exactly doing badly. But pay would be 35% higher if Jamie kept compensation ratios in line with everyone else.

So why doesn’t he?

1). Innate parsimony: When Dimon arrived at the firm in 2004 he went on a cost cutting drive involving such crowd pleasing measures as the closure of staff gyms.

2). Memories of past profligacy: In the fourth quarter of last year investment banking revenues were negative, but $1.2bn of compensation was paid to investment bankers. Keefe Bruyette and Woods expressed concern over elevated compensation at the bank.

3). Retail banking mentality: JP Morgan employs 26,000 investment bankers and 103,000 retail bankers. $233k for six months’ work seems an enormous amount when most of your staff are tellers. HSBC pays notoriously badly for the same reason.

4). The balance sheet: When you’ve got a $2 trillion balance sheet to help fund transactions, it’s difficult to establish whether it’s the balance sheet or the bankers who are winning business. Assume it’s the balance sheet and the need to give bankers half your revenues disappears.

Comments (11)

Comments
  1. “With $233k in accrued compensation during the first half of the year, ”

    That is assuming the next months won’t take any disasters / hits to revenue. And that bonuses will be fairly distributed. Sarah Butcher you seem to operating under the guaranteed bonus mentality that is present in so many undeserving bankers today. Not a good idea.

  2. It could be some of those reasons, it could also be that he actually understands that he is running a bank on behalf of its shareholders. I imagine it is also because he is one of the smartest guys around and is actually paying what needs to be paid, to build a strong business and that Goldmans and the like are closer then they think to falling to the second tier.

  3. @Dimon fan:

    “and that Goldmans and the like are closer then they think to falling to the second tier.”

    The word is than, not then. Why are so many people clearly incapable of constructing a coherent sentence. What does “… are closer then they think” mean? Maybe one of your television-watching pleb friends can enlighten those of us from the educated classes.

    @Sarah: Can eFinancialCareers be amended so that people who want to post a comment must certify that they are not a member of the lower classes. This should eliminate the incoherent comments that have recently started to appear on this website. I would expect the editor of eFinancialCareers to show competence in respect of the moderation of comments!

  4. Supply demand. Surplus of bankers, shortage of jobs. Unless you’re a rainmaker you have nothing much to bargain with. He also seems smart enough to see how angry everyone who isn’t a banker is.

  5. Im thinking of jacking it all in when I see such low figures. I’m thinking of becoming a journo. Sarah – how much would I earn? Not asking what you are on but need to know ball park for joining a trade type rag….I have three years post uni experience as an analyst in tier one. Realise I’d be looking at a pay cut, but what might that be? 70k basic maybe, plus a 50% bonus?

  6. A good journalist for a serious paper (Times, Telegraph) can expect to earn 250k.

  7. @JonesG: Sarah is having a well-earned day off today, so allow me to answer your question. 70k is well above the average for journalism, even at nationals. And 250k is for top, top people.
    Personally, I get by on a bag of salt and vinegar crisps everyday, with an annual bonus of a cube of Wiltshire cheese, but my needs are small.

    Paul, eFinancialCareers Reply
     
  8. “Personally, I get by on a bag of salt and vinegar crisps everyday, with an annual bonus of a cube of Wiltshire cheese, but my needs are small.”

    And one would hope, nay, insist on the cube of Wiltshire cheese being from Waitrose!

  9. Analyst, you’re a tool. Is that clear? Constructed properly?

  10. @ Analyst: In this market? I’ll be lucky if I get Aldi cheese-flavoured product

    Paul, eFinancialCareers Reply
     
  11. it just goes to show that what comes out is a distillation of what goes in.

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